(Oct. 24, 2005) — In the sports world, when a team is stuck in the doldrums, sometimes the general manager decides to shake things up a bit and fires the manager.
Maybe the team is too old, or too young, or not talented enough compared with the competition. But it's easier to replace the manager than the whole team, and sometimes a change at the top makes a big difference. Managers know that's part of the game, so they typically move on quietly when the time comes.
In the past few weeks, Newell Rubbermaid Inc. and PolyOne Corp. have done the business-world equivalent of changing their managers in the middle of a rebuilding year, replacing top executives Joe Galli and Tom Waltermire, respectively.
Just as sports teams have a bottom line — wins and losses — publicly traded companies ultimately are judged by a single statistic: the stock price. Neither manager was making the grade. The fans wanted a change.
Although Galli and Waltermire really don't seem to be cut from the same executive cloth at all, there is one striking similarity — neither one was the type to stick with the status quo and promise that better times were just around the corner. These were men of action.
Under Waltermire, PolyOne has closed more than 20 plants and cut more than 1,300 jobs. On Galli's watch, Newell Rubbermaid has closed more than 40 factories, and now it's preparing to close 25 more and cut 3,000 jobs.
If the Harvard Business Review were looking for companies to study to explain why the United States is losing manufacturing jobs, these two companies would make pretty good case studies. Many in the plastics industry already have opinions about these companies and their executives. Anyone who cuts this many jobs and makes this many changes is bound to make a lot of enemies.
What it all boils down to, though, is that during the 1990s, both Newell and PolyOne grew rather significantly, but they didn't do enough at the time to prepare for the recession that started in mid-2000. Who can blame them? In the 1990s, manufacturers seemed to need all the capacity they could find. But when the economy soured and U.S. manufacturers found themselves competing for scraps against low-cost global competitors, suddenly the need to become lean and mean was something they couldn't put off any longer.
Neither Newell Rubbermaid nor PolyOne is a failure. Think about it: Bigger names in the plastics industry have been through bankruptcy court the past few years. These two companies never came close to that level of disappointment. They just haven't been making enough money.
Now, the big question is whether their successors will stay the course and continue their respective restructuring plans, or try something radically different.
William Schmitz, an analyst with Deutsche Bank Securities, said it best during Newell Rubbermaid's recent conference call: “It's like a new football coach coming in with an old playbook.” No coach would do that — even if the team was successful. And that's not the case here. So expect the new coaches to at least tinker with the personnel and the playbook.
But don't expect them to turn around completely and go back to the 1990s strategy. Because if that worked, they'd still be doing it.
