Leadership of Chainsaw Al Dunlap - Sunbeam Corporation

Leadership Case Study

Sunbeam Corporation

Abstract

The Sunbeam Corporation decided in 1996 that they needed to restructure in order to become a viable company. They hired Chainsaw Al Dunlap to come in and trim the excess in order to make the company healthy and profitable. When Al Dunlap took over he had a vision of what the company would look like going forward. He enlisted the leadership around him that would support his ideas at any cost. Throughout the two years he stayed on course with his vision to the determent to the company as a whole. The company started to misrepresent their sales and revenue information in order to meet these unrealistic goals. In 2008 the representation came to a head when investigators discovered what was going on. As a result of Al Dunlap, Sunbeam was left to possible bankruptcy. Then Jerry W Levin was named the CEO and charged with reorganizing the company's vision and reputation through proper and ethical leadership. With Jerry, the company was able to reestablish themselves with an ethical direction. Looking at the two leaders with Sunbeam, you are able to exam the unethical and ethical styles of a leader and the result they have on an organizations culture and direction.

Background

Al "Chainsaw" Dunlap build a reputation for being a cutthroat CEO who made his name by taking over failing or struggling companies applying massive layoffs and cuts to streamline operations and bring results to its shareholders. His primary goal was to make as much money as possible and often at the determent to the company's strength. His decisions and leadership style resulted in thousands of employees getting laid off and many plants and factories to gain profits. He drastically improved companies like Scott Paper and Crown Zellerbach. Due to his efforts he was able to sell Scott Paper to Kimberly-Clark in 1995 for $7.8 billion and personally walked away with $100 million in personal gains. Al Dunlap graduated from West Point before taking over as the CEO. His military background often played a role in his leadership style throughout his career. Al liked to refer to himself as "Rambo in Pinstrips" and others compared him to General Patton in his delivery and practices. In 1996, Al took over as the CEO of Sunbeam Corporation and was tasked at turning around the corporation to make it profitable. His methods and style led to record earnings of $189 million in 1997 before their collapse in late 1998. Sunbeam was investigated for accounting irregularities and suspicion over the revenue and sales figure miscalculations based around a "bill and hold" strategy to retailers. The board of directors of Sunbeam Corp. had made the decision that on June 13th, they needed to fire the storied CEO Al Dunlap which led to a suit against him which dragged on until 2002, ending his tenure as the stored "Rambo in Pinstrips".

To replace the unethical leadership that Al Dunlap demonstrated, the board of directors hired Jerry W. Levin to come in and restructure Sunbeam Corporation. He led the company through bankruptcy and back to a functioning company by demonstrating ethical leadership with production, staffing, and accounting principles. In 2004, Sunbeam was able to sell its company and became American Household. Jerry Levin used ethical leadership to restructure Sunbeam Corporation by building a management team that focused on integrity in reporting and competence based upon the industry knowledge and strengthening of its core business.

Challenges

Chainsaw Al's start at Sunbeam Corp was met with great expectations by investors and analysts, the companies stocks soared nearly 60% when the announcement was made. When he arrived for his first meeting, managers knew there was tough medicine to be administered. On June 22, 1996 Al marched into a meeting with anxious group of executives and Chainsaw wasted no time delivering his typical Patton like speeches. He shouted "you guys are responsible for the demise of Sunbeam!" and "I'm here to tell you that things have changed, the old Sunbeam is over today!" Al Dunlap from the start created an environment of accusations and uneasiness amount executives. His final remarks were "This is the best day of your life if you're good at what you do and willing to accept change. And it's your worst day of your life if you're not." From the start Al created an environment of attacking and hostility that would result in many of the current management being replaced by people who would get the results Al wanted with no option for failure.

Within a few days of arrival, Chainsaw Al delivered on his early promise get results and change Sunbeam. Al decided to replace a lot of the expertise and wisdom with his own people who made decisions based upon bottom line results and not the best interest of the company. He first brought in C. Donald Burnett from Coopers & Lybrand to analyst the vast payroll cuts that Al expected. Their first recommendation was to take the 75 person human resource department to 17. When the human resources chief questions the decision, the response was that most companies have a human resource manager for every 100 employees, so Sunbeam could have 1 for every 300 "it's simply the ratio". When Burnett came back with his final recommendations, Al Dunlap claimed that it was not strong enough and did not meet his expectations. Al's final plan resulted in 6,000 employees and 87% of its products being eliminated. This causes wide stream problems for the Sunbeam Managers which resulted in total chaos. IT department was outsourced which resulted in the system going down when they tried to upgrade the system. Al made the decided against