Fast Talk: Time for a Turnaround

A troubled economy leads to troubled companies. How do you start turning things around? How do you know if you’re making progress? When does it make sense to move faster — or slower? Six turnaround leaders explain their strategies.

Lisa Harper

Chairman and CEO
The Gymboree Corp.
Burlingame, California


I was the reluctant CEO, the naive CEO. I took the helm after Gymboree had taken a long walk through a dark forest. There had been broad pressure to grow the business and reinvigorate the brand — but with no consideration for what the brand stood for. That had to change. I was passionate about the people, the product, and the customer, and I wanted to bring the business back to life. I didn’t get lost or paralyzed by the high-stakes enormity of turning this around. Instead, I thought about fixing the product and reenergizing the team.

Step one, then: Fix the product. Our customers couldn’t stop telling us how stupid we were for getting rid of our unique, colorful mix-and-match designs and replacing them with trendy, adultlike clothes for kids. We had to innovate through the customer’s eyes. If you want to turn a company around, you can’t turn your back on the customer.

In those first 18 months, we also paid close attention to our people, especially the ones in the stores. They heard from angry customers all day, every day. One thing we do now is get feedback on every line from the stores and then respond to it. We say, “Here’s why we’re using that suggestion” — or not. The idea is that we always close the loop on communication.

Lisa Harper ( rejoined Gymboree as senior vice president of design in 1999 and was promoted several times before assuming the role of CEO last February. Gymboree recently launched Janie and Jack, a retail concept that offers newborn apparel and accessories.

Richard Syron

Chairman and CEO
Thermo Electron Corp.
Waltham, Massachusetts

Never understate the value of two key factors: clarity and luck. Back in 1999, Thermo Electron was on the road to trouble. We were just too complex. It wasn’t that the company was suffering because of our products. Our products were suffering because of how we were set up. If you put a hundred customers in a room, you’d hear a hundred ideas about our core capabilities. So we sold or spun off units with more than $2 billion worth of sales.


Naturally, people were skeptical. So we pushed for operational clarity too. We created a matrix — our various businesses on the vertical axis, action items on the horizontal — and put it on the Web. I told employees, customers, and shareholders to review that matrix regularly. If most of the boxes weren’t checked after one year, then they would be and should be talking to a new CEO.

Of course, we began the reinvention process when the market was healthy. I don’t know if we could do in this economy what we started a few years ago. That’s where the luck comes in.

Richard Syron led Thermo Electron’s transformation from a holding company with 24 public companies to one operating company focused on technology-based instruments. Prior to joining Thermo, he was chairman and CEO of the American Stock Exchange.

Carolynn Reid-Wallace

Fisk University
Nashville, Tennessee

Fisk University used to mean something. It is one of the oldest historically black universities and a citadel of higher education. I’m a member of the class of 1964, and I watched the school fall on hard times during the 1980s and struggle to turn things around. It’s still struggling. Today, we’re at the very beginning of a major transformation. I’m trying to reinvent a historically black institution into a truly American institution. Fisk is no good to anyone as a shrine to its past glory. We must open our doors to a large number of students who aren’t black.

The fact that I’m the first female president has made a tough job tougher. A man who walks into a turnaround gets a year to prove himself. A woman gets 60 days. So I made my agenda clear to every constituent group. In fact, I made it clear to the board of trustees before they hired me. I said, “Here’s my program. Take it or leave it.” That way, I could match words with action from the outset.


And I did. During my first 60 days, I recruited eight new members of my staff. Finally, I began a revitalization of the campus. Art that used to be in vaults now hangs on walls. Beauty lifts morale.

Carolynn Reid-Wallace ( became Fisk’s 13th president in 2001 and the first woman to hold the position in the school’s 136-year history.

Keith Blackwell

Cofounder, chairman, and CEO
Bristol Technology
Danbury, Connecticut

How do you transform an organization during and after a legal battle with one of the world’s most powerful firms? You are extremely clear about the future and who is going to get you there.

Back in 1998, when we filed our lawsuit against Microsoft, we assumed that our existing business would go away. Microsoft would cut us off from the source code for its operating system and, as a result, kill our products — which had been growing at around 70% a year for five years. So we had to do two things. First, we had to hold on to our key people. Second, we had to transition to a new set of products.

I targeted 25 employees who were critical to our redirection. I knew they were thinking, “Do I want to stay with a company that’s in an antitrust suit with Microsoft, or do I want to find the next eBay?” None of them left. The next move was to launch two R&D efforts in the hope that at least one would evolve into a new product line. Today, those two lines account for 80% of our business.


Most experts will tell you that real change only starts after a trauma, and we had that. But what we really wanted was the whole Microsoft chapter to fade from memory. We just want to be thought of as a company with great products, service, and people. At last we are on that path.

Keith Blackwell ( cofounded Bristol Technology in 1991. Bristol’s lawsuit against Microsoft was settled in 2001.

Mary Sammons

President and COO
Rite Aid Corp.
Camp Hill, Pennsylvania

You think your company needs a turnaround? Consider our situation a few years back. In 1999, I was part of a four-person team that came in to tackle the mess at Rite Aid. The company was saddled with nearly $7 billion of debt, it was on the verge of bankruptcy, and it was in the middle of an accounting scandal. And that was just what we knew going in! It turns out that there was virtually no cash flow and almost no cash, period. It was a high-anxiety situation.

I was in charge of the stores. My first move was to go to the front lines and tackle the fixable problems. They weren’t hard to find. Our stores were in disarray, and our ads were a joke. There was a whole division on the West Coast that was rumored to be for sale. When in fact, we had no plans to sell it. So that became my first big project. I remodeled and remerchandised four of the larger stores and used them as examples. Within 90 days, we had repriced about 1,500 key items in stores.

People on the front lines can either be your biggest allies or your worst enemies. In our case, they needed to see and feel that we were serious about change. But the one thing I didn’t do — even though it’s the one thing that everyone wants to do — is make promises. I told people that there wasn’t any structural reason why we couldn’t be successful. But at the beginning of a turnaround, you’re not in a position to be certain about anything. I gave perspective without making promises.


Mary Sammons ( and three other former executives of Fred Meyer Stores came in to turn around Rite Aid in 1999. With about 3,400 stores and annual revenue of more than $15 billion, Rite Aid is the nation’s third-largest drugstore chain.

Charles Hoffman

President and CEO
Covad Communications Group Inc.
Santa Clara, California

Lots of companies in our business are hoping for a miracle — but there are no miracles on the horizon. We spent vast sums of money on building a nationwide network and ended up $1.4 billion in debt. There was no way we were going to pay off that debt. So we bit the bullet early and made a deal with our bondholders in the form of a prenegotiated bankruptcy.

Nobody wants to be associated with that awful word. But there’s no way around it: You’ve got to tackle the big problems first. We paid the piper and got the bankruptcy done — and thank God we did, because this year’s environment is even worse than last year’s.

Meanwhile, even before I arrived at Covad, I asked each of the senior executives to send me a list of the top 10 issues facing the organization. It turns out that there was no consensus on the 10 biggest problems. So I consolidated the lists, came up with 10 strategic imperatives, and started working through them. And we worked fast. We fired the CFO during my first week and started from scratch with the finance department.

We also had to persuade people at all levels of the organization to stop worrying about the stock price and start worrying about the basics of the business. If we got the basics right, the stock might come back. So we created a performance scorecard that focused on the fundamentals: speed of installation of new lines, how quickly we answer the phone in our call centers, and the rate of churn among customers. My message is simple: As tough as the problems in this industry are, if we work on the right things, we’ll end up with the right results.


Charles Hoffman ( joined Covad, the nation’s largest independent DSL supplier, in 2001. His career in telecommunications spans more than 25 years.