Sony is planning to cut 10,000 jobs worldwide, according to Japanese news reports. Yahoo! likewise announced 2,000 planned job cuts last week in addition to a new, more tightly focused business strategy. Avon today announced that it is getting a new CEO. And Burger King is currently trying to rebrand itself and go public again.
They're all very different companies, but they all have some key common traits: they have fallen on hard times and are struggling to right themselves. Here are a few of the tactics that flagging companies adopt and how those fixes could either succeed or fail.
Trim the Fat
The benefits: Cutting thousands of jobs, as Sony and Yahoo! are attempting, quickly cuts costs for companies that may need an immediate way to stanch the bleeding. Yahoo!'s search revenue, for example, dropped by more than 40 percent last year, as Forbes has reported. Likewise, both S&P and Moody's recently downgraded Sony, citing declining revenues from TV sales, among other reasons.
Yahoo! CEO Scott Thompson explained that the job cuts would help to make Yahoo! "smaller, nimbler, more profitable and better equipped to innovate," as MarketWatch reported. In Yahoo!'s case, cutting back and refocusing may indeed be the answer. Kartik Hosanagar, associate professor of information and operations management at the University of Pennsylvania's Wharton School, compares the company's scattered strategy with that of uber-successful rival Google.
"I think if you ask consumers, 'What do you associate Google with?' the answer is either 'search' or 'innovation,'" he says. "If it's Yahoo!, it makes them pause. It makes them wonder what it is."
By refocusing its energies on search and advertising, Yahoo! may again make itself a known quantity to consumers.
The drawbacks: Mass layoffs are often an example of treating the symptoms, rather than the disease, says E. Allan Lind, James L. Vincent professor of leadership at Duke University's Fuqua School of Business. While cutting workers saves money now, he says, "if that's all you do you often don't succeed."
Hire a Headhunter
The benefits: Yahoo!'s CEO Scott Thompson came to the company in January from PayPal. Avon's new CEO, Sheri McCoy, comes to the company from Johnson & Johnson, where she started as a scientist before moving to the executive offices.
It might seem that these jumps would make Thompson and McCoy both fish out of water at their new companies, but that's exactly the point. New CEOs are often brought on specifically for fresh perspectives. And this tactic can work, says Lind, pointing to former GE CEO Jack Welch, who helped to turn that company around.
"[GE] was a pretty fat, sort of a blundering behemoth before he got there, and he did a lot of cutting, a lot of reorganization," says Lind.
The drawbacks: Like massive employee cutbacks, changing CEOs can be a mostly superficial fix, says Lind. And fixing the manifold problems of a massive, failing corporation can be like singlehandedly turning the Titanic around.
Avon may be a prime example of this. As Morningstar COO for Equity Research Lauren DeSanto wrote in an update today, "at this point Avon's problems are so numerous we think superhuman powers may be needed to fix them."
Try Something New
The benefits: Improving a product can be a more meaningful change than simply changing management or cutting some employees. Burger King, for example, has unveiled a new menu, not to mention testing out delivery. The logic is simple: if the consumer isn't buying enough of your products, make products that sell better.
The drawbacks: For a well-established brand, substantially changing the product can scare away loyal customers, so survival can depend upon reaching out to both old and new potential buyers.
Burger King, for example, might have to send two messages, says Lind: "We still have the Whopper, but for those of you who left us or who drive to another fast food outlet, consider us now because we have some other things."
Less obvious is that it can scare away loyal employees. A bevy of new ideas, especially from a new leader, can make workers resentful. "You don't want to say to them, 'You've been doing everything wrong, and I'm the woman who's here to tell you to do it right," says Lind.