Turnaround Tycoons

Dec. 21, 2004
CEOs find satisfaction and stress in running troubled companies.

They must have sensed it was coming. The lifetime employees of Corning Inc.'s consumer products division must have known the troubles faced by the 149-year-old corporation. Corning's stock price refused to budge. Other old-economy companies nearby such as Xerox Corp. were shuttering factories and eliminating thousands of employees. Analysts badgered Corning top brass about unloading the slow-growth unit that made casserole dishes and other kitchen-ware. Still, thoughts of carving off 30% of the corporation -- its signature business -- rattled CEO Roger G. Ackerman, himself a lifetime employee. "It hurt to admit that we couldn't make it in consumer products," Ackerman acknowledges. "We stood in front of all the people in consumer products and told them we were selling. People started to cry," recounts the executive, who in college learned something about stress management when he made ends meet by collecting tolls at night on the Garden State Parkway near Newark, N.J. Selling the consumer-goods unit would prove pivotal in transforming Corning from old-economy laggard into new-economy leader. But no matter how good the reasons, or how many times it happens, downsizing is difficult for just about everyone. It is the most stressful task a CEO faces, according to IndustryWeek's 29th Annual CEO Survey, which included questions on what responsibilities caused the most grief and the most satisfaction for CEOs. Leading a public company is a grueling job. Some 47% of respondents to the survey said they work more than 60 hours a week. Top executives travel two out of every three nights, sometimes to politically unstable regions where markets or supplies exist. "You have to go where God put the oil," points out Archie Dunham, CEO of Conoco Inc., Houston, who travels to Russia, Venezuela, and the Middle East. Difficult, yes, but Dunham's job also is thrilling. He treats the world as his classroom and visits historic sites and homes of officials and customers in exotic lands. "Spending time in a beautiful palace or home, learning about how families and individuals live, that's a highlight," he explains. But life at the top also has its share of anxious moments, and nowhere is that more evident than during a turnaround, when both stress and satisfaction can be tremendous. Revitalizing a company offers a chance to build a legacy and to develop people by teaching them new ways to think. A turnaround is also exciting because the person who carries it out bucks the odds. Nevertheless, the business press is littered with CEO blunders. "Chainsaw" Al Dunlap lost his status as corporate vanquisher when he failed to rescue troubled Sunbeam Corp. during the two years he ran it. At Xerox Corp., G. Richard Thoman fell short in his efforts to right that company. For Ackerman, 61, satisfaction came in making the right decisions and enjoying the consequences. Like other turnaround tycoons, Ackerman surrounded himself with smart people who would help shoulder the stress associated with tough choices. Ackerman sold Corning's $675 million consumer-goods unit and its $2 billion lab-testing division. He set about doubling spending in research and development in communications networking. As Ackerman's plans unfolded, the Asian currency crisis hit. It devastated prices for the company's optical fiber, and analysts called on Ackerman to cut costs and trim his research plans. Corning's stock price lost half its value. Wall Street Pressures The stock market provokes almost universal angst among CEOs. Investors thrive on peppering gray-haired corporate veterans with tough questions during presentations and over the phone. To keep them happy, some executives become obsessed with quarterly earnings. Missing them can cause a company to lose 20% of its market capitalization in a week. Too often leaders are forced to make short-term decisions to boost the numbers, but at the same time they need to focus on growing the business for the future. "Any hiccup in earnings, no matter how good the long-term story, and there will be problems," observes Robert J. Gariano, Chicago-based head of recruiting firm Russell Reynolds Associates Inc.'s global industrial manufacturing and distribution practice. Ackerman withstood pressure from the investment community to cut back on research to make the corporation's numbers temporarily look better. Not only did he maintain R&D spending, he announced a plan to acquire market share in Asia. "My reaction was if any competitor cuts price on us, we'll go below them," he remembers. That meant slicing prices by as much as half. Making and sticking to decisions under pressure is a key CEO characteristic, and Ackerman believes his parents helped shape his resolute will. Raised by a father who was a teacher and a mother who was an executive, Ackerman describes a childhood of praise: "My parents never raised their voices at me." Sticking to his plans in the face of crisis yielded Corning handsome results and Ackerman tremendous satisfaction. Profits in 1999 reached $482 million on sales of $4.3 billion. Now regarded by the investment community as a new-economy leader, Ackerman has overseen Corning's skyrocketing share price, from the low $30s to the low $300s during his tenure. The turnaround story at Terex Corp. is just as dramatic. Few people would have considered the CEO role Ronald M. DeFeo accepted. When he became CEO of the Westport, Conn., manufacturer of earth-moving and lifting machines in 1995, it faced an audit by the IRS and a Securities and Exchange Commission investigation. "Our franchises weren't very good, we had a couple of large business units that weren't producing any cash," DeFeo adds. With the grim reaper in the office, DeFeo held daily cash calls to figure out whom the company could pay. "When you're not sure you can make payroll, you have sleepless nights," acknowledges the 48-year-old CEO. DeFeo began to revitalize Terex by selling its interests in ailing businesses such as Fruehauf Trailer Corp. He answered persistent questions of auditors and bankers who wondered if the company would survive. "My first inclination was not to take the calls, but that's wrong. If you talk to them honestly, and they see the problems, see your path of action and how you're implementing it, that can be very empowering," DeFeo explains. Step by step DeFeo is turning Terex around. The SEC investigation ended in 1999 with Terex agreeing to an administrative cease-and-desist order related to accounting methods. The company also resolved the IRS audit. Last year Terex boasted profits of $173 million on sales of $1.9 billion. DeFeo is proud of the corporate rescue team he created, comparing them to Olympic Jamaican bobsledders who bucked the odds. "Many of our competitors have likened us to a phoenix rising from the ashes," he crows. Restructuring Woes What the hell do I do now?" was the question running through William R. Holland's mind when in 1986 he took over as CEO of United Dominion Industries Ltd., Charlotte, a company as troubled as Terex. A recession and Japanese competition had slowed sales at the conglomerate. A series of acquisitions had saddled it with debt. Holland, 61, remembers the nadir: "We were informed on a Thursday night that bonding for our construction business would be dropped by the following Monday." The CEO worked most of the weekend and secured new financing. Then he set about restructuring the conglomerate. He wanted to focus on manufacturing, so he sold off United Dominion's other businesses in construction and engineering. Half the company's staff left or was laid off. "I was primarily engaged in paying down debt, which is kind of debilitating work, but we did it step by step," remembers Holland, who turned to golf to take his mind off business. "I picked it up because, as a workaholic, I realized I could use it in business, but once I started playing, I became a real fan," he explains. While he shed low-margin divisions, Holland found satisfaction in creating a tightly focused corporation by seeking and acquiring complementary companies. He purchased 55 businesses that fit into United Dominion's niche of heavily engineered products that require technical expertise. United Dominion's transformation is nearing completion. In 1999 it counted profits of $98 million (before restructuring and unusual charges) on sales of $2 billion. But thoughts of business never really leave Holland's mind. "It's like a big bird hovering over your head. You learn to live with it," he says. M. Christine Jacobs knows that omnipresent big bird. The CEO of Theragenics Corp., a company that manufactures implantable radioactive "seeds" to treat prostate cancer, takes pleasure in describing the steps she took to build the profitable medical-device manufacturer. When Jacobs joined Theragenics in 1987, the Buford, Ga., company was short on cash and experienced managers. The investment bank that took Theragenics public had gone bankrupt, and Jacobs was surrounded by brilliant scientists who thought they could cure cancer but lacked the commercial acumen to do so. Jacobs, 50, who started as marketing and sales director, built a market for the cancer-treating devices by learning the language of oncology. She traveled three weekends out of four to radiologists' conferences. She searched for doctors willing to try experimental therapy, and found a few. She organized advertising campaigns to tell consumers about the product, hoping they would persuade doctors to try it. Jacobs discovered gratification in creating a market for Theragenics' products where there was none. By 1991, the company had turned a profit. Theragenics tapped Jacobs as CEO in 1993. That's when the executive, who delights in challenging established ways of doing business, realized contract manufacturers couldn't handle the product line. She brought production in house. "We bought a machine that had been used by universities, but never in the manufacturing sector," recounts the CEO. "We had no idea what the margins would be or how much cash the process would eat up." The company put up its first plant and after some experimentation began production. Today Jacobs leans on a network of six female friends who also are CEOs, and who share many of her sources of stress and satisfaction. The group meets to talk and has traveled to Europe together. Jacobs also balances work-related tension with a sense of accomplishment at creating a product that treats a life-threatening illness. But she never escapes the stresses of the CEO post entirely. Now she's battling a share price that's lost 50% of its value in the last six months despite strong sales and earnings. At United Dominion, Holland has similar concerns. "The last couple of years we've had a very good record, good cash flow, but our share price continues to languish like many industrials," he complains.

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