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Back from the brink: These Kellogg School graduates are experts at finding value in floundering companies

By Kari Richardson

Bettina Whyte '75 lives from crisis to crisis, showing up when the balance sheet needs mending or customers have abandoned a company in droves.

Whyte, a principal at the New York office of Alix Partners LLC, repairs companies for a living, signing on with firms that have hit a rough patch. When she's helped steer the company back on course --- or when circumstances warrant, helped it navigate the murky waters of bankruptcy --- she's on to the next set of problems.


"People in this industry, rather than being undertakers, are leaders. They have talents beyond firing people. They have a way to find the weak spots and fix them. And they have ways of gaining people's trust quickly, because if you don't, you won't last long."

— Prof. James Shein

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"I've been described as a crisis junkie," says Whyte, who began her career working with problem loans in commercial lending and who last year served as president of the more than 10,000-member American Bankruptcy Institute. "I wouldn't want to be the CEO or the CFO of a single corporation. I like continually finding myself in different circumstances and I like solving problems."

The Kellogg School graduate counts herself among the ranks of turnaround experts --- professionals who don't run away from corporate trouble, but actually seek it out. Turnaround professionals, and others who find their calling fixing troubled firms, specialize in getting to the heart of what's ailing a company and finding new solutions to problems that are often deeply ingrained in a firm's culture.

It's not a job for the faint of heart.

The open wound
Turnaround specialists routinely must use imperfect information to make split-second decisions that have profound and lasting consequences. (One such professional likens the decision-making process to "ready, fire, aim.") Day in and out, they lead workplaces buzzing with anger, hostility, severe stress and confusion.

Top managers often have made a hasty exit as part of the effort to fix what's wrong, and the turnaround expert's presence may have been mandated by a lender when the company defaulted on a loan.

"Turnaround experts or restructuring officers have to be prepared for constant change in terms of both assignments and new problems that will come at them," says Adjunct Professor of Management and Strategy James Shein, a lawyer with the Chicago office of McDermott, Will & Emery and businessman who has guided several companies back on the path to profitability. "They have to be prepared to handle all sorts of problems in multiple disciplines, often without the cooperation of people in the organization."

"Chainsaw" Al Dunlop, the ex-CEO of Sunbeam who sought to bolster corporate profits by hacking thousands of jobs, may have done damage to the public's perception of a corporate restructuring guru. Today's turnaround professionals focus on the good they do, and the restructurers leading change at Enron, WorldCom and others have highlighted their role for the public.

According to the Web site of the 6,600-member Turnaround Management Association, restructuring professionals routinely save jobs, preserve entire companies or parts of them and return money to shareholders and creditors.

Bettina Whyte  
Bettina Whyte '75  

"People in this industry, rather than being undertakers, are leaders," Shein says. "They have talents beyond firing people. They have a way to find the weak spots and fix them. And they have ways of gaining people's trust quickly, because if you don't, you won't last long."

For those leading change, denial is one of the most potent challenges to establishing trust.

Bettina Whyte quietly followed the path of a struggling company for two years before its board of directors hired her to sort out its financial troubles. An angry group of senior managers greeted her when she arrived the first day. Her help wasn't needed, they said. But when Whyte asked the CFO whether the firm could meet payroll the following week, beads of perspiration appeared on his forehead. He confessed he didn't know how much money the company had banked.

"We are the open wound or the root canal," Whyte says. "Management doesn't really want to see us because it suggests they failed. In reality, they may or may not have failed."

After years in the industry, she has fine-tuned her strategy for getting remaining managers to play a role in the changes.

"One of the things I do almost immediately is bring every member of the executive team in for an hour to talk with me alone," she says. "During that hour or two, I find out a lot about the individual. I explain that things are going to be very different now. That we are a team trying to reach a realistic, but successful, outcome. And that if they don't think they can be part of that team, I want them to quit as soon as possible. You can't have someone on board who's going to be disruptive or negative."

If it's broke, it better be fixed
Simply deciding which pressing task to tackle first is often a monumental challenge for those who enter a floundering firm.

Carroll Mackin '96 earned his stripes in corporate renewal when he bought a bankrupt maker of specialty aluminum, stainless steel and copper nails.

"All of these things are broken," Mackin says of his early days managing Great Northern Manufacturing. "You have to prioritize what you do first."

"We had a ton of broken business processes," he recalls. "We didn't have a good method for selling our product. We didn't have good vendor relationships. We didn't have a good process for invoicing. The answer was simple — fix them."

Mackin set to work. He hired capable people to fill critical roles in the company, mended ineffective business methods, forged new relationships with vendors, and ultimately, repaired damage to the company's reputation. His perspective as an outsider enabled him to make many of the necessary structural and strategic changes, he says.

Today, he takes pride in what he's accomplished while drawing on almost all of the skills he learned while an MBA student at the Kellogg School: the company has graduated from a substantial loss to strong profitability, gross margins have more than doubled since he bought it, and 20 workers have had steady jobs in a topsy-turvy economy.

"The end result may not be so sexy," he says. "It's business school 101. But implementation is a lot more work than it appears."

Restructuring officers and entrepreneurs like Mackin offer a fresh perspective and new skills to apply to problems that often have deep roots.

Shein was once part of an early-stage turnaround at an appliance parts manufacturer in which 100 percent of employees stayed in their jobs. Working with the company president, he developed a list of essential tasks to be completed to set the firm on a fresh course.

But when he checked back one month later, Shein discovered the president hadn't completed any of the items on their mutually agreed-upon list.

"He said he had divided the items on the list into two categories," Shein says. "Half of them he didn't know how to do, and the other half he couldn't bring himself to do."

The solution: Shein hired a person to work side-by-side with the president, identifying new ways to accomplish key tasks and finding new roles within the company for a couple of workers who had been promoted beyond their expertise.

"If the CEO knew how to do it, chances are it would already be done," he says.

Next page: "Too often, by the time someone gets to us all that's left is liquidation"
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©2002 Kellogg School of Management, Northwestern University