Thursday, April 10, 2008

Kinko’s – Was It Damaged?

Claudia H. Deutsch of the NY Times reported on Clayton, Dubilier & Rice’s management of Kinko’s on May 5th 2007 with an article titled "Paper Jam At FedEx Kinko's". One quote referring to the culture change: “Some say Clayton, Dubilier massacred Kinko’s, and that FedEx can never repair the damage.”

On March 8, 2008 the New York Times reported again on the issue, “...the unit has underperformed since FedEx bought the business for $2.4 billion.”

In my experience as CEO, a culture change was necessary in every turnaround I have managed. The turnarounds were largely penal colonies staffed with brow beaten and frightened officers and managers. The uncoordinated top-down, silo management process was used. Analysis made it clear that mistakes mounted and financial deterioration occurred a matter of months following the start of a punishing culture.

Improving the cultures was accomplished via cross-functional communication meetings with candid discussions at all organization levels. Once an improved culture was accomplished and a self-confident team was developed, profits followed shortly thereafter – usually in just a few months.

One lesson I learned seeing the consequences of the angry, confrontational style used by Emerson Electric Co.'s CEO was not to bully and yell at employees. As CEO I want strong, assertive but civil officers and managers to build a solid performing company. A CEO can whisper and get results.

Emerson Electric conducted anonymous employee opinion surveys annually on each of its divisions. Ironically, if a division president was confrontational with employees and maintained a punishing culture, Chuck Knight would remove him.

As Peter Drucker and Jim Collins advise, use metrics to make people accountable for tangible results. Fire the non-performers. Only deal in brutal facts in an open culture in which everything can be discussed. A tyrant style can sometimes get immediate profit improvement, but it usually results in the company becoming uncoordinated followed by unexpected mistakes and short-term profit decline. It can make the sale of the company problematic if potential buyers realize the management is weak.