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PHIL HARDWICK — Turning things around: Two companies and one federal agency

PHIL HARDWICK

PHIL HARDWICK

The cover of the current issue of the Harvard Business Review proclaims, “Making Strategy Work – How to Avoid the Traps and Execute Brilliantly.” Strategy is about how to achieve goals. It is especially important for companies that were once flying high, but have found themselves at a lower altitude.

Turning around a struggling company is a daunting task. So what are the keys, if any, to turning around a company that has lost its luster? After a diligent search of articles, it appears that one of the better observations on the subject comes from an article by Douglas A. McIntyre entitled “America’s Ten Biggest Corporate Turnarounds,” published February 3, 20122 at the 24/7 Wall St website.

Several well-known, once very successful companies are front-page business news these days because they are struggling and in a turnaround mode. Topping that list is McDonald’s. Also in that category is Weight Watchers International. If government agencies were included, then the Veterans Administration would certainly be in the mix. McIntyre lists the following primary reasons that companies falter:

» Bad management;

» Miss the sea change in their industries;

» Belief that future will be driven by mergers and acquisitions; and …

» Market conditions.

McDonald’s has really been in the limelight. Hardly a day goes by that its situation does not make news. Its competitors have had significant financial gains in performance and share price, while it continues to struggle. February same store sales were down 4 percent. Weight Watchers lost money and members during the holiday quarter. Shares of its stock fell to $14.99 within the past two weeks, which is below the 52-week low of $16.40. The V.A. seems to be struggling to turnaround an agency that was excoriated last year by many members of Congress after reports that at least 19 veterans died at VA hospitals in 2010 and 2011 because of delays in diagnosis and treatment.

McIntye’s article points out that most large turnarounds have several things in common. They are:

1. New CEO cuts staff sharply to reduce costs

2. Exit non-core businesses

3. Focus on core skills and products (Starbucks and Ford moved back to their roots

4. New CEO’s often come from outside the corporation’s industry.

Therefore, let us apply these characterists to the companies and federal agency under discussion.

1. New CEO cuts staff sharply to reduce costs — McDonald’s new CEO does not appear to see cost-cutting as part of a new strategy. Weight Watchers announced plans to cut $100 million in costs. V.A. does not plan to reduce costs. Secretary McDonald told “60 Minutes” he hopes to hire about 28,000 medical professionals.

2. Exit non-core businesses — One report said that the new McDonald’s CEO wants to try new things. It announced that chicken products would be free of antibiotics. Weight Watchers will stay with core business, but the new strategy is to step up its fitness and technology focus, using personal coaching and 24/7 expert chats to develop online relationships.  V.A. does not really have any non-core activities.

3. Focus on core skills and products — Many analysts say McDonald’s should get back to basics. The new CEO is reported to say McDonald’s, “plans to create a “modern, progressive burger company.” The V.A. is adding more mental health professionals, but also focusing on core services.

4. New CEO’s often come from outside the corporation’s industry – McDonald’s new CEO is an insider, but he is known as a change agent. Weight Watchers International, Inc. is laying off the president of its North American business, but current CEO of overall company remains. The new V.A.  Secretary Robert McDonald is an outsider. He was formerly CEO of Proctor & Gamble.

It will be interesting to follow these turnaround strategies. As the saying goes, there are no silver bullets. Below is a list of America’s Ten Biggest Turnarounds, according to McIntyre.

1.    Altria

2.   Apple

3.   Chrysler

4.   IBM

5.    Ford

6.   Hewlett-Packard

7.   Sirius XM Radio

8.   Starbucks

9.   Caterpillar

10.  Xerox

» Phil Hardwick is a regular Mississippi Business Journal columnist and CEO of The Hardwick Company, LLC, which provides strategic planning facilitation and leadership training services. His email is phil@philhardwick. com and he’s on the web at www.philhardwick.com

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