Although different companies may require different qualifications at different times, the following key attributes are essential no matter what the situation.
Every CEO must be able to
- Create, with input from appropriate management team members, a carefully conceived written plan
- Recruit and retain the right people
- Ensure that the company has in place a sound system for ensuring accountability throughout the organization
Preparing a list of qualifications for a new CEO? Be sure that these three attributes are in the “must have” column. Without them, the entity will flounder.
In 2003, I worked as a consultant to R.M. Wade & Co., a 5th-generation family-owned business.
This year—2015—the company is celebrating its 150th anniversary with an absolutely fascinating website, which I urge you to visit. The website includes actual documents and photos from the company’s history, film footage from old ads, newsreels about farm equipment, and—my personal favorite—a poem written by R.M. Wade, himself, about his wagon train journey to Oregon in 1850.
The story behind the company’s success has been described in this Portland Business Journal article and will also be featured in Family Business Magazine.
As you know, it is extremely unusual for family-owned businesses to last this long. Wade’s longevity is a tribute to the family—their intellect, their willingness to change, and, most important, their focus on maintaining strong family relationships.
In January 1987, just 5 months into my career, I received my first turnaround referral from the Special Assets (troubled loan) department of a bank. The client? Pesznecker Brothers. At that time, the company was a 2nd generation family business. There were two banks involved and serious doubt about whether the company could survive. Six months later, after instituting a variety of critical changes and successfully implementing an out-of-court Chapter 11 through which all creditors were ultimately paid in full, the company returned to profitability.
Fast forward to September 5, 2014: Pesznecker Brothers is now a third-generation family business, and the Portland Business Journal just ran a story ( Pesznecker Brothers Business Journal Article ) about a new product developed by the company in partnership with Portland’s Central City Concern, a win-win for both.
These were/are really good people. Turnarounds can be gut wrenching. Owners are asked to make dramatic, sometimes painful changes, and it can take a while to for them to recover. In this case, a year after I left, Dick Pesznecker and Don Ford, the owners at that time, invited me to lunch to thank me.
Since 1987, I have had clients almost 100 times the 1987 size of Pesznecker, but this turnaround remains one of my favorites. Making money is nice, but seeing the lasting fruits of my labor and being appreciated have value beyond measure.
I still display in my home a beautiful copper box, handcrafted by Leo Pesznecker, one of the original founders, and presented to me as a thank you. My photography is not great, but here are two photos: One of the box, itself; the other, Leo’s inscription from the bottom.
If you want to know more about Pesznecker from inception to today, visit About Us on the company’s website.
On Thursday, during a panel discussion on “Corporate Governance Perspectives,” a part of Portland State University’s Idea Xchange, Rick Miller, Founder and Chairman of the Board, Avamere, succinctly summarized his view of the role of a corporate director: “Strategically engaged; operationally distant.”
The question in my mind is, “How distant?” Elsewhere in my blog I have described major operational shortcomings in well known companies, shortcomings that have a negative impact on the bottom line. Clearly, the board should not be mucking about in operations, but shouldn’t the board have some way of evaluating operational effectiveness?
As you may recall, one of Renee’s Rules™ is “Two sick companies do not make a healthy one.”
Based on my in-store and on-line customer service experiences with both Office Depot and Office Max, I predict that my rule will prove true for their upcoming merger UNLESS–and this is important–they hire a new, capable CEO for the combined entity. Although it is true that some of their troubles are attributable to the changing environment, the bigger problems is that these two companies simply are not well managed.
I rarely visited the Office Depot store in downtown Portland. Store layout was horrid. It simply took too long to find anything. (Apparently, others felt the same. The store is a ghost of its former self.) The last time I tried to do business with Office Depot, I tried to use a coupon I received in the mail to make an on-line purchase. The website would not recognize the coupon, so I tried calling. When the customer service rep was unable to solve the problem after 15 minutes, I said, “Thank you very much” and have never bought anything from them again. I really do “vote with my feet and/or my fingers.”
Office Max seems slightly better, but when I recently returned home from buying supplies at Office Max, I found a coupon that had started that day. Really?
In the big picture, I am a teeny customer, but the examples above are symptoms of the kinds of problems that affect larger customers, too.
These companies–like too many others (ToysRUs comes to mind.)–simply do not pay adequate attention to operations and to detail. They do not think about what it is like to be their customer. The merger will extend life but is unlikely to produce a healthy entity.
As you probably know by now, the CEO of Yahoo, Scott Thompson, misrepresented his educational achievements on his resume.
Verifying the accuracy of educational claims is easy. Really easy. Evidently, however, no member of the Board of Directors asked whether any one had verified all of the statements on Thompson’s resume.
How could this happen? Apparently, board members “assumed” that basic due diligence had been done when, in fact, it had not.
Why does this happen? My personal theory is that many CEO’s and board members have never been intimately involved in or had responsibility for the details of running a business. They focus too much on the big picture and not enough on the details that can spell the difference between success and failure.
If you have time, I’d love to know your theory!
There’s a very tight lid on communications from Harry and David. I don’t know what’s going on inside, but here are some things I do know:
1. According to media reports, two lawsuits have been filed against Harry and David.
- The first was filed by Drew Reifenberger, Executive Vice President and Chief Customer Officer, who was fired by then-CEO Steven Heyer in January. The basis of the lawsuit? Termination without cause and lack of contractually required payments.
- The second suit, claiming almost $10 million, was filed last week by Convergys Customer Management Group (CCMG). According to the suit, Harry and David and CCMG signed a 2-year contract which required CCMG to provide call center services and to hire an additional 25 full-time personnel during that period. CCMG is requesting payments due under the contract.
2. On February 18th, Harry and David announced the hiring of Kay Hong as “Chief Restructuring Officer and CEO.”
3. Harry and David is hiring. Careerbuilder.com shows 14 jobs that have been posted since Kay Hong was hired. Positions advertised include store managers, Controller, Director of Online Marketing, Director of Market Research, and Manager of Website User Insights. Nothing in the ads indicates that this is a “turnaround” situation.
What is the significance of all of the above?
With regard to the lawsuits
1. When the contract was signed with CCMG in August, did Harry and David’s CEO and upper management realize that Harry and David’s situation was precarious? If so, was it ethical to enter into an agreement it might never be able to honor? Was it wise? If Harry and David’s CEO and board did NOT realize that the situation was precarious, they certainly should have. Any competent turnaround CEO would have known that, but, of course, Wasserstein hired Heyer, who was not, in fact, a turnaround expert.
2. Who signed the contract with CCMG? Was it Heyer, or was it Reifenberger? If it was Heyer, it raises questions about his experience, wisdom, and ethics. If it was Reifenberger, is that part of the reason his employment was terminated? Again, however, responsibility lies with Heyer and the board. One of the first groundrules established by an experienced turnaround CEO is that material contracts require his/her sign off.
3. Is the company not paying CCMG and Reifenberger because it is conserving cash so it can successfully navigate a planned Chapter 11?
With regard to “Chief Restructuring Officer and CEO”—In my experience the title CRO is used primarily in a bankruptcy situation, so the title suggests that the company expected to file Chapter 11 at the time Hong was hired.
Hiring: If you follow my blog, you know that my assessment is that poor quality control coupled with poor customer service have contributed to the problems facing the company, so I am happy to see that they MAY finally be focusing on the customer experience. One caveat, however: when I advertise for positions in turnaround situation, I usually try to let applicants know right away about the situation facing the company. Some people love a challenge. Those are the people I am looking for. I have met many people, however, who have been recruited into troubled situations in which the executives have failed to disclose the company’s situation. Shame on the companies!
On a different note: Perhaps the recruiting is a signal that management believes that Harry and David can, in fact, survive.
It’s easy to blame e-readers and associated technological changes for Borders’ predicament, but they are merely the symptoms and not the disease.
When companies face the double whammy of game-changing technology and a sagging economy, they simply must have a sound strategy and consistent, capable, visionary leadership. Since 2005, however, Borders has had 4 different CEO’s. How could the company possibly develop or effectively execute a company-saving strategy while there was a revolving door at the entrance to the executive suite?
I sent an email to some of my business contacts with a link to the article, and an amazing number responded with either similar views or their own tales of horror.
If you have time, I’d love to see your comments, too.
Well, Gregory Meyer was, in fact, added to the board of Blockbuster.
The questions now are:
- Is it too late, anyway?
- Will he be able to have any real impact, or will he be marginalized? After all, the CEO and board strongly opposed to his serving.
Can’t help it–I am fascinated with Gregory Meyer’s challenge to the Blockbuster board. For all I know, Meyer is a total flake, but why would anyone have confidence in the CURRENT board of directors who, by the way, are strongly fighting Meyer’s bid?
Click here for details from my earlier post.
For latest news: Click here.
The board meeting is June 24th… am eager to see whether Meyer gets elected.
“These are the times that try men’s souls” (Thomas Paine, The Crisis, 1776)
As financial troubles roll through the economy, many–possibly, most–companies are seeking ways to ensure their survival. The purpose of this blog is to provide helpful information to
- Businesses, whether they are publicly held or owned by private equity, family, or employees
- Boards of Directors
- Trusted business advisors to whom businesses and their owners turn in times of trouble; e.g., accountants, attorneys, bankers, insurance agents, financial advisors, investment bankers
Based upon my experience as an award-winning turnaround expert, I plan to provide practical advice, comments, and tools that readers can use to improve their business prospects both now and in the future.