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.
As of December 31, 2015, the international Turnaround Management Association (TMA) reported that there were 487 Certified Turnaround Professionals (CTP) worldwide. Of those, only 24 of us are women.
When I read the BusinessWeek article, Amid Scandal, the Pope Sticks With Reforms, it occurred to me that Pope Francis is leading an incredibly challenging turnaround. As we all know, the Catholic Church has been faced with both sexual and financial wrongdoing, and Francis seems intent on bringing an end to both. In addition, he is urging a more welcoming and compassionate approach while also expressing his views on global issues.
Any turnaround requires significant change and involves
- Identifying what change is needed
- Defining and implementing specific actions to be taken to achieve that change
- Persuading key stakeholders, at every step of the way, to accept and support the change
Stakeholder persuasion is often the most challenging aspect. It has been said, “If you want to make enemies, try to change something.” Although Francis enjoys broad support both within and outside of the Church, he also faces an entrenched bureaucracy and opposition from “conservatives.” At least some members of those factions, threatened by or disagreeing with his actions, are surely trying to thwart his efforts.
Beneath his kind, gentle-but-strong public presence, Pope Francis must have a spine of steel.
Last week, the Business Journals ran an article, “3 qualities to look for when hiring a consultant.”
The three qualities were:
1. No ties to the company (that might create a conflict of interest)
2. Depth and breadth of experience
All three qualities are important, but none is more important than “Track record of producing results.”
Renee’s Rule™ – When interviewing consultants and/or checking their references, be sure to ask, “What improvements did the client company achieve as a result of the consultant’s work?”
This week, I am particularly proud and grateful to live in Portland. Why?
Wednesday night, I attended an event co-sponsored by the Portland Development Commission and leading technology companies in the area that have joined together to promote and enhance Portland’s tech environment.
One highlight of the evening was a video, produced by John Waller’s fabulously talented Uncage the Soul Video Productions, that featured people who moved to Portland from other cities to work in the tech industry here. Aside from the fact that the work from Uncage the Soul is always superb, what set this one apart was that the techies featured in the video were not predominantly white-and-male! You can see the video here and learn more about TechTown Portland here.
After the video, representatives of several of the key sponsor companies made brief remarks. The best comments came from Sam Blackman, CEO of Elemental Technologies, who said, much more eloquently than I, that Portland is the best place in the world to live and that Portland truly welcomes and values diversity!
John Waller and Sam Blackman are two examples of exceptionally bright, talented, thoughtful people who value the most important things in life. It is a privilege to know them and to live in Portland with them!
I have written before about The Experience Fallacy; i.e., making “industry experience” a must-have requirement for a CEO.
What should be the must-have requirements? The following, copied from a position description posted on the web, captures perfectly the truly critical attributes:
- Inspiring and Courageous Leadership: Ability to inspire, persuade, engage, speak straight-forwardly about complex issues, make tough decisions and take difficult actions. Display balanced thinking that combines analysis, wisdom, experience and perspective. Produce data-driven decisions that withstand the “test of time.”
- Creativity and Innovation: Ability to generate new, innovative and visionary approaches to issues, approaches that are effective and responsive. Bring insightful perspectives on emerging and leading trends and best practices.
- Build a Talented, Effective Staff Team: Hire, mentor, develop, retain, and manage a diverse staff. Assemble and reinforce a cohesive, dedicated, highly effective inter-disciplinary team. Ability to lead team through change processes.
- Business and Management Acumen: Ability to manage human, financial and information resources strategically. Bring innovative approaches and solutions to challenges. Streamline and remove processes that do not bring value. Measure success based on results. Set high standards of performance, using accountability measures and benchmarks to track progress.
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.
If you are interested in the topic of gender diversity (In this case, that means women in leadership roles), you will likely want to read the results of McKinsey’s global survey regarding gender diversity. (The article includes a link to the entire report.)
To me, the most notable finding is the disparity between the perceptions of women and men. The study notes: “At all levels, the views on leadership ability diverge by gender.”
As an example, see below: (Please note: this chart includes responses only from those who agree that women can lead as effectively as men. It is unfortunate that the chart below does not include responses from those who do not agree that women can lead as effectively as men.)
Whether you are male or female, I urge you to read Lean In by Sheryl Sandberg. It’s short and easy to read. More important, it’s a real eye-opener.
Women, you will see yourself in some of the situations and be surprised by others. Men, the book will give you a glimpse of the world we women inhabit, and you will likely be shocked.
Would love to know what you think about it!
I often borrow ebooks from the Multnomah County Library (my library) and, as I would do if I were visiting the physical library branch, spend time skimming the “shelves.” As a result of a recent search, I cannot help wondering who decided to acquire 60 ecopies of 50 Shades of Grey (15 copies currently available) but only 16 copies of Lean In (57 users currently on waiting list) and what criteria that person used.
I suspect that almost everyone hopes that those news publications that provide accurate, thoughtful reporting will continue to thrive in the digital age.
For those of us who live in Portland, Oregon, therefore, it has been difficult to watch the struggles of The Oregonian, long our leading newspaper. In June, The Oregonian announced that it is shifting to four-day-a-week home delivery. Personally, although I do, occasionally, prefer to read “hard copies,” mostly, I love having digital access and, for example, read only the digital versions of The New York Times and The Wall Street Journal.
It is time for The Oregonian to enter the 21st century:
Most urgent: It is way past time for The Oregonian to require readers to pay for access to its on-line content. Much smaller communities figured this out long ago: e.g., the Medford Mail Tribune–a publication in less populous southern Oregon–for more than two years has required payment after a reader has clicked on 10 articles in one month.
People will pay for content that is valuable to them. The question now is: What content will The Oregonian decide to provide in order to attract readers?
As you can see, I haven’t “blogged” since March 7th. The reason? I’ve simply been inundated on both the business and personal fronts (most of it good!).
Recently, however, someone whom I respect criticized my most recent post, so I decided to clarify its purpose:
- In several prior posts, I have made the point that poor customer service and lack of attention to operational excellence can lead to lost customers, lost sales, lower profits–poor financial results.
- I have also written about “the paradox of choice;” i.e., when companies offer too many choices, people may avoid making purchases and/or may buy from a competitor that provides fewer choices–poor financial results.
- In my most recent post, I was making the point that not only can poor customer service and too many choices lead to undesirable financial results, but they can also lead to undesirable societal results; e.g., increased stress; wasted time; anger and frustration.
If I were a researcher, I would conduct a study and write a book about the impacts of disorganized, inefficient businesses on society as a whole. To me, that is a topic worth exploring.
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.
The New York Times today has a story, “A New Capital of Call Centers,” which focuses on the fact that many companies with US customers are moving their call centers to the Phillipines or back to the U.S. because personnel in the new locations speak better English than, say, their counterparts in India.
Evidently, these companies believe that customers’ primary concern is the quality of the language used by the call center agents. My primary concern, however, is whether or not the call center agent is actually able to answer my questions, solve my problem, and/or take my order accurately. Overall, I’ve had much better luck with the hard-to-understand foreign agents who seem to know what they are talking about than with US-based agents who are poorly trained and/or work in call centers in which no system is in place to help callers actually get their questions answered.
In brief, I wish companies would pay more attention to this Renee’s Rule™: Make my life easy.
What do you wish?
There have been many analyses written about what made Steve Jobs great, but the articles I have read have missed the key ingredient: Steve was able to make things easy for his customers. He knew instinctively that people would be more likely to use products that were intuitively easy to use, and his genius was that he was able to turn the idea of easy into the reality of easy.
My sons have saved my Apple IIe and the floppy disks with the games they played. We all love our iPhones, iPads, and Macs…..
I’ve been thinking about the issue of “easy” because I had two “high-end” ovens installed in my kitchen this week. Really, I just want to be able to put something into the oven and cook it, but the display is so complicated and the instruction book so inadequate that what should be intuitively easy, will take hours. Will I love my ovens when I finally figure them out? Of course, but the manufacturer has missed the boat by failing to provide the “customer delight” that results when something is actually easy to use.
Today, most of us feel that it has become increasingly difficult to get things done, so “easy” is now more important than ever.
As you may recall, one of Renee’s Rules™ is: Make my life easy. This was one of Steve Job’s Rules long before it was mine.
It’s no wonder Sears is in trouble. Their personnel training and software systems need help.
The situation: A repair person came to perform annual preventive maintenance on my Kenmore washer and dryer. When I showed the person that I could not get the lint screen clean, he offered to send me a new one because a clogged screen slows down the drying process and uses more electricity.
He ordered a replacement screen. Sears sent the wrong screen. It would not fit into the slot.
I called Sears to order a replacement for the replacement and carefully explained what had happened, including that the problem was that the screen, itself, had lint that could not be removed by the repair person or by me.
Again, Sears sent the wrong part–but a different wrong part. In the photo below, the original part is on the top; the second replacement part, on the bottom. As you can see, there is no “screen” on the second part.
Here’s the worst part: After getting the second wrong part, I tried cleaning the screen with a soft-scrubbing sponge–guess what? It worked! If the repair person had only been properly trained……
Sears’ cost: Time for the repair person and the operators who took both the first and second orders + shipping for two parts + an unhappy customer.
A professional friend recently pointed out to me that in my two most recent posts, I was actually addressing the fact that www.thefoundary.com did not have a search function. It still doesn’t have one.
On the other hand, www.foundary.com, does have a search function but is likely just a site set up by a domain squatter to capture ad revenue from visitors who do what I did: type in the wrong URL.
Or..is it? Perhaps the people behind thefoundary.com are also using the name “foundary” in order to increase their revenue at a very low cost….
In my last post, I questioned the wisdom of Foundary.com’s lack of a search function. In fact, I had actually sent an email to them about this topic.
Here is a part of their reply: “Because we have a very limited, specialized, selection and each sale only lasts a few days there is no search feature.”
There is hope, however. When I visited their site today, there was a “Search” field…It doesn’t work for items on their site–it takes visitors to other websites–but I am hoping this means they listened and will develop an effective search function in the not-to-distant future. If they do, I may shop there.
Zulily.com and Foundary.com are websites that offer products of interest to me, HOWEVER, I don’t shop at either one because those sites have no effective search function. There is no field that says, “Search.”
What are they thinking? I assume they think people will buy a larger number of items if they have to navigate through lots of different pages to find something of interest because they’ll see multiple items they’d like to buy.
This may be a great strategy for shoppers who either live to shop or have plenty of time on their hands, but it may prevent busy people from doing any shopping at all on those sites.
Here is the question: Are the total sales to people with time to shop likely to be larger than total sales WOULD be if it were easy to search for specific items on these websites? My gut feel is that if these websites had first-rate search functionality, they would land sales not only from people who have time to shop but also from those who are pressed for time.
Perhaps I live in a warped reality–but most of the people I know (all age groups) would prefer EASY and TIME-SAVING to CUMBERSOME and TIME-CONSUMING.
The greatest danger to the future of our democracy is that too many people are unable to differentiate between what is fact and what is fiction and too few care.
Although I certainly agree that academic achievement needs to be improved in our country, no job in our educational system is more important than ensuring that our citizens can evaluate critically the information they receive.
Perhaps you have followed the Kyl/Colbert saga which prompted this post. Senator Jon Kyl declared in a speech in the US Senate that 90% of Planned Parenthood’s budget goes to abortions. He was more than slightly off the mark: the percentage is only 3%, and his office said that his comment was “not intended to be a factual statement.” The comedian Stephen Colbert responded with a twitter campaign that mocked Kyl’s behavior and drew attention to the lack of fact-based discussion which has become all too common.
Regardless of how we may feel about the abortion issue, it is scary to see that our elected officials (and too many others) simply don’t care about basing their arguments on facts. We will never all agree on all topics, but let’s base our disagreements on FACT rather than on FICTION. If we do not, we risk domination by demagoguery.
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.
I have recently been asked by reporters, “What would you do at Harry and David?”
I responded with a description of the turnaround steps described below. Those steps are always the same, but the specifics vary from project to project. (When I spoke with reporters, I also discussed some of the situation-specific actions I would initiate.)
My S.O.P. (Standard operating procedure)
- Get total control of cash
- Prepare short-term cash forecast
- Select Turnaround Team from key, existing management team members
- Convene the team; go through financial statements line by line–first, looking for ways to improve short-term cash situation, second, identifying ways to increase revenues (and/or margins) and decrease costs — (note: understanding the financial statements inside and out is critical!)
- The result is a written plan that includes a list of who is responsible for achieving what results by which dates and financial projections, which are the numeric representation of the plan.
- Then, it’s time for the team to implement!
- Design and begin implementation of a sound management control system if one does not exist
- In the meantime, there are generally crises to contend with and negotiations with a wide range of stakeholders.
In addition to the above, I also send a web-based confidential survey to all employees. The employees know what’s wrong, what needs to be fixed, and often see things that people at “corporate” miss. Surveys to vendors and customers can be equally enlightening.
The above steps make it sound like the turnaround process is an orderly one, but it’s not. Leading a turnaround is like being a general on the battlefield. It’s messy and fraught with peril. You have a plan, but unexpected crises are constantly arising. I always tell prospective clients that it will feel like the opening scene from Saving Private Ryan. One of my favorite owner/clients used to stop by my office occasionally and say, “I’m having a ‘Saving Private Ryan’ day.”
Someone submitted a comment about my February 16th post in which he pointed out that Kay Hong has been appointed Interim CEO of Harry and David and asked whether I know her and whether her appointment is a good thing.
I haven’t met Kay, but I do know that Harry and David is at a crossroads that definitely requires someone with experience in distressed situations and someone who is strong not only financially but also operationally.
Some comments submitted in response to the Harry and David story in the Oregonian today confirmed my suspicions about what is going on operationally at the company; e.g., complaints about poor product, poor customer service, poor internal systems, and lack of adequate inventory control. All of those will need attention if the company is to prosper.
Most people here in Oregon are partial to our home-grown companies and are pulling for Harry and David to survive. Many jobs and the welfare of the area will be affected by the outcome.
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’ll have more to say on this topic later….but from feedback I’ve been getting, it appears that the problems I saw were only the tip of the iceberg.
Many people believe that the CEO should have the “vision thing.” I believe that our presidents (plural!) and other elected officials should have the the “vision thing,” that it is their responsibility to set the priorities and anticipate problems before they occur.
It appears to me that these officials too often don’t even think about anticipating problems before they occur, let alone initiate preventive actions.
For example: On February 2nd, the Washington Post ran a story, Why does Fresno have thousands of job openings- and high unemployment? The answer, of course is that there is a mismatch between job openings and the skill sets of job applicants. Duh!
We seem to be discovering this nation-wide mismatch only recently, when it has, in fact, been on its way for at least 25 years.
For example, when I was in my MBA program (1984-5), I wrote a paper, “What to do about the coming structural unemployment.” In the paper (lost to posterity because I created it on a floppy disk using my Apple IIe), I addressed the unemployment/change in employment opportunities that would result from the two obvious trends: globalization and greater use of robotics.
If the trends and their impacts were obvious to me, surely they were obvious to countless others.
So here is the question: Why didn’t we, as a country, pay more attention to this problem earlier?
My answer is two-fold:
1. Elected officials are really fire-fighters who are so busy putting out the the current fires, they don’t have time to attend to the likely future ones.
2. We get the government we deserve.
On the business (as opposed to the political) front: Is the phenomenon described above any different from the leadership of Blockbuster and Borders being late to the technological revolution?
Why do some people “see” while others do not?
Everybody did it: Borders, Burlington Coat Factory, Dick’s Sporting Goods, Toys “R” Us and others all opened “pop-up” stores for the holidays. This year, Toys “R” Us alone opened 600 pop-ups instead of the 90 they had last year.
What many retailers seem to be missing, however, is that, with the exception of the short-term leases, the underlying principles that make this boost-holiday-profits strategy successful also provide the underlying principles for improving the bottom line year-round.
Here’s why: In an ideal retail world, retailers would stock only products with the highest margins, the least waste, and the lowest product-related, facility and personnel costs.
Pop-ups, therefore, are close to the ideal retail because only the most popular, highest margin items are on the shelves. As a result, fewer square feet are required. There are fewer sku’s to stock and track, and, at season’s end, there are fewer items remaining. Those that do remain are the fastest moving and most desirable. In addition, it’s easier for customers to find things, so personnel can spend less time helping customers find things and more time ringing up sales at the cash registers. This means shorter customer waits in the checkout lines and/or fewer personnel. Last, but not least: there is no long-term lease expense to drag down the bottom line during the slow seasons.
Except for the short-term, season-only leases, why don’t more retailers apply these same “pop-up” principles to their year-round strategies? Evidently, somewhere along the way to too many marketing plans, too many people bought into The More Choices Fallacy; i.e., retailers need to carry every product under the sun in order to entice customers into their stores. The results for too many retailers? Shrinking margins and turned-off customers.
It’s time to rethink this More Choices strategy because offering fewer choices might well lead to both increased revenues and improved profitability. Stocking fewer sku’s might increase revenues by making it easier, quicker and more pleasant to shop, and stocking fewer sku’s can reduce expenses across the board.
Barry Schwartz, in The Paradox of Choice: Why More Is Less, makes the case that being faced with an overabundance of choices can be both overwhelming and stressful. In fact, he cites evidence that customers are actually less likely to buy when faced with too many choices. If retailers started measuring sales lost due to customer frustration, the results would likely be staggering, and today, every sale counts.
- Having too many choices complicates decision making and, therefore, makes shopping take more time. For many prospective customers, time is a precious commodity.
- When there are too many products, customers are often frustrated because salespeople either can’t locate the merchandise or can’t answer questions about it. There are simply too many items for sales staff to master.
- On top of that, as every shopper knows, many products’ additional bells and whistles don’t work as well as their simpler, less snazzy predecessors—people lose faith in those brands.
Stocking fewer sku’s can also improve the bottom line by reducing costs. After all, the more distinct products a store offers, the more people, space, etc. will be needed to support those products. When retailers offer a smaller, carefully chosen number of selections, they have
- Fewer sku’s to order, transport, stock and track
- Fewer products personnel need to master
- Lower facility costs because less space is required
- Less undesirable, unsalable merchandise left over
Babies “R” Us, with its vast array of goods, almost certainly faces a huge percentage of lost sales. Almost no one I know will shop there. It’s too hard to find things; clerks aren’t knowledgeable or available; the lines are too long; the baby registry is broken, etc.
On the other hand, Pearl Hardware, a small store located in a gentrified area with many high rises, is like a beacon in a storm to every shopper I know, male and female; young and old. Why? Whatever we need for our households (other than large appliances and furniture), Pearl Hardware has it. Need stainless steel cleaner? Paint and painting supplies? A serving dish for that dinner party tonight? Screws, tools, garden and cooking implements? Pearl Hardware has them all. Although the store offers only a narrow assortment of each type of item, every item the store does carry, without exception, is of good quality. If we need something for our homes, Pearl Hardware has it, so that’s where my friends, neighbors, and I go. In the meantime, some other retailer is losing those sales because that retailer simply stocks too much stuff that’s too hard to find.
Wednesday, I am leaving for the Distressed Investing Conference of the Turnaround Management Association and am eager to see whether presenters spend much time discussing leadership considerations.
Many investments in distressed companies fail because the investors (most of them private equity firms) pay too little attention to selecting and managing company leadership, but the last time I attended this conference, 2009, there was only one session (really, it was only one panelist) who highlighted this very important issue.
Mike Heisley discussed the fact that distressed companies require a leader with traits that are very different from those required to lead a “healthy” company. He was exactly right. Click here to view my post from that event.
It may be that the economy is, in fact, reviving, but we definitely are not “there yet.”
My prediction for the coming year—maybe longer—is this: In those industries experiencing intense price competition, the big winners will be those companies that figure out how to provide excellent customer service while remaining cost competitive.
Consumers have had it. They are frustrated by having to take their time to make ten phone calls to solve one simple problem or by spending time looking for an item in a crowded store only to find a clerk (finally!) who either can’t find the product or is unable to answer questions about it.
Many financial experts in the corporate suite subscribe to the axiom that improved customer service adds cost and, therefore, hurts the bottom line. Although there are situations in which that axiom holds true, operational experts know that the opposite is often the case, that companies that think through their processes and procedures–how they provide their products and services to customers—can develop ways to deliver superior service at the same or even at a lower cost thereby improving margins and retaining customers who would otherwise be lost.
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.
In the 9/20-9/26 edition of Bloomberg BusinessWeek, Matthew Lynn (and the photo that accompanied the article) implied that Stephen Elop, who became CEO of Nokia on 9/21, is not the best person to lead the turnaround because Elop is not a “phone expert.”
I do not know a great deal about Elop except that he was recently “the Canadian head of Microsoft’s business unit” and that he has software experience and a reputation for “shaking up” businesses, but I do know that Lynn’s apparent assumption—that “industry experience” is central to a turnaround—is just plain flawed.
One needs to look no further than Alex Mandel’s leadership of Teligent in the late ‘90’s to see that “industry experience” does not guarantee success. Mandel had been president and COO of AT&T, but Teligent failed spectacularly under his leadership. Although the failure was blamed on “the downturn and overcapacity,” the underlying issue was that on the ground and in the trenches, Teligent was simply unable to provide the reliable wireless services it promised. The lesson: The leadership skills required to launch a technology start-up with no existing infrastructure are very different from those required to lead a long-established company.
In a turnaround, where time truly is “of the essence,” the most valuable commodity is effective leadership, not industry expertise. I’ve had 34 clients. Of those, 3 were in one industry; 2 were in another; the rest were all “one-off.” Based on that experience, it is clear to me that industry experience is not, by any means, the determining factor.
The most important skills needed in leading a turnaround are
· The “power of the glance;” i.e., the ability to see quickly what needs to be done
· Common sense
· Ability to establish the right priorities
· Clarity of vision and the ability to convey that vision
· Ability to mobilize the troops to provide ideas and support the effort
Is having industry expertise a plus? Yes. But it is no substitute for having the right leadership skills. No matter what the industry, it is relatively easy to find someone with industry expertise. It is much more difficult to find someone who has the right leadership skills.
I’m rooting for Stephen Elop and hope he proves Mr. Lynn wrong!
As you may have noticed, my entries are getting shorter–Working 80 hours a week will do that to you….
My thought for this week: Every time I read in the business news that “Revenues are up,” I ask myself, what about profits? Are they up or down?
This question popped into my mind today: What would be the impact on the U.S. economy if most businesses were run efficiently instead of inefficiently?
It’s a question I’ll be thinking about and writing about–but probably not for a while because I just started a new Interim CEO engagement and will be extremely busy for a while…..
I have concluded that the vast majority of companies today either do not agree with and/or do not care about and/or are clueless about how to implement the above Renee’s Rule™. There is a good chance you have reached the same conclusion. It has become incredibly difficult to get anything done. The simplest tasks have become complicated.
There seems to be widespread recognition that being nice is an important part of customer service, but the other piece–making things easy for customers–has somehow been lost in translation. Personally, what this customer wants/needs is for the companies I deal with to make life really EASY for me. What do you want/need?
As you may have guessed, this post is the result of a my experiencing a spate of bad (abysmal) customer service over the last few weeks. Everyone is NICE; nothing gets DONE--or gets done only with much wasting of time…..I know that you, too, have “been there; done that;” e.g.,
- You are required to enter your phone number to get to tech support, but the first thing the person asks is, “May I have your phone number?”
- You call for repair help. You provide a description of your problem in infinite detail, but the details somehow do not survive the distance between customer service and the people who actually do the repair work, and it takes forever to get the problem solved.
I understand that many of the companies we call could not care less about whether they are wasting our time…but do they have so many customers, and are they making so much money that they don’t want to improve their bottom lines by streamlining their customer service? Think of all the personnel time and $ that would be saved if no one had to ask, “May I have your telephone number?” or if the technical person “on-the-ground” received enough detail from customer service to solve the problem on the first try.
Enough complaining for one day–you can tell I’ve had too much TERRIBLE customer service from too many NICE people….It may be time for a new Renee’s Rule™: Enough is enough!”
In future posts, I’ll share some examples from my personal experience about how companies can reduce costs AND provide better customer service.
When I’ve abandoned almost all hope of ever finding good customer service anywhere ever again, I stop by Pearl Ace Hardware to reassure myself that there IS actually ONE place that really “gets it.”
Pearl Ace Hardware may be the best store on the planet. On-line reviews reflect this, and all of my friends and neighbors feel the same way. I’ll bet that this is one retailer that is profitable in spite of the downturn.
Why? Because this store truly understands the marketing equation:
Renee’s Rule™: Providing what your customers want/need + great customer service = loyal customers + steady stream of revenue.
They ALWAYS have what I need. They ALWAYS have knowledgeable, friendly staff available to help. No problem finding what I seek; no trouble finding someone to answer questions; no long check-out lines; no surly clerks. It is Customer Service Heaven on Earth!
When I check out, I inevitably find myself saying to the clerk, “I just love this store!” (And trust me, Reader, I am P-I-C-K-Y.)
Some retailers compete by having the largest selection of merchandise–being a “one-stop-shop.”
Some compete by having great “customer service”–being super-nice to customers.
Too many businesses have neither; too few manage to have both.
If every cloud really does have a silver lining, perhaps the silver lining of this downturn will be that we will see a return to first-rate customer service. After all, survival may depend on it.
Renee’s Rule™: There is a connection between customer service and sales.
I’ve seen some pretty scary hiring mistakes. Here is an example in which “The Emperor Had No Clothes.”
In the 1990’s, I became Interim CEO of a company that was experiencing the worst production problems I had ever seen. The company had hired a new Director of Materials Management. He had been referred by a management team member who had worked with him elsewhere, and his references from former employers were excellent. Everyone told me–and seemed to believe–that this guy was a genius. During meetings, he typed on his own notebook computer (fairly unusual at that time), looked impressive, and made “pronouncements.”
I, however, couldn’t understand a thing the guy was saying (plus, of course, materials management was still totally out-of-control.). I said to myself, “I have an MBA, am pretty darned bright, and have run more than 10 companies. If I can’t understand him, maybe he isn’t saying anything. Something is wrong.”
HR had checked his references, but I asked them to contact the universities listed on his resume to verify his degrees. Surprise, surprise: this fellow had lied on his resume and had no college degree. Needless to say, that was the end of his employment with the company. (The company, by the way, was successfully turned around.)
The question in my mind remains: Why in the world hadn’t someone else called his bluff? (A question to be explored in a future blog..)
At least three of Renee’s Rules™ apply:
- If you can’t understand what someone is saying, he may not be saying anything.
- Too often, people are afraid to speak out when they think something is wrong.
- Check references thoroughly.
Too often, people make hiring decisions based upon “experience” rather than “results.” A true story illustrates my point.
Several years ago, at the beginning of what ended up being a very successful turnaround project, the CEO told me, “We have a new CFO who has experience in turnarounds.” (I’ll call the CFO “Jill,” to protect her real identity.)
“Oh?” I said, “What kind of experience?”
To make a long story short, Jill had been CFO at company A, and it went out of business. Then, she went to company B, and it went out of business.
During my tenure in this extremely troubled company, it soon became apparent that although Jill talked a good game (and, indeed, sounded very impressive!), she was simply unable to make needed changes. She fancied herself a turnaround expert but was absolutely unable to fulfill even her most important job function; i.e., producing timely, accurate financial statements. I replaced her with someone who could.
Not long ago, I read about a company that expected to have to shut down if it could not get additional financing very soon. Guess who had recently been a financial officer for that company?
The companies that hired Jill undoubtedly made “experience” their key criterion. Instead, they should have asked about and verified what RESULTS she had actually achieved.
Please note: Although Jill, who marketed herself as someone who could turnaround a company, was neither capable of doing that nor able to accomplish basic accounting functions, there are many extremely capable CFO’s who have found themselves in distressed companies through no fault of their own. I have had the pleasure of working with some of them.
Renee’s Rule™ – When hiring, RESULTS are more important than “experience.”
It seems like every minute a new book with the “latest” business “secrets” hits the market. In reality, however, running a business profitably and well boils down to taking care of the basics; i.e., having a well-conceived plan, having a capable leader, and implementing a carefully crafted management control system. It is astounding to me that so many companies lack these basics—not just family-owned, but also publicly and private equity-owned (You know some of their names.)
Much of the information in this blog may sometimes sound like nothing more than common sense, but common sense and an attention to the basics are too often missing-in-action.
An example from my personal experience: In 2007, a private equity firm interviewed me for a turnaround project. The company had been losing money for three years; there was no business plan; the president was clearly not qualified; and there was no effective management control system in place. After I mentioned that the company needed these basics, the managing director said, “We know that.” (As in, “do you think we are idiots?”) So…if they knew all of that, then where had they been, and what had they been doing for the past three years? And these were people with MBA’s from prestigious institutions, who, presumably, have a fiduciary duty to their investors and definitely know better.
Find a way to step back from your business, to take a cold, hard look at where you are and what your real prospects are…Are you making money or losing money?