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Once considered a brilliant contemporary manager, CEO Chainsaw
Al Dunlap was later branded a symbol of corporate greed and long-term failure.
Former CEO “Chainsaw” Al Dunlap built up his reputation and career
quickly, achieving short-term success at a number of companies. However, a number of lessons can be learned
from the former Sunbeam Chairman and CEO’s rise to success and
subsequent fall to corporate failure.
Business
ethics in management requires telling the truth; lies told by corporate leaders
can ruin their careers.
Part of former Dunlap’s corporate character was built
upon a fictionalized dramatization of his childhood. True, Al Dunlap earned some respect for being
confident, getting good grades in high school, working out frequently, and
standing up for himself when challenged by peers. However, Dunlap’s life was not as
difficult as he painted it to be. In his
adulthood, he told his peers that he grew up in a poor
household. Yet, his own sister, Denise
Dunlap, said that the Dunlap family did fairly well financially and lived
comfortably.
While at Sunbeam Corporation, Chairman and CEO Dunlap
took part in channel stuffing in order to make Sunbeam’s inventory levels look
more favorable in the accounting records.
Sunbeam’s channel stuffing led to better stock ratings and better stock
performance. Meanwhile, Dunlap took as much credit as he could for Sunbeam’s success (as he had at
Scott Paper Company and other companies) and distanced himself from whatever
failures Sunbeam experienced. He turned rivals, subordinates, and even some allies into scapegoats if
it meant keeping him out of trouble. The
defensive moves would not keep Dunlap’s job safe, as he would eventually be
removed as Sunbeam Chairman and CEO.
Cutting
costs isn’t everything; short-term results do not last forever.
Chainsaw Al built his career as a CEO around drastic
cost cutting. Everywhere Dunlap
went—from Sterling to American Can Company to Lily Tulip to Crown-Zellerbach to
Diamond International to Consolidated Press Holdings Inc. to Scott Paper Company
to Sunbeam Corporation—the manager turned profits by cutting costs. Chainsaw Al’s cost-cutting measures
included numerous waves of laying off workers, closing several factories,
limiting expansion of other facilities, and even halting research and
development efforts. Mixed in with cost-cutting
efforts was a non-cost cutting, unnecessary attempt by Dunlap and his
sidekick confidant Russell Kersh to move the Sunbeam headquarters to Boca
Raton, Florida—where both Dunlap and Kersh lived.
The short-term profits that Dunlap earned as a corporate
manager led to greater long-term challenges for his management peers at these various companies. In
particular, Kimberly-Clark, who had purchased Scott Paper Company, and Sunbeam
Corporation both lost millions of dollars due to Dunlap’s shrewd
cost cutting. Dunlap’s failed turnaround efforts at Sunbeam Corporation eventually led to his
removal from the company as its Chairman and CEO.
Self-perception
isn’t everything; even the best media coverage does not make a good reputation
last forever.
During the buildup of his career, Dunlap did his
best to gain fame and popularity through the media. As a cost cutting guru, the CEO accepted innumerous interviews and took part in shameless self-promotion. In one scenario, Dunlap was the only CEO bold
enough to accept an interview for a 1995 Newsweek
feature story on corporate restructuring.
After writing his book Mean
Business, Chainsaw Al Dunlap—aka “Rambo in Pinstripes”—posed for a photo
shoot in Rambo army gear to symbolize his ruthless cost cutting. In his own right, Dunlap graduated from
West Point Military Academy in 1960 and had deservedly worn army gear
before.
Still, his seemingly high level of confidence caught
up to him as he struggled as CEO of Sunbeam Corporation. What worked for Chainsaw Al in short
stints at other companies lost momentum at Sunbeam. Sunbeam Board members and employees questioned
his decisions. Even his close colleagues found themselves fighting “Chainsaw Al”. When his days were numbered and his ouster by
the Sunbeam Board of Directors was imminent, Dunlap called it a
‘conspiracy theory’ led by billionaire Ronald Perelman. Dunlap even hoped investment fund manager
Michael Price—a key Sunbeam shareholder who helped Dunlap become
Sunbeam Chairman and CEO—would buy out Perelman’s Sunbeam stock in order
to put an end to the ouster threat.
In the end, Dunlap’s well-crafted brand image collapsed,
and he was no longer a media darling. What
was once billed as a CEO success story was now being questioned. Angry at the decline in shareholder value of
Sunbeam stock, shareholders lost their respect for Dunlap and filed lawsuits
against Sunbeam Corporation. In turn, Chainsaw
Al lost his Sunbeam Chairman and CEO positions to rivals Peter Langerman
and Jerry Levin. Instead of remaining
“Rambo in Pinstripes”—a symbol of nearly invincible corporate success—Chainsaw Al
Dunlap became a symbol of short-term corporate greed and long-term corporate
failure.
Sources:
Byrne, John A. Chainsaw: The Notorious Career of Al Dunlap
in the Era of Profit-At-Any-Price. New
York: HarperBusiness, 1999.
Byrne, John A. “How
Al Dunlap Self-Destructed.” July 6,
1998. BusinessWeek.com. Accessed July 16, 2010.
“‘Chainsaw Al’ axed.”
June 15, 1998. CNNMoney.com. Accessed July 15, 2010.
“‘Chainsaw’ calls a truce.”
August 5, 1998.
CNNMoney.com. Accessed July 15,
2010.
Kadlec, Daniel, Valerie Marchant, and Tammerlin
Drummond. “Chainsaw Al Dunlap Gets The
Chop.” June 29, 1998. Time.com.
Accessed July 15, 2010.