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BMC Turnaround a Lesson in Corporate Leadership

BMC Turnaround a Lesson in Corporate Leadership

When most companies are in trouble, they clean house or sell off assets. BMC has done neither. So far, it's working.

Company turnarounds are a big part of what I cover. There's clearly a process that seems to work far better than others. Based on what I saw at BMC Engage, the first BMC conference this decade, and have learned over the last year of executive meetings, Bob Beauchamp and his team have done an impressive job. If it weren't for the fact that BMC plans to go public again I can hear Michael Dell in my head, screaming, "Don't do it!" I could easily say this turnaround is complete.

(Note: The author services BMC under a contract with Valley View Ventures. This work does not include consulting on BMC's turnaround effort.)

I'm also struck by the contrast between BMC and other turnaround efforts in progress (such as HP) and past famous turnarounds (such as GE). I'm particularly fascinated about what people take away from these efforts. Even though we have plenty of good examples, most CEOs, including Yahoo's Merissa Mayer, seem to avoid the best practices others have painfully learned.

Get a CEO Who Cares About More Than Money

Beauchamp told the story of his turnaround both in a general session with analysts and in an interview discussion that followed. I think of many CEOs as poseurs and fools, and only a handful as good people. Beauchamp falls in the latter class. I don't care for CEOs who seem to think they are royalty and focus more on their compensation and image than the care and feeding of their company and employees.

[ Commentary: 7 Habits of Highly Effective Tech Company CEOs ]

Pointing out the CEOs who I think are pond scum would be an expensive practice, but pointing out the ones I see as good people, such as Beauchamp, sets them up as a better example for others (I hope). If you do business with BMC, or are considering it, you should try to meet Beauchamp.

The process Beauchamp took to recover BMC shows his good side. The first phase of most turnarounds is ensuring there's enough cash to execute. If you don't have the resources, you can't hire or hold onto good people or pay for the marketing you need to get folks to buy your products or, if you're public, invest in the firm. That's why it was so critical for Steve Jobs to get $100 million from Bill Gates early on in Apple's turnaround process that opened to the door to other investments and bought Jobs time to fix the firm.

Beauchamp, on the other hand, took the company private and found an investment firm that didn't want to break up the company up and sell it in parts. That's an easy path it can generate a lot of cash but it isn't very humane given that you put a lot of people out of work and fracture the relationship with customers who had your trust. Bain Capital, often regarded as the break-up-the-company type, actually backed the firm's desire to go private.

Going private should go down as a best practice, as both Dell and BMC have demonstrated far faster progress by not being public. Both firms throw off massive amounts of cash now, allowing them to pay down the debt that going private creates. (Generally, you end up with far fewer investors and far more debt.) Going private also focuses executives on long-term goals, not quarterly results that place sales ahead of customer retention. The latter pays off, but it takes years. Sales will help you hit quarterly numbers at least until customers start leaving faster than they join.

Build a Loyal, Supportive and Qualified Team

It amazes me how many CEOs step in and don't immediately change out much of the executive staff. CEOs don't run companies; they manage them. The executives in place are likely more the reason that the company needs a turnaround than the prior CEO is. In addition, you can't fix loyalty issues and culture clashes unless you change the executive staff. People who wanted the top job but didn't get it tend to bushwhack the new CEO. We saw that happen at HP with CEO Leo Apotheker and Todd Bradley. Apotheker was gone in less than a year and things didn't work out well for Bradley, either.

[ Related: How Microsoft's Delayed Reorganization Fixed the Loyalty Gap ]

Beauchamp went out and attracted the best people he could find from a variety of companies. These people are loyal to him, with no agenda other than BMC's successful future, and they have a high regard for their boss and each other. A few years back, at an analyst event similar to BMC Engage, it was clear that two of the top people hated each other so much so that I'm surprised they didn't get into a physical fight. That company isn't with us any longer; in hindsight, that internal animosity was a clear warning sign.

Appoint a Chief Customer Officer, Avoid Doing Stupid Things

When I first started in the technology market, I joined ROLM, largely because it had a Great Place to Work department. It made a huge difference; the guy who ran it, Leo Chamberlain, did incredible work and earned everyone's love.

When IBM bought ROLM, it believed every manager should want to make the firm a Great Place to Work and eliminated the group. This was one of the moves that turned a company making nearly $1 billion a year into a company, with the same expenses, making $250 million a year. The top people in most divisions left. This taught me an important lesson: If something is everyone's job, it's actually no one's job.

[ More: BMC and the Anatomy of a Successful Turnaround ]

BMC doesn't have a Great Place to Work department I hope this idea resurfaces someday but it does have a Chief Customer Officer, Paul Avenant, who ensures by proxy that the customer sits at the table for executive decisions. (I once pitched a similar idea to Microsoft, though I called it a Chief Don't Do Something Stupid Officer. I think BMC's choice for a title is far better.) Most firms argue that this is every executive's job. That means it's really no one's job.

EMC had a similar position, and Jim Bampos did amazing things for customer loyalty, retention and advocacy all critical to EMC's continued success. This is a new job at BMC, but it's part of a larger trend in many industries (though not yet in technology), complete with a Chief Customer Officer Council and advocates for the job to not just report to the CEO but be a board-level positon as well. In effect, the CCO truly makes customer satisfaction, loyalty and advocacy every executives' job. Avenant could be the most important executive in BMC after its CEO.

It's Time to Make the Right Choices

Clearly, there are other parts to a turnaround, from creating a strong command-and-control structure to making sure you actually have viable vision tied to potentially successful strategy. In BMC's case, though, the elements I've listed here stand out. (The same was true with Apple, where Jobs himself was the Chief Customer Officer.)

[ Commentary: 7 Ways to Get Your CEO Fired ]

Let's look at this way: Dr. A really cares for patients and Dr. B does well selling patient organs to other people. As a patient, you'd pick Dr. A. As an investor, though, you might pick Dr. B. This would create a whole class of practices selling organs, as behavior often follows the money. Suddenly, your odds as a patient of getting Dr. B would go up exponentially.

CEOs who mistreat their people or bleed their companies and customers set an example for the CEOs who run the firms we work for and that work for us. It's in our best interest to support behavior that's nurturing in who we work for, invest in and buy from. Put a different way, we should favor firms that prioritize the quality of the job and our satisfaction over firms overly interested in milking us and their companies for perks and money.

I walked away realizing BMC is a new company with an old brand, one that showcases how a firm should be run along with an impressive enterprise software product portfolio. It's an excellent example of how to turn a company around.

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