This may sound odd to some, but regular readers of this blog have probably figured it out already: I live, and thrive, on bad management.
It’s not that I don’t appreciate all that good-to-great leadership that people spend so much time talking about; it’s just that I find that I get a lot more insight, strategy and perspective from bad management than I do from good. I was always the guy in business school who wanted to hear more about the destructive shenanigans of guys like “Chain Saw” Al Dunlap at Sunbeam than the smart and savvy work of a visionary like Herb Kelleher at Southwest Airlines.
In short, I believe that there are great lessons in closely examining bad management. And, that’s why I follow Sam Zell so closely.
Zell is the foul-mouthed CEO of Tribune Co., the big media company that owns not only television and radio stations but also big newspapers including the Los Angeles Times, Chicago Tribune and Baltimore Sun. He was in over his head from the moment he cut the deal to take control of Tribune, and his over-the-top hubris, chronic arrogance and terribly shortsighted decision-making (by both Zell and his management minions) have helped push Tribune into Chapter 11 bankruptcy.
Well, we may be starting to see the end of Sam Zell, at least as the guy controlling Tribune. The Chicago Sun-Times reports that “Sam Zell’s days as a media titan in Chicago are nearly over. … Eight months after [Tribune’s bankruptcy] filing, two sources familiar with the process said creditors are working on a reorganization plan that elbows Zell aside. The creditors, including investment banks owed $8.6 billion from Zell’s Tribune takeover, would stage a takeover of their own and sell off the company’s newspapers and broadcast stations as they see fit.”
A big part of Zell’s problem, of course, is that he took control of Tribune and “piled on debt at exactly the wrong time, and a collapse in advertising for traditional media forced him to take the company to Chapter 11 bankruptcy.” But, Zell’s incredible arrogance in his own leadership and managerial abilities played a big role as well.
“This was a textbook case of a leverage buyout gone bad,” said William Brandt Jr., a corporate turnaround expert not involved in the case who talked to the Sun-Times. Brandt, president of Development Specialists Inc., hit the nail squarely on the head when he said that Zell and his team “were imbeciles who had no idea what they were doing.”
And, the newspaper noted that “Tribune debt recently traded for about 7 cents on the dollar, meaning investors think a lottery ticket is just as likely to pay off. The company’s total debt, counting what Zell assumed in his takeover, is around $13 billion. Brandt said the Tribune deal has become such a ‘reputational disaster’ for Zell that he’s probably not involved much in management other than creditor negotiations.”
I’m not sure why an “imbecile” like Sam Zell, a guy who knew absolutely nothing about the media business when he took over Tribune, thought he could swoop in and be successful where more experienced media managers had failed. Maybe it’s that “Master of the Universe” mania that author Tom Wolfe chronicled so famously in The Bonfire of the Vanities that led Zell to think he was smarter and savvier than everyone else.
He wasn’t, of course, and it’s pretty clear that he’ll leave Tribune, when he finally gets out, a whole lot worse off than when he took it over. When that happens, I’ll miss Zell and his foul-mouthed ways, but it will be better for all if he’s relegated, like “Chain Saw” Al Dunlap, to a management school case study on how NOT to run a business and lead a workforce.
A famous Los Angeles Times memo to the staff once described Sam Zell as “a force of a nature,” and it was spot-on true. Unfortunately, Zell was a terribly destructive one, like an earthquake or hurricane, and those left at the company he has done so much to harm will be left to clean up the mess he created for many, many years to come.
Sometimes however, you see some spur-of-the-moment action take place in the workplace that is so over-the-top wrong that it makes you wonder—what the hell were they possibly thinking?
Don’t know what I’m talking about? Well, in the sunny Sunshine State of Florida, “Take Your Sons and Daughters to Work Day” events in the local prisons turned into a form of show-and-tell that ended up going terribly wrong.
According to the newspaper account, “Three prison guards have been fired, two have resigned and 16 more employees—from corrections officers to a warden—will be disciplined due to the incidents that unfolded April 23, said Florida Department of Corrections Secretary Walt McNeil. An investigation is ongoing. None of the children in any of the incidents required medical attention or was notably harmed, McNeil said. He said the children, who ranged in age from 5 to 17, were all children of prison officials.”
And in what must easily qualify as the Management Understatement of the Year (and I’m open to your nominations for a better one), DOC secretary McNeil said, “I can’t imagine what these officers were thinking to administer this device to children, nor can I imagine why any parent would allow them to do so. This must not happen again.”
If you look at the goals for “Take Our Sons and Daughters to Work Day,” it talks about things like “helping (children) discover the power and possibilities associated with a balanced work and family life, and providing them an opportunity to share how they envision the future and begin steps toward their end goals in a hands-on and interactive environment … each year, we develop new interactive activities and partnerships that will assist us in taking girls and boys to the future they dream of.”
Somehow, I don’t think that the organizers of this event anticipated that the “hands-on and interactive environment” would include getting some up-close-and-personal contact from the business end of a stun gun, but the thing that surprised me the most is that this isn’t just some random incident. It happened at three different correctional facilities to 43 children!
I can’t imagine a worse way to expose children to the workforce, even if you account for the fact that a prison, jail or correctional facility isn’t your typical, run-of-the-mill workplace environment.
“(Corrections secretary) McNeil repeatedly stressed that the stun-gunning only happened at three of the 55 institutions and that it wasn’t part of a widespread practice,” the Herald story said. “Still, he acknowledged that it was ‘logical’ to assume other children had been shocked on other take-your-kids-to-work days.”
And if that’s not bad enough, the newspaper story added this kicker: “So far this year (in Florida), none of the devices have been used on the 100,000 prison inmates—only the children of DOC workers.”
I’m all for helping get children excited about jobss and careers, and I’m sure that “Take Our Sons and Daughters to Work Day” is a wonderful success 99 percent of the time, but really, did any of the numbskulls wielding the stun guns stop and think about this for more than 10 seconds? If they had they would have known that this is hardly the way to handle children, keep your job, or most importantly, to encourage those delicate young minds that will become your future workforce.
You can barely turn around these days without bumping into news of yet another company that’s cutting staff, downsizing or laying off workers. These are all the same thing, of course, and no matter what label you put on it, in the end it’s about people losing their livelihood or “involuntarily separating” from their employer, as they sometimes say in HR Land.
I understand layoffs, and I’ve been involved in more than I care to remember (from both sides of the table). But I’ve never understood the misguided notion that layoffs are some sort of smart business strategy. Layoffs, for the most part, are simply a way to quickly cut costs and improve the bottom line. There are times when they make sense, but all too often, they’re done with a chain saw instead of a scalpel.
One my favorite Zell-owned newspapers, the Los Angeles Times, has been hit particularly hard. But to add insult to injury, Zell’s minions have now started to move away from just plainly stating that they are laying off staff and have instead started to engage in the worst form of corporate B.S. Here’s what I’m talking about:
According Crain’s Chicago Business and other media, the Chicago Tribune eliminated at least a dozen staff positions from its newsroom this week as part of a new wave of cuts designed to rein in costs as advertising revenue continues to decline. Tribune warned of the cuts last week when Tony Hunter, CEO of Chicago Tribune Media Group, told employees that the company was engaging in “right-sizing activities.”
What the hell, you may ask, is a “right-sizing activity”? It’s PR blather and corporate cover for the real word that should be used here: layoffs. It’s silly and patronizing to the people losing their jobs to call it anything else. And it makes me wonder where Sam Zell gets his Tribune executives? Does he stand in line at the School for Brain-Dead Management and simply roll them into his car when they graduate?
Why do companies feel that they have to resort to silly, incomprehensible corporate speak in an attempt to deflect attention from what they are really doing—in this case, seriously reducing the workforce? Do they think that anyone is so stupid as to not see what’s afoot?
Here’s a tip: Be kind but talk straight to your workforce. Even if you must get rid of people, don’t insult them with silly, politically correct jargon that seems to come straight from some Orwellian HR department.
Last year’s “winner” will be hard to top, because Circuit City and then-CEO Philip Schoonover set the company on the course that led to those wonderful going-out-of-business sales you see today. But as I’ve noted before, Zell and his team at Tribune make a formidable Stupidus Maximus candidate for the 2008 honor. They might be very tough to beat.
There’s still time, of course, to nominate someone else for this singular “honor.” Please let me know if you have a better candidate, either with a comment on this blog or via an e-mail sent to me directly at jhollon@workforce.com. All nominations will be held in strict confidence, of course, to protect the innocent from the guilty.
Is there anything worse than getting laid off or being forced to take a job buyout? If you said no to that question, well, try this one on for size: How about taking a buyout or layoff with severance, only to then have your former company file for Chapter 11 bankruptcy protection?
This not only means that you are without your job, but that the severance pay you were counting on to tide you over has now become part of the bankruptcy proceedings. And that means you are now a creditor, someone who has to stand in line to get paid by your former employer—if you ever get paid at all.
It’s clear to me that he has turned into a formidable Stupidus Maximus candidate—very tough to beat.
Got a better candidate for this singular “honor”? Or, do you think that Sam Zell is a lock for Stupidus Maximus glory? Please let me know what you think, either with a comment here or via e-mail sent to me directly at jhollon@workforce.com. All nominations will be held in strict confidence.
I’m not one of those “I told you so” guys, or the kind of person who would crow about being right all the time, and that’s doubly true when comes to being right about something I would much rather prefer to be wrong about. That’s how I’m feeling today about Circuit City.
Today, the country’s second-largest electronics retailer announced that “it will immediately close and liquidate 155 stores and lay off thousands of employees as it struggles to survive an increasingly dreary holiday shopping season,” according to a story in The Wall Street Journal.
The company is not going away, of course (at least not yet), but it also said it “planned to reduce about 17 percent of its domestic work force, and slash operating, payroll and marketing expenses. Circuit City currently operates 721 stores and outlets in the U.S. as well as 770 mostly smaller locations in Canada, and employs roughly 55,000 workers including holiday help.”
I don’t think I am going out on a limb saying this, but today’s decision by Circuit City is just another step in the road to shutting down the company, to ultimately filing for Chapter 7 bankruptcy and liquidation.
The PR minions at Circuit City will undoubtedly be doing their best to spin this as a positive move, but really, how can closing 155 stores heading into the busy (and critical) holiday season be seen as anything except a desperation move to buy time and put off the ultimate, final decision?
Former CEO Philip Schoonover thought it was a winning strategy to get rid of his best and most experienced people, simply because veteran workers were paid better than new, green employees. It wasn’t; it left Circuit City with a demoralized, inexperienced workforce and hurt the company’s competitiveness in relation to industry leader Best Buy.
As one comment to the Wall Street Journal story put it: “It’s tough to sell anything when you don’t have salespeople. Maybe that explains why much of my possible CC purchases are bought online from online retailers. We’ll see CC in Chapter 11 or 7. They’ve earned it!”
Schoonover’s decision will be the fodder for many a business-school class, because it is the classic strategic business decision that made no sense at the time and seems to have accelerated the company’s free fall, rather than set it on a strong new course. It’s also why I awarded Schoonover and Circuit City my first annual Workforce Management Stupidus Maximus Award “for the most ignorant, shortsighted and dumb workforce management practice of the year.”
This is a classic case of bad management driving a company into the ground—by former CEO Schoonover, who made a truly stupid decision that belittled and demoralized his workforce, and by the Circuit City board of directors, which let him do it.
If Circuit City ultimately falls, which is something I see happening in the near future, it will be self-inflicted. Death by management, if you will. Even then, I promise to refrain from saying that “I told you so.”
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