Case Study of a
Turnaround
Anthony Macari
Clinical Assistant Professor of
Finance and Owner of
ExplainFinance.net
September 20, 2011
What we will cover
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Introduction
Turnaround process
Guiding Principles
Lessons Learned
Major Mistakes
Case Study
Questions
BACKGROUND
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Education:
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Emery Worldwide, PepsiCo, Kiewit Continental - 1981-1988
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Various Finance/Planning/Acquisitions positions
Fortune Brands – 1988-1999
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University of Connecticut – BA, MBA
Pace Law School–JD
Director of Planning and Director of Business Development-focus on Strategic
Planning, Acquisitions, Divestitures
Sacred Heart University-2000-2003, 2008-Present
New York University-2003-2006
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Clinical Asst. Professor of Finance and Director of Welch MBA Program
Assistant Dean of Business and Legal Studies at NYU
Consulting work with for-profit Education
Clients included SchoolNet, Cardean Learning Group, Lehman Brothers
ExplainFinance.net
ExplainFinance.net
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Provide financial training/coaching to
non-financial employees and executives
More cost-effective than seminars
Can be customized by company or
function (human resources, operations,
marketing, etc.) in order to focus on
what is most relevant to the group
Thanks to Mark Bonney
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Mark is the EVP and CFO for Direct Brands and has
permitted me to use a number of his slides outlining
the turnaround process. His affiliations include:
Board of Directors
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American Bank Note Holographics, Inc. (NASDAQ)
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Audit Committee Chair; Compensation Committee
Axsys Technologies, Inc. (NASDAQ)
ThreeCore Inc. (Venture funded start-up)
Community Health Centers, Inc. (Non-profit)
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Chairman of the Board; Audit and Finance Committee;
Compensation Committee; Executive Committee
Turnaround Process
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Fix – Find what is broken and fix it
Re-Margin – restructure, revise business
processes, renegotiate and retool IT to
lower fixed and variable costs
Grow – look for the “Blue Ocean”
growth opportunity early but fix and remargin first so growth is profitable
Fortune Brands
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Tobacco, Spirits, Golf
Office Products
Home Improvement (Moen, Mlock,
Cabinets)
Office Products and Home Improvement
combined some low margin businesses
in consolidating industries
Guiding Principles
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People will watch your every move!
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Be respectful of everyone.
Work harder than anyone.
Be visible. Be accessible. Talk with people about their lives not just their
work.
Communicate and cascade appropriately. Expression needs to match words.
Base decisions on facts and data.
Decide quickly.
Good results come from your Team’s efforts.
Bad results come from bad decisions…don’t be afraid to say that you made a
mistake…makes you human…earns respect.
Managing up is as important as managing across and down.
It’s not “just business”. It is about people and the relationships that form and
maintain that will define you.
Enjoy the ride and have fun.
Lessons Learned
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Before you join.
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Can the business be saved?
I look for three things:
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CEO with strong skills in the critical area.
Brand reputation.
People that will execute.
Also good if there is an obvious source of
CASH.
Lessons Learned
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You have six months:
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Day 1: Communicate the seriousness of the
situation and take control of CASH processes
Day 2: Understand why performance is bad
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Day 3: Find the enablers
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Bad is a relative term
History is more important than you think
Change is harder than you think
Always think in terms of FIX, Re-Margin, then
GROW!
Major mistakes
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Impatience while learning
Firing too fast
Firing too slow
Not respecting history
Giving history too much credence
Over-achieving
Not managing upward
Case Study-Profile
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Highly educated work force
Significant licensure requirements
Strong pricing-well above inflation rates
Strong demand profile worldwide
Highly fragmented
Product quality inconsistent
Consumer profile varies
Case Study-Profile
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Considerable debate on whether
industry or individual providers need to
be fixed
Definition of product quality and basic
success metrics unclear
The Education Industry
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K-12
Community Colleges
Regional Colleges
State Universities
Elite Universities
A Few Myths
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Just need business expertise
Gates Foundation
Mike Milken Foundation
Mike Bloomberg
Just need more money
Technology will solve the problem
Educational Governance
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At the college level, the “inmates” do
run the asylum, with mixed impact
Personal agendas vs. optimal solution
Project management vs. academic
integrity
Input is considered a “right”
Similar to local non-profit Boards
The “Corporate “ Culture
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20% are truly outstanding
60% are competent and want to do the
right thing
10% are not competent
10% are very high maintenance
Real gap between faculty and
“corporate/administrative” functions
What is “Good” Education
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Before understand why performance is bad,
need to define “good” performance
Is it achievement on standardized exams?
Is it getting a job?
Good teacher evaluations?
Assurance of learning?
Is it development of the total person (soft
skills, dorm life, athletics)
For Profit Education
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Lower teaching costs ($1.5k vs $25k)
Leverage technology
Marketing and customer service
Rubric based grading and assessment
Marketability of degree
Quality debate
More typical corporate structure
Back to Mark’s Points
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Can the “business” be saved?
Can it be fixed like any other business
or is there a different model?
Questions