Obama and Bartz: Looking Ahead to U.S. and Yahoo Turnarounds


Barack Obama and new Yahoo CEO Carol Bartz sure have taken on massive tasks. Both are attempting critical turnarounds for badly damaged organizations.


I've spent a lot of my time over the past few decades watching turnaround efforts. The market is a graveyard for those like Circuit City and Gateway that failed, and yet HP, Apple, and maybe even Palm -- still too early to call that one -- can succeed.


The United States is a much more complex problem than Yahoo, but both have a degree of difficulty associated with them that would make the job seem impossible and make you wonder whether the folks attempting to lead people out of this mess are fools. Yet IBM and Apple were in worse shape than Yahoo, and you could argue that China was in worse shape than the United States, and they all were successful.


Part of it is believing you can actually do the job. Naive or not, without that belief there is no chance of success, and both Obama and Bartz clearly believe this. I'm not an expert on government, and corporations really don't have an analogy to Congress, but I'll use the Yahoo turnaround as a proxy for what we should look for from Obama.


Buying Time


One of the biggest problems for a turnaround is buying time. The organization is economically unsound and generally, if expenses aren't brought in line with revenues quickly, the clock will run out. Granted, a company can't print its own money like the government does, but the principle is the same: If the entity can't be made solvent quickly enough, there won't be enough time for a turnaround. But this pain has a positive aspect.


Louis Gerstner, on paper, shouldn't have been able to turn IBM around, but he had two things going for him: He had a CFO handpicked by the IBM board who had done a turnaround before and he didn't know the job couldn't be done. But, according to Gerstner's book, one of the biggest problems IBM had was a culture that was "inbred and ingrown." There was one way to do things and that was the IBM way. Regardless of the fact that it didn't work, the company was still going down that path when he took over. Like Apple when Jobs took over, IBM was close to closing its doors for good. The combination of massive cuts coupled with a near-career-death experience for lots of executives and employees broke the company from its lethargy and it survived.


This will be vastly easier for Bartz than Obama, but if he can't wake up his bureaucracy or she can't move her employees, they won't reach the end they seek.


Building a Team


There is no "I" in team. For anyone trying to turn around a company, one of the biggest initial problems is forming a team. Probably the reason the company is in this mess isn't because there is no strategy, it is because there are too many of them and they are all closely related to individual employees' personal economic and career goals.


One of the reasons Carly Fiorina failed and Mark Hurd succeeded at HP is that Fiorina never formed a team loyal to her. She was the star and wanted folks to marvel at her brilliance -- even attempting to eclipse the founders in moves that were similar to President Bush's "Mission Accomplished" mistake. She was charismatic and people did follow her, but she never gained loyalty and, in the end, she was largely betrayed by those closest to her. Mark Hurd handpicked his team, makes sure they get credit for their work, and backstops them in their efforts. In turn, they are very loyal and HP has risen to pass IBM and Dell as a result.


Bartz, who is clearly different than Fiorina, has a Hurd-like reputation for attracting loyalty. But Yahoo is a mass of conflict at the moment, suggesting that to be successful, she will need to bring in trusted people who will be loyal to her. In her first appointments, likely their loyalty and not necessarily their core skills will be most critical to her success.


Sue Decker's departure is actually a good initial sign. Obama has made a number of very impressive selections, but the problem with superstars is that they don't play well on teams unless they lead them. There can be only one president; Carter's failed presidency is partially an example of what can happen if you can't get stars to play well together. In Obama's case, watch who he fires first to establish that he is the leader. The more powerful the person fired, the more likely the lesson will take and that those who remain will form that critical team.


Wrapping Up


We'll look at this off and on as we tightly cross our fingers for both executives and hold our breath as we wish them well. Yahoo is a big employer where I live. Should it fail, it would clearly be painful. I don't even want to think about the outcome from an Obama failure.


In these early rounds, watch how they build their teams and buy time so that they can be successful. This will tell you when and if you should invest in Yahoo and/or move to Panama.