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Tips of the turnaround artists

Four executives hired to rebuild Tampa Bay area companies offer techniques that can help any executive.

When they walk into the office, they're often greeted with silence or even outright hostility.

"Lots of people in an organization see someone like me and they hide under their desks," said Bob Peiser, chief executive of Vitality Beverages Inc.

Everyone knows what's going on. The company is in serious trouble, and a "turnaround artist" has arrived to fix the problems. Fast.

"You never really know what you are walking into," said Andy May, CEO at Paradyne Networks Inc., "but it's typically worse than you thought."

Bob Burton, CEO at Walter Industries Inc., and Brian Merriman, president at Danka Business Systems PLC, can relate. Call this group of four executives the Tampa Bay Turnaround Club.

Each came here with turnaround experience, and each was hired by a Tampa Bay area company counting on a miracle worker to make serious problems disappear.

Say "turnaround artist" and the phrase may bring to mind "Chainsaw Al" Dunlap, who fired thousands of workers at Scott Paper and Sunbeam before his slash-and-burn methods caught up with him. He was fired at Sunbeam after his decisions and in-your-face management style led to chaos.

But most turnaround artists aren't nearly as flashy or controversial: They usually don't boast of how many workers they've canned or write books about themselves as Dunlap did.

Still, they must be self-confident leaders who can quickly get to the roots of a company's problems and who have the guts to make dramatic, risky moves.

Walter Industries' Burton hired a new chief financial officer just two weeks after he arrived. Paradyne's May moved the high-speed telecommunications company into two new product lines, betting it could compete.

Danka's Merriman has replaced every senior manager in the copier company's U.S. operations. And Vitality's Peiser abandoned the well-known Sunkist brand because it was losing money.

Of course, not all turnarounds are successful.

Vince Naimoli, managing general partner of the Tampa Bay Devil Rays, built a personal fortune as a turnaround artist. But some critics say he did little to improve the performance of two Tampa companies he ran, Anchor Glass and Harvard Industries.

And Ron Johnson, who got the Kash n' Karry grocery chain ready to be sold to Food Lion, moved on next to a Jackson, Miss., chain called Jitney Jungle, only to have it file for bankruptcy protection.

Still, turnaround artists use many management techniques that could be helpful to any executive. Based on interviews with turnaround veterans in the bay area and beyond, here's a top 10 list:

1. Listen.

"When you come in, you don't know who is telling you the truth and who's just blowing smoke," said Peiser of Vitality, formed last year in a buyout of Lykes Bros. Inc.'s struggling juice operations. "You have to talk to a lot of people and just listen."

One of the biggest challenges is getting employees to open up. "The only way to overcome that is to keep talking," Peiser said.

At Walter Industries, Burton made a statement to employees simply by moving some parking spaces.

Senior executives used to park in front of the headquarters, while visitors and employees parked on the side or in back. Burton moved the execs' spaces to the back, opening the front for visitors.

"That wasn't brain surgery, but I know you can't have a class system," said Burton, who arrived at the homebuilding/industrial conglomerate a month ago.

2. Break down big problems into smaller, more manageable pieces.

"There usually isn't one elegant solution to a problem," said Ted Stenger of Jay Alix & Associates of Southfield, Mich., which dispatches teams of top managers on turnaround missions. Stenger has worked in high-level fix-it jobs at Fruit of the Loom and Maidenform.

"Every time you get through one piece, you get smarter," he said. "Then you address the next piece."

Turnaround experts say Al Dunlap's solutions _ cutting costs by laying off workers and eliminating product lines _ don't work unless you first understand the big picture. Decisions must be quick but not rash, because a wrong move can be disastrous.

And it isn't easy to figure out the ramifications of every move you make. For instance, Dunlap drastically cut the computer support staff at Sunbeam, only to face a major problem when the system crashed and inventories had to be done on paper.

3. Get the right people in the right jobs.

When May arrived at Paradyne three-and-a-half years ago, it had 1,100 employees. Now, it has 900, and about 400 are new. "You have to work from your gut and believe in your ability as a good assessor of people," he said.

And at Danka, Merriman and CEO Larry Switzer have restocked the management team with executives from companies such as Xerox and Westinghouse. Danka outgrew its managers' abilities, Merriman said.

"You need people with the right kind of experience," he said. "There's a difference between having one year's experience 10 times over, always doing things the same way, and having 10 years of experience where you got outside perspectives and made innovative changes."

4. Focus on what the company does best.

In each of the four local turnaround situations, the company is trimming product lines to focus on the best performers.

Paradyne is the furthest along in its turnaround, a success fueled by healthy sales in new product lines of modems and network management systems. The company, formerly a relatively small subsidiary of AT&T, had to update its product mix so it could compete on its own.

The other companies are refining their strategies. Danka is focusing on cutting-edge, higher-margin digital copiers. Vitality is building market share in the business of providing private-label juices for grocery chains and food service companies.

And at Walter Industries, Burton knows he'll have to shed some subsidiaries to succeed. "In most cases, a company needs a turnaround because its revenues and costs don't match up," he said. "That's how I look at it."

5. When people get upset with you, stay cool.

"When there's a conflict, you have to deal with it in a very measured way," consultant Stenger said. When someone gets in your face, calm the person down, he said.

"Then I have to be proactive, telling them there are no secrets here and explaining to them why we're doing what we're doing," he said. "Over time, you have to demonstrate that you aren't just making speeches, and that will pay off."

6. Convince employees that change is necessary for survival.

Burton is preaching the value of change to as many Walter Industries employees as he can, both formally and informally.

"I tell people it's better for them to have some grief now and still have a job, as opposed to not having the company around in a few years," he said.

Turnaround artists have an advantage over most executives. New to the company, they aren't bound by friendships or corporate traditions.

But management experts say all managers should try to be impartial decisionmakers.

For months, Vitality's Peiser has been hearing from worried employees at its Dade City packaging plant as the company acquired other plants around North America.

Vitality recently said it will definitely keep the local plant open, though it may close others. While Peiser is glad the Dade City employees will keep their jobs, he said Vitality's top consideration had to be what was best for the company.

"You have to be dispassionate," he said. "It's unfortunate, but you do."

7. If there are problems, take off the blinders and admit it.

"In most companies where there's trouble, the CEO is in denial," Stenger said.

He recalls a visit to a Michigan company where the problems were obvious to everyone except the guy at the top.

"So I took him to his local plant," Stenger said. "Only half the presses were running, and there was junk all over the place. . . . The scrap bins were overflowing.

"We asked a maintenance guy what was going on. "It's a mess here, and it's been like this for months,' he said. The CEO finally got it. "I guess if the guy sweeping the floor knows we have problems, everyone else does, too,' he said."

8. Learn from mistakes, and don't look back.

"When you're making quick decisions, you are going to make mistakes," Paradyne's May said. "There is nothing you can do about that."

The key is to get employees to be equally aggressive, even if they fear for their jobs.

"I'm not going to shoot anyone who has made a mistake in the past," Vitality's Peiser said. "But I am going to shoot people who aren't working at their jobs or willing to take action or to take risks."

9. Find ways to show employees you have the experience to do the job.

Turnaround artists are hired because they succeeded somewhere else. So without being preachy about it, they build confidence by showing they know what they're doing.

Paradyne's May was just 36 when he took over as CEO; all of his senior managers were older. "But I knew the industry, and people knew I had had successes before, which builds credibility," he said.

Use specific terminology to show you know the industry, the turnaround experts say. And remember that your job is to help employees see the bigger picture, whether it's what's going on with competitors or how the economy might affect your sales.

10. Seize opportunities to give out good news.

Keeping morale up is all-important for any manager, but particularly in a stress-filled turnaround situation.

"There will be small victories along the way in a turnaround, and you have to get the word out on those," consultant Stenger said.

And if things aren't going well, any success provides an opportunity for morale-building.

"You have to be a total cheerleader," Paradyne's May said.

Four Tampa Bay turnaround specialists

Bob Burton

Chief executive

Walter Industries Inc., Tampa

_ Arrived: April 25

_ Age: 62

_ Experience: Led turnaround at World Color Press Inc. in Greenwich, Conn., posting nine years of record results. Previously ran ABC Publishing Group for Capital Cities/ABC Inc., forming friendships with Barry Diller, Billy Graham and Warren Buffett. Also ran operations at CBS Publishing, and started career with Science Research Associates, an IBM subsidiary.

_ Challenge: Needs to restore stock market's confidence in the homebuilding/industrial conglomerate. Needs to jump-start Walter Industries' earnings growth and focus the business, probably by shucking some subsidiaries.

Andy May

Chief executive

Paradyne Networks Inc., Largo

_ Arrived: November 1996

_ Age: 40

_ Experience: Was vice president at 3Com Corp. before joining Paradyne. Had turnaround experience as marketing vice president for Primary Access Corp. in San Diego, sold to 3Com in 1995. Started career in sales and marketing at CompuServe Inc.

_ Challenge: May has engineered one of the Tampa Bay area's biggest turnarounds, helping Paradyne update its product mix and go public. Now, the company must meet expectations for growth: Its net income last year was 14 cents a share, but analysts estimate earnings per share of 40 cents this year and 82 cents next year.

Brian Merriman

President

Danka Business Systems PLC, St. Petersburg

_ Arrived: August 1998

_ Age: 62

_ Experience: Was senior vice president at Toshiba before coming to Danka. Big turnaround was at Savin Corp., where he led the company out of bankruptcy protection and into profitability. Also worked in sales at Konica Business Machines.

_ Challenge: To show the stock market that last quarter's surprising loss of 34 cents a share was only a blip in Danka's road to recovery. Merriman and CEO Larry Switzer have cleaned house; now the new management team must sell more copiers.

Bob Peiser

Chief executive

Vitality Beverages Inc., Tampa

_ Arrived: May 1999

_ Age: 52

_ Experience: Had three stints at Trans World Airlines Inc., leading a financial restructuring in 1995. Led early-1990s turnaround at Orange-Co Inc. in Bartow, leading to sale to Ben Hill Griffin III. Was CEO of FoxMeyer Drug Co., leading it through bankruptcy reorganization. Led unsuccessful turnaround at Western Pacific Airlines in Denver, then got Boston computer services company CVSI Inc. in shape to be sold.

_ Challenge: After a year of frenzied acquisitions, Vitality is positioned to build market share in the private-label and food service niches of the juice business. Now it must increase profits in an industry where margins are razor-thin, while streamlining operations around North America.

_ Times researcher John Martin contributed to this report.

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