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James M. Kilts, '74
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2001 Distinguished Alumni Awards
A Household Name (Continued)
Positioned as he was amid General Foods'
worst problems and best products, Kilts garnered the company's
attention in the '70s and early '80s. "When you're at the
spots where the action is, you can either succeed or fail in a
highly visible way," he said of his achievements. "I
was lucky enough to succeed."
The reason seems clear: Kilts consistently approaches
product setbacks and corporate challenges with determination,
enthusiasm, and a highly disciplined approach.
He focuses his turnaround strategy on escaping what he calls
the "circle of doom," a vicious cycle that begins when
a company sets unrealistically high growth targets. "To reach
those unrealistic expectations, they tend to overinvest in production
capacity and overhead. But when sales fall short, they are stuck
with high costs, so they increase price to compensate," said
Kilts. "And when they run out of pricing, then they cut their
marketing budgets and divert those funds to the bottom line. But
lower advertising further depresses sales and the cycle continues.
These companies tend to do a lot of things that are bad for the
long-term health of their businesses, things that ultimately come
back and weaken the franchises."
Nabisco, for example, was caught in the circle of doom when Kilts
took the helm in 1998. "When I got there, Nabisco had some
of the best brands in the world," he said. "But they
were losing share, and every quarter it was getting worse."
The $9 billion global food company, which is the No. 1 cookie
and cracker maker in the world with such brands as Ritz, Oreo,
Newtons, and Chips Ahoy!, had several serious problems. Kilts
said that its capital spending far exceeded that of its peers,
its overheads had spiraled out of control, and marketing investments
and new product development had virtually dried up. The result
was declining sales and market shares.
| "The fact that there are so
many people that use your products every day--that is very
rewarding and satisfying." |
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"Between price, promotion, and product, there
are a lot of areas that have to be done right for a business to
perform well," stressed Kilts, who escapes the circle of
doom at any company with what he calls four "critical success
factors": integrity, enthusiasm, action, and understanding.
"One of the most troublesome areas at Nabisco
was promises that were made to Wall Street and never kept,"
Kilts said. "Restoring integrity to Nabisco's projections
was one of my first jobs."
At Nabisco, it took just 18 months for Kilts to
generate real and sustained growth. On April 7, 2000, The Wall
Street Journal declared that Nabisco had either met or exceeded
analysts' earnings expectations in each of the previous seven
quarters.
In the last two years, Oreo sales have jumped
12 percent and Planters has grown from a half-billion-dollar business
to a nearly $1 billion brand. These turnarounds followed Kilts's
previous success at Kraft, where he was able to restore sliding
market shares in 14 of 17 categories.
Launching impressive turnarounds such as these
requires a motivated team, and Gillette will be no exception.
"At my Gillette meetings, I outline some major areas of short-term
focus and identify action plans for immediate implementation,"
Kilts said, explaining that he helps his employees understand
that change is possible and that a process exists to enact that
change. "While I can't provide lots of specific details,
I do provide a renewed confidence about our future."
Moreover, employees need to see action, he said.
Kilts believes in establishing a sensible business strategy and
setting it in motion as quickly as possible. "The worst thing
you can do is go into a prolonged quiet period as you gather and
then study all of the necessary data," he explained. "You
have to decide on an approach and then work it hard."
At Nabisco, for example, Kilts quickly revised
the company's earnings projections, restored marketing spending,
and strengthened the sales force by hiring and training thousands
of new employees.
Working a plan hard means recognizing that the
immediate measures of today generally benefit the more carefully
developed strategies of tomorrow. "For example, if you're
losing market share and your advertising is down significantly,
you learn that there's a good chance you need to restore that
advertising."
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