A couple weeks ago, a good friend asked my opinion on the expected failure of Hostess Brands Inc., the 85 year-old maker of Wonder Bread, Twinkies, Hostess CupCakes, Ho Hos, and Ding Dongs. His question prompted a flashback to regular visits my college buddies and I made decades ago to the 24-hour lunch counter at the Hostess bakery in South Miami after some, ah-hem… late night studies.
Without putting too fine a point on it, I suggested to my friend that the company was probably doomed on at least two basis:
- They found themselves trapped in an ultra-competitive industry, making products that fewer and fewer people were willing to buy and eat.
- It is clear that, for quite some time, Hostess customers, employees, and owners had been failed by an under-performing management.
Many have suggested that the straw that broke Hostess’s back came in the form of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union’s refusal to accept the pay cuts contained in the company’s final contract offer. The union’s recalcitrance didn’t help matters, but as much as we might like to put the lion’s share of blame on them, this unfortunate saga didn’t begin, or end, with the unions.
Hostess was like a cow that was being milked every day, with no thought whatsoever given by dairymen to the condition of the pasture or feed lot, the need for veterinary treatment, milk production technology, or even the market for their products. Whenever management got in a pinch, they sold the cow, renamed her, or filed bankruptcy. The end result in this case, after three changes of ownership since the 1980’s and two bankruptcies, is that some 18,000 people got the ultimate pay cut, the “turn-around” managers get court approved bonuses, and the bakery will be liquidated, one slice at a time.
Are there lessons in this sad affair for the rest of us? Sure. Here are but two of them:
- Stay away from any organization that is bereft of a cogent, convincing long term strategy, and is being run instead purely for near term financial gain. If management can’t credibly explain with something as simple as a crayon, what their business stands for and where it’s going for the long pull, run.
- Have the courage to say no, when it matters, not after the fact… to employees, to unions, and bankers. Otherwise, you end up like GM and Chrysler, circa 2008, and yes, Hostess.