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Case Study of a Turnaround

Case Study of a Turnaround. Anthony Macari Clinical Assistant Professor of Finance and Owner of ExplainFinance.net September 20, 2011. What we will cover. Introduction Turnaround process Guiding Principles Lessons Learned Major Mistakes Case Study Questions. BACKGROUND. Education:

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Case Study of a Turnaround

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  1. Case Study of a Turnaround Anthony Macari Clinical Assistant Professor of Finance and Owner of ExplainFinance.net September 20, 2011

  2. What we will cover • Introduction • Turnaround process • Guiding Principles • Lessons Learned • Major Mistakes • Case Study • Questions

  3. BACKGROUND • Education: • University of Connecticut – BA, MBA • Pace Law School–JD • Emery Worldwide, PepsiCo, Kiewit Continental - 1981-1988 • Various Finance/Planning/Acquisitions positions • Fortune Brands – 1988-1999 • 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 • 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

  4. ExplainFinance.net • 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

  5. Thanks to Mark Bonney • 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 • American Bank Note Holographics, Inc. (NASDAQ) • Audit Committee Chair; Compensation Committee • Axsys Technologies, Inc. (NASDAQ) • ThreeCore Inc. (Venture funded start-up) • Community Health Centers, Inc. (Non-profit) • Chairman of the Board; Audit and Finance Committee; Compensation Committee; Executive Committee

  6. Turnaround Process • 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 re-margin first so growth is profitable

  7. Fortune Brands • Tobacco, Spirits, Golf • Office Products • Home Improvement (Moen, Mlock, Cabinets) • Office Products and Home Improvement combined some low margin businesses in consolidating industries

  8. Guiding Principles • People will watch your every move! • 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.

  9. Lessons Learned • Before you join. • Can the business be saved? • I look for three things: • CEO with strong skills in the critical area. • Brand reputation. • People that will execute. • Also good if there is an obvious source of CASH.

  10. Lessons Learned • You have six months: • Day 1: Communicate the seriousness of the situation and take control of CASH processes • Day 2: Understand why performance is bad • Bad is a relative term • History is more important than you think • Day 3: Find the enablers • Change is harder than you think • Always think in terms of FIX, Re-Margin, then GROW!

  11. Major mistakes • Impatience while learning • Firing too fast • Firing too slow • Not respecting history • Giving history too much credence • Over-achieving • Not managing upward

  12. Case Study-Profile • 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

  13. Case Study-Profile • Considerable debate on whether industry or individual providers need to be fixed • Definition of product quality and basic success metrics unclear

  14. The Education Industry • K-12 • Community Colleges • Regional Colleges • State Universities • Elite Universities

  15. A Few Myths • Just need business expertise • Gates Foundation • Mike Milken Foundation • Mike Bloomberg • Just need more money • Technology will solve the problem

  16. Educational Governance • 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

  17. The “Corporate “ Culture • 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

  18. What is “Good” Education • 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)

  19. For Profit Education • 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

  20. Back to Mark’s Points • Can the “business” be saved? • Can it be fixed like any other business or is there a different model?

  21. Questions

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