If you love those golden, cream-filled, 150 calorie, spongy cakes called Twinkies, you better stock up. Hostess Brands—the maker of Twinkies—is in their second round of Chapter 11 bankruptcy. The first round was in 2004-2009; this round was filed in January 2012. Are they going to make it? Maybe. They have asked their workforce for $200M in cost savings in wages, healthcare and pensions. We’ll know by the end of September if the workers accept the company’s ultimatum. (They have little choice if they want to keep their jobs.) But even these cost reductions may not be enough to save Twinkies in the long run.
How did they get in this mess? By years of lousy leadership—company and union. There is no other way a $2.5B company could end up with:
● twelve different unions
● 40 separate pension plans
● 36 plants● six different CEOs in the last ten years
● more debt when they exited bankruptcy in 2009 than when they entered in 2004 (I thought the purpose of bankruptcy is to reduce debt.)
● work rules that require different drivers to deliver different Hostess products to the same retail location
● sales sinking at a 10% rate
● losses exceeding $300M per year and escalating
● debt of almost $1T though hundreds of millions have been written off
(All the sordid details are in an article by David Kaplan in the 8/13/2012 edition of Fortune magazine.)
The company blames the “Atkins” diet (low carb means no Twinkies), the economy and the unions. The union blames management and those overpaid executives. The truth is, Hostess got where it is by what I call “cumulative effect consequences.” Hostess is suffering from hundreds of decisions made over decades that have the cumulative effect of destroying—or nearly so—the company. That is why no decision is inconsequential. In the long run, they add up. A questionable acquisition here, a labor agreement concession there, a self-centered CEO for a few years, slow response to changes in the economy or customer preferences, and before you know it, Chapter 11 bankruptcy is staring you in the face.
“Cumulative effect consequences” are a real part of life. One cheeseburger per week is probably okay. But add in a milkshake per week, a sugar-filled energy drink…or two…or three, a “loaded” baked potato, a couple of beers on Saturday afternoon, your “one vice”—a Twinkie every day, and before you know it, your health is threatened by obesity, high blood pressure, diabetes, or worse.
“Cumulative effect consequences” are how we get in financial trouble. A car payment we can afford, a house we can’t, the vacation of a lifetime, the iPad we put on MasterCard, and before you know it….
In life and in leadership, every decision is important, even the “little ones,” because at some point, they all add up. So take care. In the long run, a number of “no big deal” decisions can become a very big deal.
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© Copyright 2012 by Dick Wells, The Hard Lessons Company
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Great blog post, Dick…one of your best. Thanks for reminding me I’m responsible for the outcome of even the little decisions.
Thanks, Matt. In my own life, the cumulative effect consequences of on-going poor choices has been more damaging than the big mistakes. It is always good to remember that cancer starts with one bad cell.