by Adam Hartung | Jul 18, 2013 | Current Affairs, Defend & Extend, In the Whirlpool, Leadership, Lock-in
Sears has performed horribly since acquired by Fast Eddie Lampert's KMart in 2005. Revenues are down 25%, same store sales have declined persistently, store margins have eroded and the company has recently taken to reporting losses. There really hasn't been any good news for Sears since the acquisition.
Bloomberg Businessweek made a frontal assault on CEO Edward Lampert's leadership at Sears this week. Over several pages the article details how a "free market" organization installed by Mr. Lampert led to rampant internal warfare and an inability for the company to move forward effectively with programs to improve sales or profits. Meanwhile customer satisfaction has declined, and formerly valuable brands such as Kenmore and Craftsman have become industry also-rans.
Because the Lampert controlled hedge fund ESL Investments is the largest investor in Sears, Mr. Lampert has no risk of being fired. Even if Nobel winner Paul Krugman blasts away at him. But, if performance has been so bad – for so long – why does the embattled Mr. Lampert continue to lead in the same way? Why doesn't he "fire" himself?
By all accounts Mr. Lampert is a very smart man. Yale summa cum laude and Phi Beta Kappa, he was a protege of former Treasury Secretay Robert Rubin at Goldman Sach before convincing billionaire Richard Rainwater to fund his start-up hedge fund – and quickly make himself the wealthiest citizen in Connecticut.
If the problems at Sears are so obvious to investors, industry analysts, economics professors, management gurus and journalists why doesn't he simply change?
Mr. Lampert, largely because of his success, is a victim of BIAS. Deep within his decision making are his closely held Beliefs, Interpretations, Assumptions and Strategies. These were created during his formative years in college and business. This BIAS was part of what drove his early success in Goldman, and ESL. This BIAS is now part of his success formula – an entire set of deeply held convictions about what works, and what doesn't, that are not addressed, discussed or even considered when Mr. Lampert and his team grind away daily trying to "fix" declining Sears Holdings.
This BIAS is so strong that not even failure challenges them. Mr. Lampert believes there is deep value in conventional retail, and real estate. He believes strongly in using "free market competition" to allocate resources. He believes in himself, and he believes he is adding value, even if nobody else can see it.
Mr. Lampert assumes that if he allows his managers to fight for resources, the best programs will reach the top (him) for resourcing. He assumes that the historical value in Sears and its house brands will remain, and he merely needs to unleash that value to a free market system for it to be captured. He assumes that because revenues remain around $35B Sears is not irrelevant to the retail landscape, and the company will be revitalized if just the right ideas bubble up from management.
Mr. Lampert inteprets the results very different from analysts. Where outsiders complain about revenue reductions overall and same store, he interprets this as an acceptable part of streamlining. When outsiders say that store closings and reduced labor hurt the brand, he interprets this as value-added cost savings. When losses appear as a result of downsizing he interprets this as short-term accounting that will not matter long-term. While most investors and analysts fret about the overall decline in sales and brands Mr. Lampert interprets growing sales of a small integrated retail program as a success that can turn around the sinking behemoth.
Mr. Lampert's strategy is to identify "deep value" and then tenaciously cut costs, including micro-managing senior staff with daily calls. He believes this worked for Warren Buffett, so he believes it will continue to be a successful strategy. Whether such deep value continues to exist – especially in conventional retail – can be challenged by outsiders (don't forget Buffett lost money on Pier 1,) but it is part of his core strategy and will not be challenged. Whether cost cutting does more harm than good is an unchallenged strategy. Whether micro-managing staff eats up precious resources and leads to unproductive behavior is a leadership strategy that will not change. Hiring younger employees, who resemble Mr. Lampert in quick thinking and intellect (if not industry knowledge or proven leadership skills) is a strategy that will be applied even as the revolving door at headquarters spins.
The retail market has changed dramatically, and incredibly quickly. Advances in internet shopping, technology for on-line shopping (from mobile devices to mobile payments) and rapid delivery have forever altered the economics of retailing. Customer ease of showrooming, and desire to shop remotely means conventional retail has shrunk, and will continue to shrink for several years. This means the real challenge for Sears is not to be a better Sears as it was in 2000 — but to become something very different that can compete with both WalMart and Amazon – and consumer goods manufacturers like GE (appliances) and Exide (car batteries.)
There is no doubt Mr. Lampert is a very smart person. He has made a fortune. But, he and Sears are a victim of his BIAS. Poor results, bad magazine articles and even customer complaints are no match for the BIAS so firmly underlying early success. Even though the market has changed, Mr. Lampert's BIAS has him (and his company) in internal turmoil, year after year, even though long ago outsiders gave up on expecting a better result.
Even if Sears Holdings someday finds itself in bankruptcy court, expect Mr. Lampert to interpret this as something other than a failure – as he defends his BIAS better than he defends its shareholders, employees, suppliers and customers.
What is your BIAS? Are you managing for the needs of changing markets, or working hard to defend doing more of what worked in a bygone era? As a leader, are you targeting the future, or trying to recapture the past? Have market shifts made your beliefs outdated, your interpretations of what happens around you faulty, your assumptions inaccurate and your strategies hurting results? If any of this is true, it may be time you address (and change) your BIAS, rather than continuing to invest in more of the same. Or you may well end up like Sears.
by Adam Hartung | Mar 1, 2013 | Current Affairs, In the Swamp, Leadership, Web/Tech
Marissa Mayer created a firestorm this week by issuing an email requiring all employees who work from home to begin daily commuting to Yahoo offices. Some folks are saying this is going to be a blow to long-term employees, hamper productivity and will harm the company. Others are saying this will improve communications and cooperation, thin out unproductive employees and help Yahoo.
While there are arguments to be made on both sides, the issue is far simpler than many people make it out to be – and the implications for shareholders are downright scary.
Yahoo has been a strugging company for several years. And the reason has nothing to do with its work from home policy. Yahoo has lacked an effective strategy for a decade – and changing its work from home policy does nothing to fix that problem.
In the late 1990s almost every computer browser had Yahoo as its home page. But Yahoo long ago lost its leadership position in content aggregation, search and ad placement. Now, Yahoo is irrelevant. It has no technology advantage, no product advantage and no market advantage. It is so weak in all markets that its only value has been as a second competitor that keeps the market leader from being attacked as a monopolist!
A series of CEOs have been unable to develop a new strategy for Yahoo to make it more like Amazon or Apple and less like – well, Yahoo. With much fanfare Ms. Mayer was brought into the flailing company from Google, which is a market leader, to turn around Yahoo. Only she's been on the job 7 months, and there still is no apparent strategy to return Yahoo to greatness.
Instead, Ms. Mayer has delivered to investors a series of tactical decisions, such as changing the home page layout and now the work from home policy. If tactical decisions alone could fix Yahoo Carol Bartz would have been a hero – instead of being pushed out by the Board in disgrace.
Many leading pundits are enthused with CEO Mayer's decision to force all employees into offices. They are saying she is "making the tough decisions" to "cut the corporate cost structure" and "push people to be more productive." Underlying this lies thinking that the employees are lazy and to blame for Yahoo's failure.
Balderdash. It's not employees' fault Yahoo, and Ms. Mayer, lack an effective strategy to earn a high return on their efforts.
It isn't hard for a new CEO to change policies that make it harder for people to do their jobs – by cutting hours out of their day via commuting. Or lowering productivity as they are forced into endless meetings that "enhance communication and cooperation." Or forcing them out of the company entirely with arcane work rules in a misguided effort to lower operating costs or overhead. Any strategy-free CEO can do those sorts of things.
Just look at how effective this approach was for
- "Chainsaw" Al Dunlap at Scott Paper
- "Fast Eddie" Lampert at Sears
- Carol Bartz at Yahoo
- Meg Whitman at HP
- Brian Dunn at Best Buy
- Gregory Rayburn at Hostess
- Antonio Perez at Kodak
The the fact that some Yahoo employees work from home has nothing to do with the lack of strategy, innovation and growth at Yahoo. That failure is due to leadership. Bringing these employees into offices will only hurt morale, increase real estate costs and push out several valuable workers who have been diligently keeping afloat a severely damaged Yahoo ship. These employees, whether in an office or working at home, will not create a new strategy for Yahoo. And bringing them into offices will not improve the strategy development or innovation processes.
Regardless of anyone's personal opinions about working from home, it has been the trend for over a decade. Work has changed dramatically the last 30 years, and increasingly productivity relies on having time, alone, to think and produce charts, graphs, documents, lines of code, letters, etc. Technologies, from PCs to mobile devices and the software used on them (including communications applications like WebEx, Skype and other conferencing tools) make it possible for people to be as productive remotely as in person. Usually more productive removed from interruptions.
Taking advantage of this trend helps any company to hire better, and be more productive. Going against this trend is simply foolish – regardless the intellectual arguments made to support such a decision. Apple fought the trend to PCs and almost failed. When it wholesale adopted the trend to mobile, seriously reducing its commitment to PC markets, Apple flourished. It is ALWAYS easier to succeed when you work with, and augment trends. Fighting trends ALWAYS fails.
Yahoo investors have plenty to be worried about. Yahoo doesn't need a "tough" CEO. Yahoo needs a CEO with the insight to create, and implement, a new strategy. And a series of tactical actions do not sum to a new strategy. As importantly, the new strategy – and its implementation – needs to augment trends. Not go against trends while demonstrating the clout of a new CEO.
If you've been waiting to figure out if Ms. Mayer is the CEO that can make Yahoo a great company again, the answer is becoming clear. She increasingly appears very unlikely to have what it takes.
by Adam Hartung | Oct 4, 2012 | Defend & Extend, In the Whirlpool, Leadership, Lifecycle, Web/Tech
If you're still an investor in Hewlett Packard you must be new to this blog. But for those who remain optimistic, it is worth reveiwing why Ms. Whitman's forecast for HP yesterday won't happen. There are sound reasons why the company has lost 35% of its value since she took over as CEO, over 75% since just 2010 – and over $90B of value from its peak.
HP was dying before Whitman arrived
I recall my father pointing to a large elm tree when I was a boy and saying "that tree will be dead in under 2 years, we might as well cut it down now." "But it's huge, and has leaves" I said. "It doesn't look dead." "It's not dead yet, but the environmental wind damage has cost it too many branches, the changing creek direction created standing water rotting its roots, and neighboring trees have grown taking away its sunshine. That tree simply won't survive. I know it's more than 3 stories tall, with a giant trunk, and you can't tell it now – but it is already dead."
To teach me the lesson, he decided not to cut the tree. And the following spring it barely leafed out. By fall, it was clearly losing bark, and well into demise. We cut it for firewood.
Such is the situation at HP. Before she became CEO (but while she was a Director – so she doesn't escape culpability for the situation) previous leaders made bad decisions that pushed HP in the wrong direction:
- Carly Fiorina, alone, probably killed HP with the single decision to buy Compaq and gut the HP R&D budget to implement a cost-based, generic strategy for competing in Windows-based PCs. She sucked most of the money out of the wildly profitable printer business to subsidize the transition, and destroy any long-term HP value.
- Mark Hurd furthered this disaster by further investing in cost-cutting to promote "scale efficiencies" and price reductions in PCs. Instead of converting software products and data centers into profitable support products for clients shifting to software-as-a-service (SAAS) or cloud services he closed them – to "focus" on the stagnating, profit-eroding PC business.
- His ill-conceived notion of buying EDS to compete in traditional IT services long after the market had demonstrated a major shift offshore, and declining margins, created an $8B write-off last year; almost 60% of the purchase price. Giving HP another big, uncompetitive business unit in a lousy market.
- His purchase of Palm for $1.2B was a ridiculous price for a business that was once an early leader, but had nothing left to offer customers (sort of like RIM today.) HP used Palm to bring out a Touchpad tablet, but it was so late and lacking apps that the product was recalled from retailers after only 49 days. Another write-off.
- Leo Apotheker bought a small Enterprise Resource Planning (ERP) software company – only more than a decade after monster competitors Oracle, SAP and IBM had encircled the market. Further, customers are now looking past ERP for alternatives to the inflexible "enterprise apps" which hinder their ability to adjust quickly in today's rapidly changing marektplace. The ERP business is sure to shrink, not grow.
Whitman's "Turnaround Plan" simply won't work
Meg is projecting a classic "hockey stick" performance. She plans for revenues and profits to decline for another year or two, then magically start growing again in 3 years. There's a reason "hockey stick" projections don't happen. They imply the company is going to get a lot better, and competitors won't. And that's not how the world works.
Let's see, what will likely happen over the next 3 years from technology advances by industry leaders Apple, Android and others? They aren't standing still, and there's no reason to believe HP will suddenly develop some fantastic mojo to become a new product innovator, leapfrogging them for new markets.
- Meg's first action is cost cutting – to "fix" HP. Cutting 29,000 additional jobs won't fix anything. It just eliminates a bunch of potentially good idea generators who would like to grow the company. When Meg says this is sure to reduce the number of products, revenues and profits in 2013 we can believe that projection fully.
- Adding features like scanning and copying to printers will make no difference to sales. The proliferation of smart devices increasingly means people don't print. Just like we don't carry newspapers or magazines, we don't want to carry memos or presentations. The world is going digital (duh) and printing demand is not going to grow as we read things on smartphones and tablets instead of paper.
- HP is not going to chase the smartphone business. Although it is growing rapidly. Given how late HP is to market, this is probably not a bad idea. But it begs the question of how HP plans to grow.
- HP is going not going to exit PCs. Too bad. Maybe Lenovo or Dell would pay up for this dying business. Holding onto it will do HP no good, costing even more money when HP tries to remain competitive as sales fall and margins evaporate due to overcapacity leading to price wars.
- HP will launch a Windows8 tablet in January targeted at "enterprises." Given the success of the iPad, Samsung Galaxy and Amazon Kindle products exactly how HP will differentiate for enterprise success is far from clear. And entering the market so late, with an unproven operating system platform is betting the market on Microsoft making it a success. That is far, far from a low-risk bet. We could well see this new tablet about as successful as the ill-fated Touchpad.
- Ms. Whitman is betting HP's future (remember, 3 years from now) on "cloud" computing. Oh boy. That is sort of like when WalMart told us their future growth would be "China." She did not describe what HP was going to do differently, or far superior, to unseat companies already providing a raft of successful, growing, profitable cloud services. "Cloud" is not an untapped market, with companies like Oracle, IBM, VMWare, Salesforce.com, NetApp and EMC (not to mention Apple and Amazon) already well entrenched, investing heavily, launching new products and gathering customers.
HPs problems are far deeper than who is CEO
Ms. Whitman said that the biggest problem at HP has been executive turnover. That is not quite right. The problem is HP has had a string of really TERRIBLE CEOs that have moved the company in the wrong direction, invested horribly in outdated strategies, ignored market shifts and assumed that size alone would keep HP successful. In a bygone era all of them – from Carly Fiorina to Mark Hurd to Leo Apotheker – would have been flogged in the Palo Alto public center then placed in stocks so employees (former and current) could hurl fruit and vegetables, or shout obscenities, at them!
Unfortately, Ms. Whitman is sure to join this ignominious list. Her hockey stick projection will not occur; cannot given her strategy.
HP's only hope is to sell the PC business, radically de-invest in printers and move rapidly into entirely new markets. Like Steve Jobs did a dozen years ago when he cut Mac spending to invest in mobile technologies and transform Apple. Meg's faith in operational improvement, commitment to existing "enterprise" markets and Microsoft technology assures HP, and its investors, a decidedly unpleasant future.
by Adam Hartung | Sep 18, 2012 | Current Affairs, Defend & Extend, Food and Drink, In the Rapids, In the Whirlpool, Innovation, Leadership, Lifecycle
Apple is launching the iPhone 5, and the market cap is hitting record highs. No wonder, what with pre-orders on the Apple site selling out in an hour, and over 2 million units being presold in the first 24 hours after announcement.
We care a lot about Apple, largely because the company has made us all so productive. Instead of chained to PCs with their weight and processor-centric architecture (not to mention problems crashing and corrupting files) while simultaneously carrying limited function cell phones, we all now feel easily interconnected 24×7 from lightweight, always-on smart devices. We feel more productive as we access our work colleagues, work tools, social media or favorite internet sites with ease. We are entertained by music, videos and games at our leisure. And we enjoy the benefits of rapid problem solving – everything from navigation to time management and enterprise demands – with easy to use apps utilizing cloud-based data.
In short, what was a tired, nearly bankrupt Macintosh company has become the leading marketer of innovation that makes our lives remarkably better. So we care – a lot – about the products Apple offers, how it sells them and how much they cost. We want to know how we can apply them to solve even more problems for ourselves, colleagues, customers and suppliers.
Amidst all this hoopla, as you figure out how fast you can buy an iPhone 5 and what to do with your older phone, you very likely forgot that Kraft will be splitting itself into 2 parts in about 2 weeks (October 1). And, most likely, you don't really care.
And you can't imagine why I would even compare Kraft with Apple.
Kraft was once an innovation leader. Velveeta, a much maligned product today, gave Americans a fast, easy solution to cheese sauces that were difficult to make. Instant Mac & Cheese was a meal-in-a-box for people on the run, and at a low budget. Cheeze Whiz offered a ready-to-eat spread for canape's. Individually wrapped American cheese slices solved the problem of sticky product for homemakers putting together lunch sandwiches for school children. Miracle Whip added spice to boring sandwiches. Philadelphia brand cream cheese was a tasty, less fattening alternative to butter while also a great product for sauces.
But, the world changed and these innovations have grown a lot less interesting. Frozen food replaced homemade sauces and boxed solutions. Simultaneously, cooking skills improved. Better options for appetizers emerged than stuffed celery or something on a cracker. School lunches changed, and sandwich alternatives flourished. Across Kraft's product lines, demand changed as new technologies were developed that better fit customers' needs leading to revenue stagnation, margin erosion and an increasing irrelevancy of Kraft in the marketplace – despite its enormous size.
Apple turned itself around by focusing on innovation, becoming the most valuable American publicly traded company. Kraft eschewed innovation for cost cutting, doing more of the same trying to defend its "core," leaving investors with virtually no returns. Meanwhile thousands of Kraft employees have lost their jobs, even though revenues per employee at Kraft are 1/6th those at Apple. And supplier margins are a never-ending cycle of forced reductions as Kraft tries to capture their margin for itself.
Chart Source: Yahoo Finance 18 September, 2012
Apple's value went up because it's revenues went up. In 2007 Apple had #24B in revenues, while Kraft was 150% bigger at $37B. Ending 2011 Apple's revenues, all from organic growth, were up 4x (400%) at $108B. But Kraft's 2011 revenues were only $54B, including roughly $10B of purchased revenues from its Cadbury acquisition, meaning comparative Kraft revenues were $44B; a growth of (ho-hum) 3.5%/year.
Lacking innovation Kraft could not grow the topline, and simply could not grow its value. And paying a premium price for someone else's revenues has led to…. splitting the company in 2 in only 2 years, mystifying everyone as to what sort of strategy the company ever had to grow!
But Kraft's new CEO is not deterred. In an Ad Age interview he promised to ramp up advertising while slashing more jobs to cut costs. As if somehow advertising Velveeta, Miracle Whip, Philadelphia and Mac & Cheese will reverse 30 years of market trends toward different products which better serve customer needs!
Apple spends nearly nothing on advertising. But it does spend on innovation. Innovation adds value. Advertising aging products that solve no new needs does not.
Unfortunately for employees, suppliers and shareholders we can expect Kraft to end up just like Hostess Brands, owner of Wonder Bread and Twinkies, which recently filed bankruptcy due to 40 years of sticking to its core business as the market shifted. Industry leaders know this, as they announced this week they are using Kraft's split to remove the company from the Dow Jones Industrial Average.
Companies that innovate change markets and reap the rewards. By delivering on trends they excite customers who flock to their solutions. Companies that focus on defending and extending their past, especially in times of market shifts, end up failing. Failure may not happen overnight, but it is inevitable.
by Adam Hartung | Jul 2, 2012 | Current Affairs, Defend & Extend, In the Whirlpool, Leadership
Cost cutting never improves a company. Period.
We've become so used to reading about reorganizations, layoffs and cost cutting that most people just accept such leadership decisions as "best practice." No matter the company, or industry, it has become conventional wisdom to believe cost cutting is a good thing.
As a reporter recently asked me regarding about layoffs at Yahoo, "Isn't it always smart to cut heads when your profits fall?" Of course not. Have the layoffs at Yahoo in any way made it a better, more successful company able to compete with Google, Microsoft, Facebook and Apple? Given the radical need for innovation, layoffs have only hurt Yahoo more – and made it more likely to end up like RIM (Research in Motion.)
But like believing in a flat world, blood letting to cure disease and that meteorites are spit up out of the ground – this is just another conventional wisdom that is untrue; and desperately needs to be challenged. Cost reductions are killing most companies, not helping them.
Take for example Sara Lee. Sara Lee was once a great, growing company. Its consumer brands were well known, considered premium products and commanded a price premium at retail.
The death spiral at Sara Lee began in 2006. "Professional managers" from top-ranked MBA schools started "improving earnings" with an ongoing program of reorganizations and cost reductions. Largely under the leadership of the much-vaunted Brenda Barnes, none of these cost reductions improved revenues. And the stock price went nowhere.
With each passing year Sara Lee sold parts of the business, such as Hanes, under the disguise of "seeking focus." With each sale a one-time gain was booked, and more people were laid off as the reorganizations continued. Profits remained OK, but the company was actually shrinking – rather than growing.
To prop up the stock price all avaiable cash was used to buy back stock, which helped maximize executive compensation but really did nothing for investors. R&D was eliminated, as was new product development and any new product launches. Instead Sara Lee kept selling more businesses, reorganizing, cutting costs — and buying its own shares. Until finally, after Ms. Barnes left due to an unfortunate stroke, Sara Lee was so small it had nothing left to sell.
So the company decided to split into two parts! Magically, it's like pushing the reset button. What was Sara Lee is now an even smaller Hillshire Brands. All that poor track record of sales, profits and equity value goes POOF as the symbol SLE disappears, and investors are left following HSH – which has only traded for about 2 days! No more looking at that long history of bad performance, it isn't on Bloomberg or Marketwatch or Yahoo. Like the name Sara Lee, the history vanishes.
Well, "if you can't dazzle 'em with brilliance you baffle 'em with bull**it" W.C. Fields once said.
Cost cuts don't work because they don't compound. If I lay off the head of Brand Marketing this year I promise to save $300,000 and improve the Profit & Loss Statement (P&L) by that amount. So a one time improvement. Now – ignoring the fact that the head of branding probably did a number of things to grow revenue – the problem becomes, what do you do the next year? You can't lay off the Brand V.P. again to save that $300,000 twice. Further, if you want to improve the P&L by $450,000 this time you actually have to find 2 Directors to lay off!
Shooting your own troops in order to manage a smaller army rarely wins battles.
Cost cuts are one-time, and are impossible to duplicate. Following this route leads any company toward being much smaller. Like Sara Lee. From a once great company with revenues in the $10s of billions, the new Hillshire Brands isn't even an S&P 500 company (it was replaced by Monster Beverage.) And how can any investor obtain a great return on investment from a company that's shrinking?
What does create a great company? Growth! Unlike cost cutting, if a company launches a new product it can sell $300,000 the first year. If it meets unmet needs, and is a more effective solution, then the product can attract new customers and sell $600,000 the second year. And then $900,000 or maybe $1.2M the third year. (And even add jobs!)
If you are very good at creating and launching products that meet needs, you can create billions of dollars in new revenue. Like Apple with the iPhone and iPad. Or Facebook. Or Groupon. These companies are growing revenues extremely fast because they have products that meet needs. They aren't trying to "save the P&L."
And revenue growth creates "compound returns." Unlike the cost savings which are one time, each dollar of revenue produces cash flow which can be invested in more sales and delivery which can generate even more cash flow. So if growth is 20% and you invest $1,000 in year one, that can become $1,200 in year two, then $1,440 in year three, $1,728 in year four and $2,070 in year five. Each year you receive 20% not only on the $1,000 you invested, but on returns from the previous years!
By compounding year after year, at20% investor money doubles in 5 years. That's why the most important term for investing is CAGR – Compound Annual Growth Rate. Even a small improvement in this number, from say 9% to 11%, has very important meaning. Because it "compounds" year after year. You don't have to add to your investment – merely allowing it to support growth produces very, very handsome returns. The higher the CAGR the better.
Something no cost cutting program can possibly due. Ever.
So, what is the future of Hillshire Brands? According to the CEO, interviewed Sunday for the Chicago Tribune, the company's historically poor performance could be blamed on —– wait —– insufficient focus. Alas, Sara Lee's problem was obviously too much sales! Well, good thing they've been solving that problem.
Of course, having too many brands led to too much lateral thinking and not enough really deep focus on meat. So now that all they need to think about is meat, he expects innovation will be much improved. Right. Now that HSH is a "meat focused meals" company, and the objective is to add innovation to meat, they are considering such radical dietary improvements for our fat-laden, overcaloried American society as adding curry powder to the frozen meatloaf.
Not exactly the iPhone.
To create future growth the first act the new CEO took to push growth was —- wait —– cutting staff by $100million over the next 3 years. Really. He will solve the "analysis paralysis" which seems to concern him as head of this much smaller company because there won't be anyone around to do the analysis, nor to discuss it and certainly not to disagree with the CEO's decisions. Perhaps meat loaf egg rolls will be next.
All reorganizations and cost reductions point to leadership's failure to create growth. Every time. Staff reductions say to investors, employees, suppliers and customers "I have no idea how to add profitable revenue to this company. I really have no clue how to put these people to work productively – even if they are really good people. I have no choice but to cut these jobs, because we desperately need to make the profits look better in order to prop up the stock price short term; even if it kills our chances of developing new products, creating new markets and making superior rates of return for investors long term."
Hillshire's CEO may do very well for himself, and his fellow executives. Assuredly they have compensation plans tied to stock price, and golden parachutes if they leave. HSH is now so small that it is a likely purchase by a more successful company. By further gutting the organization Hillshire's CEO can reduce staff to a minimum, making the acquisition appear easier for a large company. This would allow a premium payment upon acquisition, providing millions to the executives as options pay out and golden parachutes enact.
And it might give a return to the shareholders. If the ongoing slaughter finds a buyer. Otherwise investors will see the stock crater as it heads to bankruptcy. Like RIM and Yahoo. So flip a coin. But that's called gambling, not investing.
What investors need is CAGR. Not cost cutting and reorganizations. And as I've said since 2006 – you don't want to own Sara Lee; even if it's now called Hillshire Brands.
