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"Mean Business"
Certainly there's no shortage of opinions on Dunlap's bloody tactics, and this month, in a new book called "Mean Business: How I Save Bad Companies and Make Good Companies Great" (Random House), Dunlap gives his side of the story.
In describing his role in turning around such moribund corporate bureaucracies as Crown-Zellerbach and Scott Paper, Dunlap writes that he focuses intently on a company's core strength and jettisons all assets, employees and management that don't contribute to it. Explaining why he tends to wear out his welcome pretty quickly, lasting no more than a few years at each company, Dunlap says he gets bored after he's done the dirty work; critics counter that he's better at trimming fat than building muscle.
Written with expected bravado and style, the book offers some interesting insights into his take-no-prisoners management philosophy. But even as he puts the wood to wasteful, inept and self-serving executives, he offers an ingenuous argument to justify his decision to move the headquarters of Scott Paper from Philadelphia to Boca Raton - where he happened to have a home. Mean Business, indeed. Some excerpts:
On his philosophy:
"Business is simple. In fact, if everyone followed my four simple rules - get the right management team; cut costs; focus on the core business; get a real strategy - the Harvard Business School, as well as most consulting firms, would be out of business."
"The most important person in any company is the shareholder. Above all, your goal is to make money for the owners. ...The most ridiculous term heard in boardrooms these days is 'stakeholders.' Who or what are stakeholders? They're the company's employees, the community where the company operates, even the company's suppliers. ... If you see an annual report with the term 'stakeholders,' put it down and run, don't walk, away from the company. I am not unmindful of interests other than shareholders. However, managing for the interests of stakeholders runs contrary to our fiduciary duty and destroys accountability."
"Show me a chief executive who's on five boards and who lends his or her name, prestige and time to 15 community activities, and I'll show you a company that's underperforming."
On Scott Paper:
Describing his first visit to Scott Paper's Philadelphia headquarters, Dunlap writes, "Taking in the company's campus, with its three handsome office buildings, manicured lawns, elegant water fountains, geese and flags representing each country where Scott did business, I knew what had to be done. In my experience, the success of a corporation is inversely proportional to the size and opulence of its headquarters. Scott's buildings told the world what management thought about the shareholders' money."
"Scott Paper was ... more than $2.5 billion in debt and bloated beyond recognition ... unable to shake off a decadent corporate culture about to implement its third three-year reorganization plan in four years."
"The bottom line at Scott: We cut back 70% of upper management and eliminated more than 11,200 total jobs, 35% of payroll. Another 6,000 jobs became somebody else's payroll responsibility as I sold off assets. ... I sold off the corporate headquarters for $39 million.
"I relocated the rest of Scott's management team to Boca Raton. Instead of a lavish spread of 750,000 square feet, we leased 30,000 square feet and saved $6 million annually. It was a great way to break the back of Scott's plodding, consensus-driven corporate culture."
On his personal fortune earned by restructuring and then selling Scott Paper: "People love comparing my $100 million against the 11,200 Scott Paper workers who were laid off on my watch. But the two totals are unrelated. The jobs were eliminated because the company couldn't afford them. The people were unproductive within the bloated corporate structure Scott had become. In a smartly managed operation, they would never have been hired in the first place. ... "If I hadn't saved the company, everyone would have been out of work, not just a percentage of people. And my compensation did not come on the laid-off workers' backs. It was a fraction of the increased shareholder value - $6.5 billion - that was created while I was chairman and CEO."
"My $100 million was less than 2% of the wealth I created for all Scott shareholders. Did I earn that? Damn right I did. I'm a superstar in my field, much like Michael Jordan in basketball and Bruce Springsteen in rock 'n' roll."
On managing:
"I cannot keep the people who created the debacle I'm expected to fix. That is a mistake made by timid executives. Existing managers are not all of a sudden going to change! They are afraid of change! They'll insist they were doing the right things all along, right up to the front door of bankruptcy court."
"Business books and the 'experts' who write them are always promoting some fad. Once it was conglomerates. A favorite today is consensus management. Tomorrow it will be something else. But consensus management doesn't work; it's a disaster that pushes its happy, smiling practitioners to less than the best solutions for their companies. To placate everybody, consensus managers sacrifice what's important. Strong managers willing to risk failure and criticism will make very different decisions. Better decisions.
"If you operate by consensus, you're not making hard decisions. Instead, you're looking for something easier."
On restructuring:
"How do you keep your people and your organization innovative and creative when all hell is breaking loose around them? That's the art form to leadership and management. We must take the people who remain and make them think of themselves as winners. ... What can they do, proactively, to improve the business? What are their individual roles in making the game plan succeed?
"You can't inspire 90% of the remaining people when you start letting people go, when their friends leave the business, if you don't combine the cutback with a vision for the future."
"What is the result of a three-year restructuring plan? Paralysis of the corporation. Paranoia. How do employees respond? 'I'm going to be very cautious,' they think, 'I don't want to take any risks.' ... The smart employees say, 'This is nonsense, I'm leaving.'
"A three-year restructuring plan is the addle-brained notion of woefully weak executives who cannot face up to putting themselves in a 12-month time frame. If you tell your employees that the bloodletting will be done in 12 months, you have committed to a time frame. You have set yourself a goal and promised to achieve it. You have put yourself under scrutiny."
On cost cutting:
"Never cut an hourly worker before you deal with the headquarters staff. If you cut costs at the expense of Joe and Judy Paycheck, they will rebel. But they'll know you mean real business if you slice the real fat first: get rid of nonproductive senior executives and middle managers, headquarters, airplanes and so on. Deal with unions and workers last. They want the company to succeed as much or more than management does."
On purchasing:
"Most people just go through the motions in purchasing. They buy everything at list and have too many suppliers. Minimize the number of suppliers for any commodity and drive your organization to obtain the most advantageous prices using a competitive bidding process. ... A smart CEO wants purchasing executives who know the company can improve profits more quickly by purchasing well than by improving production or significantly increasing sales at the same margin."
"Don't let the people who buy raw materials and supplies for you constantly lunch and fraternize with suppliers. They may feel like they work for the suppliers."
On corporate focus:
"Every company I've been in, we've created a 'dirty laundry' list. We list all the assets that don't help us, every single one, and then sell them. We free ourselves from having to manage them. We redeploy our funds into the things we should be doing. Try this process and you'll discover your company's hidden corporate bank, the money raised by selling non-core assets."
"Conglomerates - with rare exceptions, such as General Electric - do not work. Most spread their capital and management skills over too many businesses. They don't focus on a single business, and as a result, they don't do any of them terribly well. ...
"Consider W.R. Grace & Co. It's a loose conglomeration of businesses that makes no sense, from manufacturing specialty chemicals to running dialysis service centers. Its true value will come only if it sells off unrelated businesses and gets back to a core chemical business. But corporations don't do that, except under the most extreme circumstances."
On his own unpopularity:
"You're not in business to be liked. We're here to succeed. If you want a friend, get a dog. I'm not taking any chances; I've got two dogs."
