When to Push and When to Support
Part 4: The Lender’s Perspective – Control Without Chaos
The most challenging decision any lender faces is calibrating your level of involvement when portfolio companies struggle. Push too hard, and you risk undermining recovery efforts. Support too passively, and you might enable poor decision-making or delay necessary changes.
This isn’t a binary choice between aggressive intervention and patient forbearance. It’s about reading the situation accurately and matching your approach to what the business actually needs at that moment. Sometimes the same company needs different approaches as circumstances change.
The key is understanding when pressure accelerates recovery and when it hinders it. When support enables better performance and when it enables avoidance of necessary changes. When your involvement adds value and when it creates burden or confusion.
Getting this calibration right protects your interests whilst giving businesses the best chance of recovery. Getting it wrong can turn recoverable situations into losses or prolong problems that could be solved more quickly with appropriate intervention.
Reading the signals for appropriate response
The appropriate level of lender involvement depends on multiple factors that change as situations evolve. Learning to read these signals accurately is critical for effective response calibration.
Management capability under current pressure. Are they making good decisions and learning from experience, or are they struggling with basic operational choices? Do they seek help when needed, or try to handle everything independently? Are they building on successes to create momentum, or repeating failed approaches hoping for different results?
Problem complexity versus management experience. Are current challenges within management’s demonstrated capability, or do they exceed previous experience significantly? Are problems tactical issues that can be solved with adequate focus, or strategic challenges requiring fundamental changes?
Time pressure and resource constraints. How much runway exists for gradual improvement versus need for rapid change? Are resources adequate for planned solutions, or do constraints require different approaches? Is market timing creating urgency that affects required response speed?
Stakeholder confidence and support. Are customers, suppliers, employees, and other stakeholders maintaining confidence, or is external support eroding? Are other stakeholders providing appropriate support, or are they creating additional pressure that affects recovery prospects?
Progress trajectory and momentum. Are improvements building on each other to create positive momentum, or are changes isolated without systemic impact? Is the business moving toward self-sustaining improvement, or requiring constant external pressure to maintain progress?
When to push: Situations requiring more pressure
Certain situations call for increased lender pressure to protect interests and accelerate necessary changes.
Management avoidance of difficult decisions. When management recognises problems but consistently delays making necessary choices about costs, staffing, strategy, or operations. This often shows up as extensive analysis without action, repeated postponement of difficult conversations, or hoping problems will resolve without intervention.
Resource allocation avoiding priorities. When management spreads resources across too many initiatives rather than concentrating on critical issues. This pattern often indicates either inability to prioritise effectively or avoidance of the hard choices required for recovery.
Stakeholder relationship deterioration. When relationships with customers, suppliers, or employees are worsening despite management attention, it often indicates that current approaches aren’t working and changes are needed that management might be reluctant to make.
Repeated initiative failure without learning. When multiple improvement efforts fail to deliver expected results, but management doesn’t adjust approaches based on learning. This suggests either poor problem diagnosis or implementation capability gaps that need addressing.
External deadline pressures. When covenant tests, supplier payment terms, customer contract renewals, or other external deadlines create time pressure that requires faster action than management is naturally taking.
Cash burn without operational improvement. When cash continues depleting without corresponding operational improvements, intervention becomes necessary to protect remaining resources whilst changes are still possible.
In these situations, appropriate pressure might include tighter reporting requirements, more frequent reviews, specific performance milestones with consequences, involvement in key decision-making, or requirements for external expertise in particular areas.
When to support: Situations requiring patience and resources
Other situations call for patient support that gives management space to implement solutions whilst providing resources that enable recovery.
Capable management facing unfamiliar challenges. When management has demonstrated good decision-making capability but is dealing with challenges outside their previous experience. They often need time to learn and adapt rather than pressure to act quickly.
Tactical problems with clear solutions. When problems are well-diagnosed and solutions are realistic given available resources and capability. Implementation might take time, but direction is clear and management approach is sound.
Market timing issues beyond management control. When external factors are affecting performance temporarily but underlying business fundamentals remain sound. Patient support during difficult market conditions often enables recovery when conditions improve.
Improvement momentum building systematically. When management is making progress and building on successes to create positive momentum. Additional pressure might disrupt effective approaches that are working but need time to show full results.
Stakeholder confidence remaining strong. When customers, suppliers, employees, and other stakeholders maintain confidence in management and business direction despite temporary difficulties. This external support often enables recovery with appropriate time and resources.
Resource constraints limiting implementation speed. When management has good plans but lacks resources to implement changes quickly. Additional funding, extended timelines, or access to specific expertise might enable faster progress than pressure for immediate results.
In these situations, appropriate support might include covenant flexibility, additional resources, access to specialized expertise, extended timelines for implementation, or protection from other stakeholder pressures whilst recovery progresses.
The dynamic calibration challenge
Appropriate lender response often changes as situations evolve. What starts as a support situation might require increased pressure if progress stalls. Conversely, pressure situations might evolve into support opportunities as management demonstrates improved capability.
Monitoring trigger points. Establish clear criteria for when to adjust your approach: improvement milestones that suggest lighter oversight is appropriate, deterioration patterns that suggest increased involvement is needed, external changes that affect business prospects, or management behaviour changes that indicate different capability levels.
Escalation frameworks. Create clear frameworks for increasing involvement when support isn’t working: specific performance measures that trigger increased oversight, timeline commitments that require consequences if missed, resource utilisation standards that indicate intervention needs, or communication patterns that suggest defensive rather than collaborative responses.
De-escalation opportunities. Also create frameworks for reducing pressure when situations improve: capability demonstration that earns increased autonomy, progress milestones that suggest recovery momentum, stakeholder confidence indicators that suggest reduced oversight needs, or operational improvements that indicate sustainable change.
Communication about changes. When you adjust your approach, communicate reasons clearly to management. This prevents confusion about expectations and helps maintain collaborative relationships even during periods of increased pressure.
The collaborative pressure approach
When pressure becomes necessary, it’s often more effective to apply it collaboratively rather than punitively.
Joint problem-solving rather than requirement imposition. Frame increased involvement as partnership in solving shared problems rather than punishment for poor performance. Ask “how can we work together to address this?” rather than “here’s what you must do.”
Resource provision alongside pressure. When requiring faster action or better performance, also provide resources that enable improvement: additional expertise, extended funding, access to networks, or help with specific capabilities.
Clear expectation setting with support offer. Be explicit about required changes whilst offering support for implementation: “We need to see X improvement by Y date, and here’s how we can help make that happen.”
Milestone-based rather than general pressure. Focus pressure on specific, measurable milestones rather than general performance improvement. This creates clear success criteria whilst avoiding constant pressure on every decision.
Recognition of progress alongside requirement for more. Acknowledge improvements that have been made whilst being clear about additional progress that’s needed. This maintains motivation whilst ensuring continued momentum.
Reading management response to pressure
How management responds to increased pressure often indicates whether your approach is appropriate and effective.
Positive pressure responses. Capable management often responds to appropriate pressure by increasing focus, seeking help where needed, making decisions more quickly, providing clearer communication about challenges and plans, and delivering improved results within reasonable timeframes.
Problematic pressure responses. Management that becomes defensive, provides less honest communication, makes poor decisions under pressure, avoids difficult conversations, or shows deteriorating performance under pressure might need different approaches or additional support.
Adaptation to pressure changes. Watch whether management adapts their approach based on your feedback and requirements, or whether they resist changes and maintain ineffective approaches despite pressure.
Stakeholder response to pressure. Monitor whether increased lender pressure improves or worsens relationships with other stakeholders. Effective pressure often improves overall stakeholder confidence; ineffective pressure might damage relationships more broadly.
Support that enables versus support that enables avoidance
Not all support is helpful. Some types of support enable better performance whilst others enable avoidance of necessary changes.
Enabling support characteristics. Good support helps management build capability, provides resources that accelerate improvement, creates accountability alongside assistance, focuses on solutions rather than just problem relief, and builds toward independence rather than dependency.
Enabling avoidance characteristics. Problematic support allows management to avoid difficult decisions, provides resources without accountability for results, focuses on relief rather than improvement, creates dependency rather than capability building, or enables continued ineffective approaches.
Support with clear expectations. The most effective support includes clear expectations about how resources will be used, what improvements are expected, and what accountability measures will track progress.
Time-limited support. Support should generally include clear timelines and milestones rather than open-ended assistance. This creates urgency whilst providing adequate resources for improvement.
The covenant modification decision
One of the most challenging push-versus-support decisions involves covenant modifications when businesses are struggling with compliance.
When modification supports recovery. Covenant relief can be appropriate when temporary market conditions are affecting compliance, management has clear plans for improvement that require time to implement, operational improvements are progressing but haven’t yet shown up in financial metrics, or when covenant compliance would require actions that harm long-term recovery prospects.
When modification enables avoidance. Covenant modification might enable avoidance when management isn’t taking necessary action to address problems, resources are being used ineffectively without accountability, problems are strategic rather than tactical and require fundamental changes, or when modification would remove incentives for necessary but difficult decisions.
Modification with requirements. Often the best approach combines covenant modification with specific requirements: operational improvements that must be achieved, management changes that must be implemented, reporting enhancements that improve visibility, or access to additional expertise that addresses capability gaps.
Temporary versus permanent changes. Modifications should generally be temporary and include clear criteria for returning to normal covenant levels as business performance improves.
Building calibration capability over time
Developing good judgment about when to push and when to support requires experience and systematic learning from both successes and failures.
Case study analysis. Regularly review outcomes from different situations where you applied pressure versus support. What worked well? What would you do differently? What signals did you miss or misinterpret?
Management feedback integration. Ask management teams for feedback on your approach after situations resolve. Did your involvement help or hinder recovery efforts? What would have been more effective?
Peer discussion and benchmarking. Discuss challenging situations with other lenders to understand different approaches and outcomes. Industry associations and informal networks can provide valuable learning opportunities.
External perspective integration. Advisors, consultants, and industry experts can provide perspective on appropriate lender involvement levels in different situations.
The goal is developing intuitive understanding of when different approaches are most effective, whilst maintaining systematic frameworks that help ensure consistent and appropriate responses to challenging situations.
When this calibration is done well, it creates value for both lenders and borrowers by accelerating recovery whilst protecting interests effectively.
Next in the series: Managing the Recovery Journey – maintaining appropriate engagement throughout the transformation process.
