What It Takes to Execute a Successful Company Turnaround

ALISON BEARD: Welcome to HBR On Leadership. I’m HBR Executive Editor Alison Beard. On this show, we share case studies and conversations with the world’s top business and management experts, hand-selected to help you unlock the best in those around you. We carefully curate this feed from across the HBR portfolio, aiming to help you unlock your next level of leadership.

I hope you enjoy the episode.

Welcome to the HBR IdeaCast from Harvard Business Review. I’m Alison Beard. When a company division or product line has been struggling for some time, it can feel nearly impossible to get things back on track. When sales are down and margins are tight, there’s no money to invest in better marketing, new talent, or more R&D.

But big turnarounds are possible, provided you have a team willing to work hard, be creative, and embrace change. Take it from our guest today. You might think that the companies he’s helped lead, Bristol-Myers Squibb, Black & Decker, Marvel Entertainment, don’t have much in common beyond being consumer-facing. But at each of them, he managed to transform weak, underperforming businesses into Blockbuster ones.

He’s here to share what he’s learned from these experiences and explain how you might apply those lessons to execute successful turnarounds in your own spheres of influence.

Peter Cuneo is the former president and CEO of Marvel, a former senior executive at several other companies, and currently the manager of principal of Cuneo & Company. Peter, nice to be talking to you today.

PETER CUNEO: Alison. It’s great to be here. Thank you.

ALISON BEARD: So we’re going to discuss your time in lots of different industries, but let’s start with this. When you see a business or product line or even a project flailing over a period of time, what is your first step in trying to diagnose whether or not it can be saved and whether it’s even worth saving?

PETER CUNEO: Well, I’ve been asked to get involved in a lot of companies that were having problems, and I probably only chose one out of five because it’s difficult. What I try to do is find people who know the company inside to talk to them about what’s going on. What are they hearing? I have found in my turnarounds actually that the most important thing and the thing that was wrong, that was, I like to say, bankrupt, even if they weren’t bankrupt financially, what was bankrupt was the culture of the company.

The value system was, in some cases, shockingly wrong. What the company, what the organization, what the employees thought was important to accomplish, and what really was important. And so, always try to kind of attack that first question. The second thing, of course, are the things you can do yourself. There’s looking at an industry, there’s looking at the opportunities for the company within that industry, or even what’s the life cycle of the whole industry.

You always assume when you’re going into turnarounds, you are going to make a lot of change. And I always tell people now, “No matter how much information you get being outside the company, when you get inside on a turnaround, if you know it’s a turnaround, you’re going to find out that it’s always much worse than you thought it was. So be prepared for lots of negative surprises, even on top of the ones you already knew about before you walked through the front door.”

ALISON BEARD: But in your evaluation, you have to see a path forward because of the product or the people or the company’s position in the market.

PETER CUNEO: Broadly speaking, you can see that, but in the end, it’s all about execution. It’s all about the people. It’s all about having employees, particularly in key positions, that can cope with a turnaround. My experience is that most human beings have a very hard time being inside a turnaround because it’s scary. You don’t know what the future is. And it takes a certain type of person that will be comfortable with that risk, usually because they see what the rewards could be, particularly financially. But it takes a unique kind of person with a unique view of the world and themselves to actually engage in a turnaround on purpose. I think you have to know yourself, be comfortable with that environment.

ALISON BEARD: So it seems like you’re saying personnel is a huge piece of executing the turnaround. You’ve managed comebacks for everything from personal care products at Clairol to security hardware at Black & Decker, to international divisions at Remington, to movies at Marvel. Are there universal sort of strategies that you pursue for all of those cases, or does each situation require its own specific solution?

PETER CUNEO: On my podcast, I feature something I call the 32 Essentials of Superhero Leadership, and these are one-liners about leadership, about philosophy, behavior, instinct, what have you, that I’ve learned in my career. Many of them, I have to say, the hard way. One of them I actually say is never think you’ve seen it all before because every situation is largely different. Sure, there are certain things you’re going to want to do naturally. For example, the first week I would be in a new turnaround, I would ask all of my direct reports to prepare a one-pager, if you will, on the following, what was wrong with the company, who made the mistakes, and what would they do going forward if they were me?

And the one about who was at fault, I put in specifically for a reason because I could pretty much tell right away who were the keepers and who wouldn’t work out long term. So if a person came in, and this would happen, saying, “Here are our problems, I could have done this better, and here’s where I think we can really go,” that was someone I was interested in working with.

If someone came in and said, “All the problems were someone else. My organization, I didn’t make any mistakes, etc.,” I pretty much thought they wouldn’t make the cut long. And that’s generally how it worked out. So right away, I am, if you will, designing who will be on the key team that’s going to run this turnaround and places where I’ll need to find other people from outside the company.

It’s usually a melding of both. You will find people inside an organization who are actually quite good and, for reasons of poor leadership in the past, basically were never allowed to flourish. And once they are allowed to flourish, they really show their stuff.  One of the great pleasures I’ve had, actually, I’ve done seven successful turnarounds, is seeing that happen.

ALISON BEARD: And what about financial leavers better managing resources versus strategic – heading in a different direction?

PETER CUNEO: Obviously, if you’re doing a turnaround, what the numbers are and so on are very important. And I always like to be initially very close to the numbers because if you’re going into an industry that you don’t really know, you can’t pretend to yourself that you’re an instant expert.

When I went to Marvel, I had no idea how to make a motion picture. I had no idea how to publish a comic book, so I needed to learn the key points of those as quickly as I can. And actually, Marvel is a New York Stock Exchange-listed company, obviously public, and the CFO of the company, when I came, really had his doubts that the company could make it. We’d just come out of bankruptcy. Stock price was super low, and he left the company, and I became the CFO as well as the CEO. Now, today, because of Sarbanes-Oxley, you could never get away with this on a public company, but back then played both roles for two years before I really felt the turnaround was well underway. That’s one of the reasons I learned to understand the makings of making comic books and motion pictures.

ALISON BEARD: As you’re thinking about new strategic directions that you want to take, a division or an international group or an entire organization, do you look closely at what successful competitors are doing?

PETER CUNEO: When I go to a turnaround, I have only the vaguest macro notion of what the strategic decisions or future directions could be. Again, I know that I’m going to discover things that I don’t know on the outside, and in fact, I might be pleasantly surprised or not. And so I don’t get too wedded to what I think what my vision might be for the company. I’m not pushing my vision very hard to start. I want to learn to make sure I know what I’m talking about, and that takes a little bit of time. And very often, I’ve adopted other people’s vision.

Here’s an example at Marvel again. At Marvel, actually, somebody else, a guy named Avi Arad, had really started the motion picture, if you will, strategic approach for the company’s characters. When I showed up the first month I was on the job, I went to the set of X-Men 1. It was already filming. It was the first film that launched Marvel all those years ago on all the success that Marvel has had with film and other businesses. And so I was on the set after two weeks on the job. I admit it. I had no idea, and I was not about to make changes in the script or anything else because I would be the essence of arrogance to say to myself, suddenly, I know how to make a good movie.

Pushing movies in our own studio rather than with big studio partners was not me. It’s a guy named David Maisel. And David had a vision, and the more I heard about it and the more I saw, the more I got excited about his vision. And so, eventually, we made history.

ALISON BEARD: And as you work with this team of people that have been there who have good ideas and are energized by the prospect of change and new people that you’ve brought in to think about strategic directions, do you think that turnaround efforts have more success when there is sort of close attention paid to the competition and how to do what competitors are doing better or differently or more efficiently? Or is it really more about thinking outside the box toward those kind of blue ocean opportunities?

PETER CUNEO: Well, actually you can do both. You certainly want to know a lot about your competition a lot. Understand their behavior, want to understand how they think, you want to understand their cultures as well. But you can do that and take advantage of that at the same time that you’re thinking about radical approaches to the industry or to the business. It’s not an either, or in this case. And I think they’re both extremely important. They’re required actually to affect a turnaround. I was typically on my turnarounds on the job for three years.

ALISON BEARD: Three years is a really quick turnaround time. So how do you manage to do it that quickly, given the hurdles that you outlined? Natural resistance to change, for example.

PETER CUNEO: One of the things that I think many poor leaders misunderstand is the value of communications. Now, we could say, “Oh, of course communications are important, right.” Everyone would say that, but it’s really the quality of the communications that matter. It’s the quality. It’s how often you communicate. It’s how consistently you communicate. It’s also communicating to big groups.

If you have a multinational business, you’re going to have to do some of that certainly. But it’s also walking the aisles, just talking to people about their… how the day is going and talk to them about the business. And believe me, anything you say to that one individual is going to get all around the company in an hour.

You have to be consistent, willing to talk. People would rather hear bad news than no news. That’s human nature, believe it or not. That’s what I have found. I had many different ways that I like to communicate, and you may laugh, but one of them was pizza parties. So I would have every week…

ALISON BEARD: I like pizza. I’m not going to laugh at that.

PETER CUNEO: Every week or every other week, I would have a pizza lunch for maybe 12 people from the company, and they were at all levels and in all functional areas. And one of the interesting things that I found very often is even though they’re in the same building, maybe even in the same floor when we went around the room introducing ourselves, a lot of the people didn’t know the other people in the room, which told me something again about culture right away.

And so this gave me the opportunity to talk about the business, of course, to be optimistic, and you always have to be. In turnarounds, your body language has to be optimistic, what you say has to be optimistic, and so on. And there’s no room for being down ever publicly. If things aren’t going well, you can go home and scream in a pillow. That’s cool. I won’t say that I haven’t done it, but you’re on stage. You’re literally on stage. And even in the case of bad news, you have to be projecting a positive image and optimism, and that you do… one of the ways you do it. Of course, it’s through effective communications.

ALISON BEARD: Is it possible for an existing leader of an underperforming team or product line or business to execute a turnaround also, or does it take an outsider?

PETER CUNEO: I think it depends on what kind of turnaround is required. If you’re talking about radical turnarounds, I think it’s very hard for existing leadership to achieve it because they’re wedded to the past. And radical turns, all mine have been radical, I would say. I think you’re going to have to have a different leadership team.

One of the turnarounds I did I always think about this, I came in, and usually, the people I’m replacing are no longer with the company. They’re not physically there. But in this particular case, the individual was still there, and he was actually very cordial. He’d been with the company for 30 years, and he had been the CEO for like 15 years. A long time. And he said to me, “Peter, I’m glad you’re here.” And, of course, I was thinking, there’s no way that he’s happy that I’m here.

And he said, “You’ll make the changes I couldn’t.” And he said, “I couldn’t fire my friends.” It had all become a family to him with all the time he’d been there, and he couldn’t make the hard actions that he knew he had to make because change always upsets human beings. Even, quote, good change.

ALISON BEARD: And when you’re overseeing painful change like that, you’re shifting resources from one area to another, you’re perhaps laying off people, you’re cutting costs, how do you get buy-in? How do you keep people still feeling positive?

PETER CUNEO: So I’d love to tell you, I’m so wonderful, and I walk through the door, and two weeks later, every employee in a multinational company is on board. Of course, that’s ridiculous. You’re going to have people who challenge you, who don’t believe in your vision, for example, or won’t believe in all the changes that you’re making. And that’s okay.

Typically, I give people time, but after a couple of months, if they can’t make the trip with me, frankly, they have to go because they become cancers in the organization. And the organization has to have a single purpose, a single goal, if you will, in mind.

So there are times to be very, very tough, and you can’t be afraid to do that. Most human beings do not aspire to leadership simply because they know that they’re going to have to make difficult decisions and changes, and they’re going to be unpopular, and they just don’t want to ever be in a position to be unpopular to hurt other people. And that’s cool. I often say that I think that I’m the outlier. People like me we’re the outliers. I don’t say… I don’t mean that we’re insensitive. I think that we’re actually very sensitive, but we’re able, for whatever reason, to go ahead and make those changes and believe in them and give people hope.

It’s actually better for an organization. Everyone’s worried when you walk in the door, “Am I going to lose my job?” And that’s appropriate. It’s better to make those changes fast and then be able to say to the organization, in your communications, there will be no more personnel changes because then they can really start to think about, “Okay, am I on board or not now that I know I have a job?” Good leaders are, I think, excellent at feeling at the instincts of human behavior, human nature, and being able to cope with those and sometimes even use them. But it’s very important. You have to get the company to a point where everyone’s going to roll the boat in unison.

ALISON BEARD: So you’re obviously most well-known for the Marvel turnaround, and I’d love to talk about one big decision that helped pave the way for that. You, along with the Marvel board, agreed to green light Robert Downey Jr. to play Iron Man at a time when his public perception really wasn’t the best. Why was that move so important? How did you know that was the right thing to do?

PETER CUNEO: So I mentioned starting Marvel Studios, and the… I’m now vice chairman of the board. We had, by the way, a very strong board at Marvel. And this is something, again, you’re at a public company or a private turnaround, you want to make sure you have a great board. The board members there deserve a lot of credit for the success because they were believers in radical change, and they could see it and they could support it. Most boards, they don’t want to do anything radical.

And so we had started Marvel Studios, and the first film we were going to make is Iron Man 1. And this is going to be very important because we have borrowed $525 million to start this studio. And this first film obviously needs to be a hit. And, of course, the big decision who’s going to play the lead character? Tony Stark.

And we’re having a board meeting in New York, and the people running Marvel Studios come in, and they say, “Well, we have someone we really want to cast. We’ve worked a lot with him, and we think he’s ideally the best male actor in Hollywood. We want to cast Robert Downey Jr.”

And there’s this silence in the room since his mugshot had been all over everywhere two or three months earlier. And Robert clearly had some personal issues, that’s for sure. And so, to the credit of the people running Marvel Studios, they had gotten him to screen test, and they said, “We knew you would react this way,” he’d said to the board. “And understandable. But we want to show you his screen test.”

So the screen test was the first, I think, eight or 10 minutes of the actual movie. He’s in the Humvee with a female Army driver. He’s smoking a cigarette. He’s drinking a cocktail in the backseat like nothing’s going on. And, of course, they get hit, and that’s how he gets a new heart, and he’s captured and whatever. But first eight minutes are just in the vehicle, and he’s on script for the first three or four minutes.

And then Robert, as only Robert can do, I have to say, looking back, goes off, and he becomes Tony Stark just in front of us.

That film came out in 2007. So we are now 17 years later, the culture of Marvel had become, and I started it, but a lot of other people jumped on board, we’re going to change the rules of the game. We’re not going to make movies the way other people do. We’re not going to do comic books the way other people do. That was the culture. If you want to wrap it up in one line, change the rules of the game. And this was a good example of changing the rules of the game, casting Robert and he was brilliant in the movie.

ALISON BEARD: Over the course of your career, why do you think that you gravitated toward these challenges/opportunities, especially when companies were near bankruptcy or in bankruptcy like Remington or Marvel when you know you’re going to have to make really difficult changes? Why is that all of that appealing?

PETER CUNEO: That’s a great question, which I’ve asked myself many times over the years. I think it starts with how I was raised. Three of my four grandparents were immigrants, so they were risk-takers in a sense.

We don’t really think about it anymore, but way back in the late 19th century, to leave your country and come to a completely different country, particularly when you didn’t speak the language, which was true in some cases, not all my grandparents, but in some cases, and make a life for yourself takes a lot of courage and it takes a willingness to put up change.

And my mother and my father were, I think, because they’re the spawn of my grandparents, were very similar. Real quickly, my father was Boy Scout of the year at age 13 in Manhattan; was a Navy officer in World War II in the South Pacific and also was pulled… called up from the reserves to be an officer on an aircraft carrier in the Korean War.

He was also a lieutenant in New York City Fire Department, running into buildings, fighting fires in some of the worst neighborhoods in New York. So my father was a doer. He could not handle a desk job for very long. He needed to get out there. And my mother was similar. My mother was an EMT for 30 years. And so I grew up with those as models for life. And so I was never afraid of the unknown. In fact, in a funny way, I gravitated. I used to tell people I had an adventurer gene.

And then, I volunteered to go to Vietnam. I did two tours as a Navy officer in Vietnam, another adventure. I was very naive. I wouldn’t call it an adventure anymore. But that started me on a leadership… on a pattern of leadership because the military gives young junior officers a tremendous amount of responsibility during wartimes.

And so I had to cope and live with that. I actually enjoyed it. And so that’s the start. And then, of course, when I got out of the Navy, I went to Harvard Business School.

Actually, I had no idea that I would be good in turnarounds and no clue at all. Never thought about turnarounds. I was doing a fairly big corporate financial type of professional career, and one day, I was in a division in consumer products. My boss said to me, “You’re taking over the international division.” I said, “What? Yeah, we’re getting on a plane. We’re flying to London to the headquarters tomorrow.”

So I was thrown into my first turnaround, and I didn’t move. I stayed in New York, but I was quite often in Europe. And the first six months, I was very down. I really didn’t think, “What do I know about turnarounds?” And then we started to get results, and then we got really good results. And then I started to think about, “Why is it? Why are we successful?”

And I realized it was leadership, not just mine, but other people that I had found or discovered in the organization or brought into the organization. And then I was off. And then the company I was with saw what I had done after two years and said, “Okay, here’s a bigger turnaround to do.” And we had a big success there too. And then I was addicted. I was actually, I have to say, addicted to doing turnarounds. I think I still am today.

The reality is I had a lot of help, and I made some mistakes, and there is stress. Nobody can… tells you that I did a successful turnaround. It’s going to tell you if they’re honest, that there wasn’t a lot of stress because there is. Particularly for me in the first six months when I was still making changes in learning mode and what have you. And if my wife was here, she would tell you that on most of them, there were times when I came back home in the first six months and said, “I think I made a major career blunder.” It wasn’t instant. And in some cases, if anything, they were even worse for a while. So there is that too. Another reason that I don’t recommend turnarounds for everyone.

ALISON BEARD: So let’s talk about when you feel like your mission has been accomplished and it’s time to move on. I know you’ve sold a couple companies. Remington to a leveraged buyout firm. Marvel to Disney in 2009. How do you make those decisions? When do you know it’s time to step away?

PETER CUNEO: Well, as I said, most of the time, I’m in the job three years. At Marvel, it was closer to four years as CEO, and I didn’t make the decision to sell the business six years later. That was obviously a board decision. Also, the owners of Remington, when we sold the business, that was… certainly, they were a big part of that.

But as far as me being done, actually, there’s a very simple test. I start to get bored. Things seem to be running well. We’re getting good results. People seem to be happy. There aren’t the big challenges that there were when I first came, and that’s when I know it’s probably time to move on.

ALISON BEARD: What’s your advice to leaders out there who feel like the businesses that they’re managing might be in trouble?

PETER CUNEO: Well, when you say might be in trouble, I think it’s rarely a question.

ALISON BEARD: So if you think it might be, it probably is.

PETER CUNEO: Yeah, it’s probably, I would say. And so, again, leadership, great leadership takes courage. It takes being honest with yourself and with others and courage to make change and upset others. I would say to most people to determine whether you’re the person who can do it. Do you have the personality, the emotional makeup, to actually carry it off? Because if you’re honest and you’re not, then get somebody else who will.

And you’ll still get the credit for the turnaround because you brought in the person who was successful. In some cases, maybe you don’t have that option. It’s time for to look for another job. But human beings want to procrastinate. My biggest plus and my biggest minus is I’m too impatient as a personality. But tor turnarounds, you got to get… you got to move. You got to get help.

And if you’re in a situation where you’re involved in an area you just know nothing about, like I knew nothing about comics or movies, but maybe it could be today – AI. Everybody’s going to be engaged with AI in some way. If you don’t understand AI, get someone to help you understand it. And that’s not hard. It’s not hard. But if your competition is into AI already and you’re not, you have a problem. And it’s an obvious one, but don’t be afraid to get help.

ALISON BEARD: HBR On Leadership will be back next Wednesday with another hand-picked conversation from Harvard Business Review. If this episode helped you, please share it with your friends and colleagues, and follow the show on Apple Podcasts, Spotify, or wherever you listen to podcasts. While you’re there, consider leaving us a review.

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This episode was produced by Mary Dooe and me, Amanda Kersey. On Leadership’s team includes Maureen Hoch, Rob Eckhardt, Erica Truxler, Ramsey Khabbaz, Nicole Smith, and Anne Bartholomew. Music by Coma Media.