Rumors are flying around Chicago about the health of Sara Lee CEO Brenda Barnes. Will she stay or leave? Some investors are wondering as well. While I join the chorus of voices that wish Ms. Barnes good health, her departure would not be a bad thing for Sara Lee investors, employees, suppliers and customers! Whether for health or other reasons, a change in the top at Sara Lee is long overdue.
As Crain's Chicago Business reported in "Sara Lee's Secrecy on CEO Barnes' Health Leaves Investors Wondering" in the 5 years Ms. Barnes has been CEO Sara Lee's value has dropped 25%, even as the S&P consumer goods index has risen by 18%! During her tenure, revenues at Sara Lee have declined 50% – largely due to asset sales from which the cash proceeds have done nothing to improve results. Currently, Ms. Barnes has a large deal on the table to sell another multi-billion dollar business in her ongoing effort to make Sara Lee a smaller and less competitive company.
There's nothing wrong with selling a business. But leaders have a responsibility to either pay the proceeds out to investors or re-invest the proceeds into new, growing businesses with high rates of return that will add more value. In Ms. Barnes case the money has been spent buying up shares of stock (the plan for any future proceeds, by the way). That has done nothing more than make the pool of shares, like the company assets, smaller. As already mentioned, these asset sales have not added anything to revenue or profit growth and thus the company value has steadily declined.
Of course, as I vilify Ms. Barnes reality is that it takes the agreement of Sara Lee's Board of Directors for this strategy to be implemented. And it takes a leadership team which agrees to go along – without offering strong dissent and driving discussion of results and long-term impact. While I make out Ms. Barnes to be a "goat" there is a lot more wrong at Sara Lee these days than simply the CEO.
Sara Lee has long been without any White Space. The company has tried to "milk" its aged brands, hoping to get more profits out of products that were much more exciting to customers in 1970 than 2010. While Jimmy Dean Sausage, Sara Lee frozen desserts and similar products were the stuff of my youth the current generation of young adults have chosen much different fare – in not only food but household and health/beauty products. Sara Lee's leadership before Ms. Barnes started the route of focusing on past sales and simply trying to give existing customers more. As a result, there has been 2 decades of insufficient scenario planning, limited competitor analysis – and no Disruptions. There has been no White Space to do anything new.
Similarly, we can easily make heroes out of CEOs in companies doing well. Steve Jobs at Apple is a case in point. During his 10 year leadership, Apple has gone from near bankruptcy to value greater than Microsoft. But this was not all Mr. Jobs. He has pushed his Board of Directors and leadership team to do more scenario planning, obsess about competitors, implement Disruptions and open White Space for doing new things. As a result, the Apple organization is now entering new markets and launching new products.
Mr. Jobs has not been without his own health concerns the last few years. Hopefully, he is doing well and will live many, many more healthy and happy years. Yet, if he chose to depart Apple for health or other reasons Apple is well positioned to continue doing well. Because as an organization it is planning correctly and implementing Disruptions and White Space – critical capabilities of Phoenix organizations.
CEOs matter. They set the tone for their organizations. Good ones understand the need to build organizations that can enter new markets – like Mr. Jobs. Bad ones spend their energy trying to Defend & Extend past results, often getting trapped in financial machinations as the organization shrinks and value disintegrates – like Ms. Barnes. But it's not all about the CEO and we shouldn't get too caught up in that single job. Good organizations have the skills to produce long-term growth and high rates of returns, and that can be built anywhere. Let's hope Sara Lee's Board wakes up to this and starts making changes in that organization soon.