Management Mistakes and Successes
Robert F Hartley
Kmart: From Mediocrity to Leadership to Jeopardy 2
Scott Paper: Turnaround Trauma 2
IBM: A Giant Falters But Then Arises 3
Harley Davidson: Finally a Comeback 4
The Saving and Loan Disaster: Greed Running Amuck 5
Coca Cola’s Classic Planning Blunder 6
Euro Disney: Bungling a Successful Format 7
Contrast – Southwest Airlines: Finding A Strategic Window of Opportunity 8
Herman Miller: A role model disappoints 9
Reebok vs Nike: Sneaker Wars 11
Kmart: From Mediocrity to Leadership to Jeopardy
• Replace those in the company who are incapable of accepting change
• Be aggressive, voluble and full of ideas
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• The results of Dunlap’s cost-cutting frenzy resulted in a rise in earnings by 71% in the second quarter. In the third quarter, earnings increased by 73%. Fourth quarter earning were 159% higher than in 1993 (Dunlap took over in 94)
• However, Scott Paper lost market share of 1% in the bath-tissue market and 5.2% in paper towels.
• But Dunlap still said, “I am still the best bargain in corporate Americaâ€
• “Slash and Burn†techniques tend to bring great short-term results, but leave the company with longer term problems
• Cut the deadwood but not the bone and muscle
• A well-structured organization would appear to be best in many circumstances, but it tends to be too rigid, relying on rules and procedures and as a result is slow to adapt and change
• Some of the worst decisions in business concern buying and selling.
• Charisma, new blood and decisive leadership can turn around a company
• Strategic plans often delay change implementation – it is often a vehicle for procrastination and blame-dilution
IBM: A Giant Falters But Then Arises
• In 1993 IBM reported a $5.6bn loss for the fourth quarter of 1992 – a yearly deficit of $4.97bn – the biggest annual loss in American corporate history
• 42,900 jobs went in 1992 and another 25,000 were slated for termination in 1993
• IBM got fat and complacent over the years
• Akers, the chairman of IBM, recognised that the company was in trouble in 1991 and attempted to decentralise the business structure. He saw a crucial need to cut fat from the organization
• Akers’ more radical proposal was to break up IBM and divide it into 13 divisions and give each division more autonomy
• IBM was lagging behind Compaq, Sun and HP in producing affordable high-quality fast PCs. AT&T could sell a machine for $12.5 million that outperformed IBM’s $20 million mainframe
• Louis Gerstner was appointed as CEO to replace Akers who lost the support of the Board. Gerstner was an outsider, an unusual step for IBM as they had a policy of promoting from within.
• It isn’t always good to promote from within because by doing so you are happy with the status quo but always promoting from outside the company can play havoc with trainees who will lose faith in their career path within the company
• Resistance to change can be combated by good communication with participants about the forthcoming changes and by involving employees in the change process.
• Change in a gradual fashion is much easier on staff, but abrupt changes can also be more effective in certain circumstances (see the section on Scott Paper and Al Dunlap)
• IBM was guilty of complacency, conservatism and conceit – which leave no incentive to undertake aggressive and innovative acitons, causing growing disinterest in such important facets of the business as customer relations, service, and even...
