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Jewish World Review April 13, 2001 / 20 Nissan, 5761

Jennifer Couzin

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Consumer Reports

Changing times for CEOs -- SITTING in his spacious office at the Delray Beach, Fla., headquarters of Office Depot, CEO Bruce Nelson can hear the clock ticking.

All eight of them.

You can hardly blame Nelson, 56, for being obsessed with time. With responsibility for 947 stores around the world - from Tokyo to Poland to Denver - Nelson is constantly tracking operations in more than eight time zones. The clocks on his office wall are also a reminder that he may not have much time to fix his troubled company.

The job of CEO has never been leisurely, but Nelson's typical 14-hour day is a sign of changing times. Never before have CEOs had to accomplish so much so quickly - or else. The number of CEOs failing the speed test reached new heights from October to March: 679 chief execs of U.S. companies departed during that period, a rise of 56 percent from the same time a year ago, says outplacement firm Challenger, Gray & Christmas.

The churn is usually blamed on impatient shareholders. But there are other, technological factors at work. The pervasiveness of information technology as well as the high expectations created by the performance of technology and Internet firms in recent years have led companies to expect faster results from their leaders.

"The pace of business has increased a lot in the new economy," says Joe Galli, who voluntarily left his post as chief executive of VerticalNet after 24 weeks to lead Newell Rubbermaid.

Even the most technologically savvy leaders can feel overwhelmed by the speed with which they must make decisions. "It's put the CEO on call 24 hours a day," says Scott McNealy of Sun Microsystems.

In the early 1980s, most CEOs seemed to last at least 10 years, often longer. Challenger data suggests that today five or six years is more the norm. And many don't survive that long. Gillette ousted Michael Hawley after 18 months. Procter & Gamble's Durk Jager stepped down after 17 months. By these measures, Nelson, who took over the corner office after his predecessor was fired eight months ago, still has some breathing room.

Today's CEOs are like "small ships in a turbulent sea - they have very minimal control over their destinies," says Jeffrey Garten, dean of the Yale School of Management and author of the recent "The Mind of the CEO."

The image of CEOs as mere mortals buffeted by forces they cannot harness - such as technology-driven globalization - contrasts sharply with the conventional view of corporate leaders as superstars. Lee Iacocca of Chrysler is the archetype of the flamboyant, old-school CEO, credited with bringing his company back from the dead with his unbending will.

Iacocca's steady hand is no longer enough to steer a company in today's choppy seas, where technology makes it possible for competitors to emerge almost overnight. Speed is the key asset in the global economy, yet CEOs still have to make correct decisions or face the consequences.

CEOs can thank the formerly high-flying technology and Internet companies for putting them in this speed fix. As companies like eToys (now bankrupt) and grew at triple-digit rates, investors and corporate boards came to expect better results from their companies. Tech and Net companies also put pressure on CEOs to rapidly improve stock prices.

"I think there were a lot of people managing traditional companies that probably had more pressure that they put on themselves," says Neil Austrian, who is on the board of directors at several companies, including Office Depot. Austrian insists that no responsible board would expect to see an artificially high stock price. But CEO sackings often coincide with a sinking stock price.

Last year, after Office Depot's stock dropped from $11 to $6, the board fired then-CEO David Fuente.

He came aboard in 1986 shortly after Office Depot was founded as a single store in Fort Lauderdale, Fla. Initially a hands-on and inquisitive leader, Fuente led the company through a lengthy period of dazzling growth, turning it into the nation's premier office-supply chain. In 1997, Office Depot had $8.1 billion in sales and 641 outlets in 10 countries, including France and Colombia.

But by 1996 mass-market retailers like Costco and Wal-Mart began nipping at Office Depot's market share while its biggest rival, Staples, was becoming more of a threat.

Anxious Office Depot shareholders pushed Fuente to hastily add 223 stores from 1998 to 1999. In the rush, managers made poor decisions, unveiling outlets in too many markets. The stores performed poorly. Eileen Dunn, VP of investor relations, notes:

"We extended ourselves too thinly across too broad an area."

Fuente's demise came last July, after Office Depot revealed dismal second-quarter results. Six days later, the board handed the CEO title to Nelson and made Fuente chairman. Fuente, as it turns out, was one of 76 CEOs replaced that month.

Nelson has spent most of his career immersed in filing cabinets and thumbtacks. He headed up BT Office Products USA in the 1980s and then Viking Office Products, which was acquired by Office Depot in 1998. After two years overseeing Office Depot's international wing, Nelson was tapped for the top spot.

Nelson knew from the start that drastic measures were called for. And by the new year, he announced plans to shutter 67 stores in the United States and three in Canada - about 8 percent of the company's North American outlets. The cuts were by far the deepest in Office Depot's history.

But is Nelson's own day of reckoning approaching?

Though Office Depot board member Austrian declines to talk specifically about the CEO, he says, "I don't know how anybody can be expected to perform in a year, particularly if it's a turnaround scenario."

Nelson acknowledges the pressure of time. "I would expect that the average length of a CEO (term) will be far less in the future," he says, "than it has been in the past."

The clocks are ticking.

Jennifer Couzin writes for The Industry Standard. Comment by clicking here.


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