I received an email from a reader in response to How Do These CEOs Keep Their Jobs? that brought up a thought provoking question: "How long should it take to turn around a company and how do you know if it's working?"
Here's an excerpt from the email:
"I personally am surprised you included Dan Hesse from Sprint in your list. It would appear apparent that Sprint has gotten itself into a rough position to say the least. That all appears to be pre Dan Hesse days. Would you consider it a "fair" statement that Dan Hesse inherited a bit of a mess?"Well put, and for the most part, I agree.
"It would seem reasonable that a company the size of Sprint would take "some" time to make a significant turn-around. It would also seem reasonable that there would be specific behaviors that would/could/should be observed to validate if the correct steps were being taken."
As I said in the original post, "Predecessor Gary Forsee screwed up the Nextel merger and Sprint's been hemorrhaging ever since. Unfortunately, Hesse hasn't managed to stop the bleeding as customers flee, losses mount, and the share price nears an all-time low."
For more background, here's Bob O'Brien's latest take on Sprint, from his blog at Barron's Online.
Now, it's true that Hesse has only been in the CEO spotlight for 10 or 11 months. And he has made efforts to improve the balance sheet, fix customer service issues, and offer customers aggressive pricing plans as incentive to stick around.
Nevertheless, the company is in a downward spiral and, so far, Hesse's efforts don't appear to be having a positive effect on customer or shareholder confidence. That's not meant to be critical of Hesse's efforts or abilities; it's just how I see the results, to date. Now let's see what we can glean from that.
Turnarounds at HP and IBM
Let's take a look at CEO Mark Hurd's turnaround of HP. HP's a bigger company than Sprint, its issues were certainly challenging, and the sentiment of investors was well expressed in this story: HP Chief Faces Short Honeymoon.
That said, Hurd's restructuring efforts were evident almost from the start, and operating results showed marked improvement within two to three quarters.
As another data point, it took Lou Gerstner a quarter or two longer to get the ball rolling in the right direction at IBM.
What to Expect From a Turnaround
Of course, every company and turnaround is different, but in my experience, irrespective of company size, here's what folks should be looking for in terms of evident improvement and timeframe:
- Within one to two quarters, a turnaround plan should be in place and initiated.
- Within two to three quarters, behavior and operating change should be evident to employees, customers and shareholders, improving morale and confidence.
- Within three to four quarters, operating fundamentals should show marked improvement.
Do you think my expectations of turnarounds are too high, or not high enough?
(Images courtesy of Sprint)