When John Collard was hired in 1988 to help revive Delta Data Systems, a board member of the troubled manufacturer voiced a concern: "It's not clear to me that you're tough enough," he told Mr. Collard.
Puzzled by the remark at the time, Mr. Collard said he's learned since then that the toughness factor should be part of any job interview with a "turnaround" manager promising to fix a broken company.
"The thing to ask turnaround people is, 'When was the last time you went into a company and took 400 employees down to 200?' " said Mr. Collard, president of Strategic Management Partners, an Annapolis consulting firm. " 'How do you do that? How do you sleep at night?' "
Step into the posh, hypertense world of corporate turnarounds, where the next call is probably from an angry creditor, where the salaries run as high as the stress and where store closings, plant shutdowns and layoffs are part of the resume.
"Turnaround professionals need to have developed battle scars," said Shaun K. Donnellan, managing director of Glass & Associates Inc., a prominent "corporate recovery" consulting firm based in Canton, Ohio.
Turnaround pros are hired on short notice generally and charged with reviving troubled companies, often by drastic means. No strangers to Maryland, "crisis management" consultants again are seeking employment in the state.
Merry-Go-Round Enterprises Inc., the big, struggling apparel chain based in Joppa, is deciding whether to hire a manager with turnaround credentials as its acting chief executive officer. Last week the retailer's board interviewed CEO candidates from at least three crisis firms, including one that played a key role in the bankruptcy case of R.H. Macy & Co., sources said.
It's uncertain whether Merry-Go-Round's board of directors is committed to hiring a turnaround artist or what a new CEO's prescription would be. Merry-Go-Round, which sought bankruptcy protection in January and booked $44.9 million in operating losses on $494.5 million in revenue for eight months ending Oct. 1, has declined to comment.
But interviews with consultants and analysts offer a look at the unconventional profession being eyed by Merry-Go-Round's board.
True, dyed-in-red-ink turnaround artists tend to be lone rangers with bad telephone manners.
"They yell. . . . They're very obnoxious over the phone," said Harlan D. Platt, professor of finance at Northeastern University. "The secretaries here, they've grown immune to it."
In person, turnaround managers "are very nice," added Professor Platt, who works closely with the Turnaround Management Association, a trade group.
Crisis pros are often brash, disciples of calculated risk and eager to plunge into the most hopeless business muddles. They spend only a few years on each assignment, shipping their families from city to city or commuting hundreds of miles.
"We're not going to stick around. We're migrant workers with a tie on," said Jim Moran, executive vice president of Buccino & Associates Inc., a well-known New York turnaround consultancy.
Crisis managers bill more than migrant workers.
Jay Alix is a top turnaround jockey who recently revived General Motors' ailing National Car Rental division. Several years ago, in the bankruptcy case of Cardinal Industries Inc., Mr. Alix billed $1,000 an hour for his personal time and a total of $11.3 million for three years of work by him and his firm, Jay Alix & Associates. A bankruptcy judge cut the fees, but they were still in the multiple millions.
In 1989, the Buccino firm submitted a bill for $322,000 for its crisis management efforts in the case of Chas. A. Stevens & Co., a Chicago women's apparel chain. U.S. Bankruptcy Judge John H. Squires ordered the fees cut by 40 percent, saying they were out of line with the benefit received by the retailer, which was liquidated.
A bankrupt company "is not a cash cow to be milked to death by professionals," Judge Squires wrote in his decision.
Despite cases such as Stevens, many clients offer positive testimonials about Buccino and other crisis specialists and believe they are worth the fees.
Mark Millman, president of Millman Search Group Inc., a retail executive search firm based in Baltimore, summed up a chapter in the life of a corporate crisis manager this way: "A one- or two-year project. Turnaround. Say thank you very much. Big bucks. Big bonuses."
Turnaround specialists have existed for decades. But in recent years, the profession has grown into a mini-industry, as ballooning bankruptcies of the late 1980s and early 1990s increased calls for corporate first aid.
The Turnaround Management Association, of which Mr. Collard is the chairman, has 1,700 members. The trade has spawned its own newsletters and culture.
The language of corporate crisis sounds a lot like that of another contemporary growth industry: the self-help, 12-step, psychological wellness business. Turnaround artists talk about the need for entrenched managers to overcome their "denial" of company dysfunction.
A Buccino ad reads: "The path to positive cash flow is available to those with the courage to follow it." A Jay Alix ad shows a rock climber bridging a chasm and says, "Crisis summons unexpected strengths."
Like the personal self-help business, the corporate therapy trade has bred frauds and incompetents.
"There are a lot of guys who can sing the song and talk the talk and walk the walk where you really don't know exactly what you're getting," said John R. Byrnes, assistant U.S. trustee with the Justice Department in Milwaukee. "There unfortunately have been instances where turnaround artists turn around companies themselves or their friends."
It's also hard to measure crisis managers' success, analysts said. If the client company thrives, the hired guns can take credit. If it dies, they can say its problems were too severe.
Expertise should be less of a problem for a big company like Merry-Go-Round, which, sources said, has been considering only well-known crisis firms.
To improve the industry's reputation, a trade group recently started granting a "certified turnaround professional" designation based on rigorous tests in business law, accounting and management.
Turnaround jobs come in many forms. One pro was hired recently to help fix finances in a Native American tribe. Crisis cases have included insurance companies, manufacturers, real estate firms and retailers.
If the cases have a common theme, it's one of shrinking and retrenching. The broad theory of turnarounds is that somewhere, underneath a mass of money-losing operations and unproductive assets, lies a healthy, if smaller, business, waiting to be freed.
"You've got to get rid of your losers. You've got to find a profitable, core business," said Chris Beard, who publishes Turnarounds & Workouts, a newsletter.
The other tenet of the trade is that existing managers are often too close to foundering companies to fix them. "The person who calls somebody in from outside has to admit that they've failed and that they can't solve the problem," said Gary Brooks, of Allomet Partners Ltd., a New York-based turnaround firm. "That's very hard to admit."
One well-known retail turnaround is in Maryland: Jos. A. Bank Clothiers Inc. Crisis manager Timothy F. Finley rescued the apparel seller from near-bankruptcy by closing unproductive stores, cutting more than 200 jobs and reducing interest expense by persuading bondholders to convert to stock.
Today Bank is profitable and growing, and Mr. Finley has stepped out of turnaround-jock character: He has signed on as permanent chairman and chief executive.
Like Mr. Finley, the best turn around artists have strong quantitative skills. But they get used to making hard decisions in the face of what Mr. Donnellan called the "severe information gaps" that often exist at troubled companies.
Few gaps were as bad as those at Phar-Mor Inc., the discount drug chain that plunged into bankruptcy after top managers were accused of embezzling funds and keeping a fake set of books. Turnaround manager Antonio Alvarez shrank Phar-Mor from 310 stores to 168 last year and laid off more than 4,000 full- and part-time workers, improving cash flow in the meantime.
If turnaround managers often wield a sharp knife, maintaining grace under fire helps, too. When bad news must be dished out to creditors, shareholders, suppliers, employees, unions, landlords and government officials alike, diplomacy becomes a survival skill.
"It's all on the shoulders of the turnaround manager," Professor Platt said. Good ones, he said, "bring a level of credibility, of believability."
The turnaround case of Cardinal Industries, a syndicator of real estate partnerships, shows how high the complexity can run. Mr. Alix, the manager who took charge, had to deal for three years with bankruptcy filings by 32 separate affiliates and 11,932 claims for payment totalling $2.6 billion.
Some situations are too difficult for even the most reputable recovery artists. Victor Palmieri in recent years has successfully sorted through the rubble of the insolvent Mutual Benefit Life Insurance Co.
But earlier he tried to salvage Crazy Eddie Inc., the electronics retailer that had been defrauded by owner Eddie Antar. "We are going to rebuild, grow and see it succeed," Mr. Palmieri said in 1987.
The company was liquidated in 1990.
Lately, some partnerships have had to practice recovery skills on themselves. With the improved economy and decline in bankruptcies, said Allomet's Mr. Brooks, "I think there is some restructuring going on in the turnaround business."