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Lessons learned from Twinkies maker's demise


(MoneyWatch) At the end of last week,Hostess announced plans to wind down its business operations, shut its factories and lay off some 18,500 employees. Over time, it seems likely that some of its iconic brands may be revived but, for now, a large number of people are going to have a miserable Thanksgiving. Even in boom times, this would be bad news.

The easy explanation has been to blame the unions. The same was true when America's car companies failed. But while costs, of course, do count, you have to ask the more serious question: How responsive was this business to a changing, competitive and technologically advanced marketplace? Why weren't labor issues tackled? What was the management thinking? What did the unions seriously expect to gain?

You can't explain this business failure by anything sudden -- it is their second bankruptcy -- and tastes in unhealthy snacks have not undergone any revolutionary change. But the company has been sold three times since the 1980s, at each juncture racking up debt. So this is the classic story of a company that isn't being run for its customers, isn't being run for its employees, isn't driven by a love of product, but which is regarded purely and simply as the vehicle for financial transaction. The people who ran it consistently awarded themselves pay increases, all the time creating no future for the business that paid them so well.

It's become very fashionable of late to write about business failure caused by galvanic changes in the market place, disruptive technologies, fierce competition, volatile social change, globalization and so-called black swan events. But, rather like its products, this is an old-fashioned story of bad management: Well-paid managers who just didn't care about their future or that of their 18,500 employees.

It used to be said that Twinkies were the only food that could survive a nuclear holocaust. What they couldn't survive was greedy, short-term leadership by cynics who just didn't care.

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