According to Crain’s Chicago Business “Sara Lee Looks to Sell Bread Business.” Large investors seem to support the sale, hoping this will expedite a take-over by a larger consumer goods company or a privage equity firm.  They hope the sale of this laggard company will finally bail them out of a bad investment.  Should either takeover happen, Sara Lee would likely cease to exist as a company.  Most employees would lose their jobs, more products “streamlined” into the dustbin, and another Chicago headquarters would disappear. 

Since taking the helm in 2005 CEO Brenda Barnes has systematically dismantled Sara Lee.  Then a $19B company, Sara Lee has shrunk by almost 50% to just over $10B.  From 2005 to 2009, as asset sales dominated management attention, value declined by 75%, from $20/share to $5.  On the hope of high values for the asset balance as the company is shopping its very existence, value has risen to $15/share – a 25% decline from the starting point.  Hard to call that “excellent” CEO performance.

Sara Lee leadership was so focused on trying to Defend & Extend legacy business models that when they didn’t improve the business was sold.  Year by year, Sara Lee got smaller.  And the end of the road looks to be the end of Sara Lee.  Customers lost  many products, with almost no new product introductions to replace them.  Employees had almost no growth opportunities as the company shrank.  Suppliers saw margins shrink as they were beat upon to lower prices.  And investors have suffered losses.  There is no “winner” at the end of the road for Defend & Extend Management.  When the company moves into the Whirlpool little is said as the remnants slip away.

Today we are fascinated by BP’s effort to cap the Deepwater Horizon oil leak in the Gulf of Mexico.  Will it work?  Everyone certainly hopes so.  But what will it mean for BP if the leak is capped?  Unfortunately, precious little.

The New York Times reported recently “In BP’s Record: A History of Boldness and Costly Blunders.” In classic Defend & Extend behavior, Tony Hayward early on implemented a “back to basics” campaign to “refocus” BP on its “core strengths.”  These are all warning signs. When management looks backward, it is not looking forward.  Taking “bold action” to “do what the company has always done best” is simply using euphemisms to ignore added risk in effort to protect a Success Formula with declining value.  People feel pushed to improve performance by constant optimization – including a lot of cost cutting.  And cost cutting leads to blunders.

BP is far from the Whirlpool.  But things don’t look good for BP.  As Forbes published in “BP’s Only Hope for Its Future” BP has to change its direction pretty remarkably or it’s employees, investors, suppliers and customers could find out BP has a long way yet to fall.  Drilling ever riskier wells, in riskier places, for less reserves is not a long-term viable Success Formula.