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September 2004

“You're Hired…Now Turn It Around!”

In April I told our newsletter readers: “You're Fired!” This month, I've changed my mind and decided that not only are you “hired”, I want you now to look at your job through the eyes of a “turnaround executive”.

In May I attended The World Business Forum in New York City, where I had the privilege of listening to such distinguished former executives as GE's Jack Welch and Bill Clinton. But the speakers who impressed me the most were two CEO's who had been hired by their respective company Boards, each on a “bet the farm” strategy, to turn around two icons of American industry — IBM and Xerox. These two executives shared invaluable “lessons learned” that can help any one of us who face either daunting turnaround challenges or the continuous demands for growth and competitive advantage.

Lou Gerstner, retired CEO of IBM, faced an incredible challenge when, with much trepidation, he took the helm of a beleaguered IBM in early 1993. Hemorrhaging from massive debt and mass defection of once Big Blue loyal customers, the company was on the verge of bankruptcy and dismantling. Gerstner, a former McKinsey Partner with CEO experiences at American Express and RJR Nabisco, had been an IBM customer over the years, but was not a technology expert. However, the Board told him that IBM did not have a technology problem; it had a leadership problem that needed fixed… fast.

What Gerstner found, when he walked through the IBM portals, was a company that had fallen victim to the “success syndrome”. It was an insular bureaucracy whose structure and culture was not adapting to rapidly changing technologies and customer demands.

Gerstner began leading IBM through a massive culture change and, in a period of just one year, revenue, net income and earnings per share turned in a steadily positive direction. In his nine years at the top of IBM Gerstner and his team saved IBM from self-destruction and expanded the business by forty percent. His greatest leadership lesson: “I came to see, in my time at IBM, that culture isn't just one aspect of the game — it is the game. In the end, an organization is nothing more than the collective capacity of its people to create value.”

Anne Mulcahy was also a reluctant “turnaround executive” when she was named President of Xerox in mid-2001. Unlike Gerstner, who was an industry outsider, Mulcahy is a Xerox lifer who was witness to Xerox's downward spiral in the late '90's. Critics from both inside and outside the company were skeptical whether someone who had been part of the problem, much less a woman, could make the tough decisions required to revive the fabled male-dominated company.

But Mulcahy, who was later named Chairman and CEO, followed good old-fashioned business instincts to cut costs and out-of-date operations and began to “really listen” to what Xerox customers were saying about the company and its products. She also did not hesitate suggesting to some long-tenured “entitled” employees that the Xerox game was changing and that if they didn't want to play by the new rules, maybe they better leave.

In the case of IBM and Xerox, as with most turnarounds, you have a “burning platform”, and to do nothing is not an option. However, if you're only standing still in today's competitive marketplace…you'll lose. So this summer, how about you and your team putting on a “fresh pair of sunglasses” to look at your team, your products and your processes from a turnaround executive viewpoint. You might be surprised at what you find!

Who Says Elephants Can't Dance?
by Louis V. Gerstner, Jr

The problem with some celebrity CEO books is they're filled with excessive pride and self-congratulation (p.s., we will not be reviewing Clinton's 900 plus pages here). Gerstner's book, however, gives you an insider's view on the tremendous effort and focus required to turn around a gargantuan company that was on the verge of collapse.

What I found interesting and helpful was the case study like blow-by-blow descriptions of what Gerstner actually did, from the emails he wrote to employees, to the outline of presentations he made to key customers, to the key changes he made to help change the Big Blue culture. While most of us will never face his specific challenges, there are common sense leadership lessons we can learn from and adapt — even when we're lucky enough to not have to turn our teams or our companies upside down.

Actions for Results: Tips and Tools for Getting Breakthrough Results…FAST!

Although with different perspectives and examples, Gerstner and Mulcahy told our New York City audience that there were three critical leadership lessons that enabled them and their loyal teams around the world to turn IBM and Xerox around:

Strategic Conviction: Identify the 5-6 things (usually the basics) that are critical to achieving your goals and then focus on only those things. One of them must be: retain and listen to your customers/clients.

Execution: An underappreciated skill that can be used as a competitive advantage because so many companies or teams don't execute strategy well. Don't confuse communicating expectations with inspection; hold people accountable for meaningful targets.

Personal Leadership: Culture is everything, from dress code to team play to respect for customers. When you value and reward different things, people behave differently. If you're not getting what you want, look in the mirror.