United Airlines. Providian Financial. Warnaco. Xerox. Gillette. Campbell Soup. Just a few of the companies that have hired so-called turnaround CEOs in the past year.
The list is growing daily — and little wonder. In these recessionary times, the promise of salvation by a white knight exerts a powerful hold on corporate directors of troubled companies. “Boards want to be seduced by someone whom they have been told is a turnaround artist. They’re looking for someone to help them out of a desperate situation,” explains associate professor Laura Resnikoff, who teaches a course in turnarounds at Columbia Business School. Investors like them, too: The appointment of a CEO with turnaround credentials rarely fails to boost even the most moribund stock.
But experience suggests that the phrase “turnaround CEO” is only rarely accurate. More often it’s simply optimistic (think Ford’s Jacques Nasser) or even a complete misnomer (think Sunbeam’s Al Dunlap). Few of them (think IBM’s Lou Gerstner) return a company to its former luster. At best, most of them succeed only in slowing the fall and providing a reasonably soft landing for investors, whether through sale, merger, or even Chapter 11 filing. In fact, a May 2000 article in the Harvard Business Review estimated that 70 percent of all turnaround efforts are failures.
But thanks to the itinerant nature of their careers, turnaround CEOs are usually off to the next assignment before the success or failure of their previous charge is known. “These guys get their halos way too early, before we’ve had five to seven years to see what they did,” says Resnikoff.
So how should their records be fairly assessed? What really separates the successes from the failures and the patch-up jobs? And what are the chances that their next turnaround will be the one that solidifies their reputations?
To find out, CFO examined the careers of three CEOs who have made names for themselves as turnaround guys: Norm Blake, CEO of Comdisco Corp.; Allen Questrom, CEO of J.C. Penney Inc.; and Robert S. “Steve” Miller Jr., CEO of Bethlehem Steel Corp. Collectively, their résumés include 20 attempted turnarounds, with only eight outright successes, five question marks, and several failures. And while the jury is still out on their latest efforts, their track records serve as fair warning to any company expecting “happily ever after”: turnarounds are inevitably painful, invariably different from what was envisioned, and often too difficult for one individual to achieve.
Three Leadership Styles
What Blake, Questrom, and Miller have most in common is that they have made careers out of troubled companies. Without question, their arrivals have been greeted with great relief (on Wall Street, if not necessarily in the employee ranks). That’s not surprising considering the messy situations they tackle, says Resnikoff. “Many troubled companies drift for a long time,” she says. “Someone who is willing to assess the problem and take action is recognized for his leadership.”