Wednesday, November 21, 2012

Hostess: Management Duplicity On A Twinkie


Are you kidding me?  Has management in the US come to this?  

Seriously.  I thought the strength of America was ingenuity.  Innovation.  Being the best.  

Have you been following the Hostess-Twinkie debacle?  As the media reports it, you’d think that the 18,000 unionized employees are reveling in some form of sadomasochism as they bring down the house of Hostess.  Apparently these employees believe that losing their jobs is a small price if they succeed in punishing management.

Let’s take a brief look at the context for this story.  Yes, Hostess is in Chapter 11 and wants to liquidate if the courts allow it; however, this isn’t their first bankruptcy.  Oh no, this is becoming a core competence for Hostess.  Their first experience was in 2004 and when they surfaced in 2009 – are you ready for this – they had lower sales and higher debt.  

What Did Management Do While In Chapter 11?  
Well, employees took $110 million in annual cuts, but prior to the current filing in January there still were 372 separate collective bargaining agreements; 80 health plans; pensions; and some heavy work rules.  So how much restructuring did management actually do the first time?

Now the clock has turned and employees are told that to save their jobs they need to take an 8% cut in pay and 17% in health benefits.  About 2/3rds of the employees agreed; however, 1/3rd went on strike claiming, “it’s not our fault!”  

I don’t know where all of this will end up.  Certainly the unions have some culpability, but what about management?  What has management been doing for the last decade?  Certainly not managing.

A Benchmark - Innovation
I want to throw out one benchmark - the benchmark of innovation.  You know that quality that is naturally imbued in all Americans with the title of “manager;” that quality that built America and separates it from the rest of the world.

Here’s a startling assertion that was reported in a national newspaper: since 2009 Hostess introduced one innovation in its product line: Nature’s Pride bread.  One of its competitors, Grupo Bimbo introduced 1300; everything from flatbreads to health foods.  That’s right the innovation ratio is 1:1300.  Oh yeah, Bimbo’s employees are also unionized, but paid about $6,000/year more than comparable employees at Hostess.

So let me ask that question again: “What has management been doing at Hostess?”

Success Was Not A Mystery
Like most companies, the business conditions at Hostess were not a mystery.  The needs of Hostess customer’s shifted as the market became more “health and additive” conscious.  People still wanted Twinkies, but they wanted nutritious snacks too!  

How did Hostess miss this?  Yes, it took on new debt while in bankruptcy, but the company was expected to grow into the debt – not lose $1 billion in revenue.  Apparently management had no vision.  Apparently it had its hands firmly on the controls of internal financial management while it lost its grip on the external market, competition, and customers.

Whatever management was doing, it clearly wasn’t managing.  Now a lot of people could be hurt: owners, creditors, and employees.

Management Must Own It's Actions
It's time that Hostess management stands up and says “mea culpa.”  It's time they admit that they missed the winds of change.  It's time they recognize that lack of Innovation caused their demise.




2 comments:

  1. I don't know how true this is... but there have been some postings on the internet on how much the management of Hostess has awarded itself recently.

    Truthfully, I don't know how true all of this is. But it does remind me of what happened during the the financial meltdown of 2008.

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  2. There has been a lot written on how management has rewarded itself. I think that management deserves to be rewarded when it serves its customers and employees. That didn't happen here.

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