BMC’s CEO Bob Beauchamp and the Art of a Turnaround

Rob Enderle
Slide Show

State of IT 2015: Mid-Year Check-In

Executing a turnaround is a very unique skill and most executives don’t have it. That’s why so many turnarounds fail and either take the company down with them or force a sale to another firm that might be able to do better. Some of these things are just painful to watch; the firms become a parade of CEOs who not only don’t have the skills when they start, they appear unwilling to acquire them. They then seem surprised when they are replaced by a series of folks who have no more idea what to do than their predecessors did.

This is not only painful to watch from the outside, it is incredibly painful from the inside. People’s jobs and careers are uncertain and over time they lose hope. Once hope is gone, the firm is effectively unrecoverable.

BMC’s CEO Bob Beauchamp has been one of the rare exceptions regarding this process. He sent out a letter this week highlighting the key elements he used to turn BMC around. I’ve actually followed BMC longer than I’ve been an analyst, largely because it was the only firm to be successful at pulling IBM employees out of IBM when IBM had lifetime employment. It did this largely by focusing on what these folks wanted that IBM couldn’t provide: location stability and an assured place to raise your family (IBM used to unofficially stand for “I’ve Been Moved.”) While that world was far different from this one, given how other firms complained that they couldn’t get IBM employees to move, BMC’s success in focusing on what it could offer that IBM couldn’t has always been a reminder for me of why you need to analyze a problem before attempting to solve it.

Let’s talk about Beauchamp’s letter in the context of best practices in a turnaround.

Data Driven

One of the biggest mistakes made by a turnaround or acquisition team is to rely on perceptions or data that hasn’t been validated by people they trust. Many failures could have been avoided had those in power first done a full and accurate assessment of the firm’s status. Like a SWOT (strengths, weaknesses, opportunities, threats) analysis on steroids, done correctly, this helps prioritize what needs to be fixed, and more important, what you don’t want to break. Often, in a turnaround, the first few major changes do more damage than good, largely because the team has no idea what is and is not working. Much like it wouldn’t be wise for your doctor, after seeing you in a lot of pain, to pull out a saw and start cutting things off, it is critical to understand exactly what needs attention AND what needs to be protected before any major changes are implemented.

Granted, sometimes the company is so sick that risks have to be taken early to assure there is enough money to get to this phase, but the more informed the team is, the more successful they will be.


Beauchamp opens with this in his note, pointing out that it was only with information on BMC’s customer perceptions, market estimates and competitive information that they were able to develop a plan that could, and did, work.


The Right People

Seeing this one done incorrectly just drives me nuts: The quality of the staff directly relates to the quality of the results. Successful CEOs often have a team of people they know can perform and bring them along and/or quickly assess the team they have and then upgrade that team to address skill/loyalty shortcomings. If you don’t have the right people, you can’t be successful. It just amazes me how late some executives wait to create a viable team.

 

Beauchamp was aggressive at going out and finding the best folks to address the various areas of the business and building what looks from the outside like an all-star group. Now, the risk here is that, often, top performers have ego issues, but I’ve actually met most of the BMC team and I don’t see them having this weakness, suggesting that Beauchamp specifically weeded this trait out. The executive team is both talented and cooperative, which is a rare combination.

Taking the Company Private

Both Beauchamp and Michael Dell had going private at their heart of their long-term strategies. It is almost impossible to turn around a public company. There is simply too much focus on quarterly results to make the kind of investment needed to fundamentally rebuild the firm from the ground up, unless you can get out from under the thumb of the financial analysts. Only then can you sacrifice short-term revenues and profits to truly address the heart of the firm’s problems and create a lasting fix. This is often why firms that seem to be turned around relapse. The CEO has addressed the symptoms of the problem, but not gotten to the heart of it, because that kind of investment would crater quarterly results.

That’s why we see CEOs claim victory, then depart, only to find the firm falls apart again after they leave. It wasn’t fixed; it was patched.

Results

BMC being a private company, we have to rely on what it reports informally. To highlight:

BMC has returned to a steady growth state, with five quarters of sales growth, ending in double-digit growth in the current and prior quarters. Accelerating growth is sign the turnaround has been successful.

Strong margin performance indicates it isn’t buying the market and has costs in hand to assure the firm’s continued ability to execute.

Improvements in renewal rates and customer satisfaction showcase that the changes are endorsed by customers and that these customers are pleased with what they are seeing in the firm and its products.

A strong cadence of new products showcases that it has restored R&D and now is able again to build for the future competitively.

Wrapping Up: Steps to Turnaround Success

The key elements of a turnaround are to do the analysis first, select a team with talents matched to the jobs at hand and loyalty to the CEO, and finally, take the company private or find some other way to get the flexibility to get what needs to be done finished. Steve Jobs didn’t take Apple private but he did get Bill Gates to write him a $100M check, which jump-started new investment and gave him the time he needed to fix the massive number of problems he found. Beauchamp has pulled from a strong list of best practices to turn BMC back into a company that is healthy and growing. Folks who want to emulate what he has done should follow his example.

Whether you are buying from, working for, or investing in a firm doing a turnaround, looking for these key elements will help you decide whether you are investing in a viable future or a certain disaster.

Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm.  With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+



Add Comment      Leave a comment on this blog post
Sep 3, 2015 4:18 AM Darel Rex Finley Darel Rex Finley  says:
Where "location stability and an assured place to raise your family" means living the rest of your life in Houston. Reply

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