2 min read

Nex needs to do a Lou Gerstner

A leader of a company in crisis has to rally the troops for future success

I know I should not feel for NexInnovations’ plight, but I can’t help it. I am human, after all.

The channel community – and I have said this many times in this space – is a great close-knit group. I have met Hubert Kelly and his brother John several times. This past June I had dinner with Hubert along with several other prominent executives in the channel at a Tech Data gathering. I know others at NexInnovations as well. I would hate for them to be laid off because of this situation.

Having said all that, NexInnovations, arguably the nation’s top independently-owned VAR, is in a major hole – a $72 million hole. It is going to take, in my belief, more than just restructuring of its financial house.

This company is also very lucky because Wachovia Capital Finance, IBM Canada and Tech Data Canada will (publicly, at least) set aside their differences and the debt NexInnovations owes to help it out.

While this is not unprecedented, it is slightly unique that a firm’s creditors are willing to lend it money, supply product and source out goods so that debtor can do business as usual.

However, I don’t believe cutting jobs is the answer here. NexInnovations has roughly 1,200 employees and 30 offices, not to mention customers all over the world. Believe me, it will take good people to run that ship.

Kelly said in an affadavit that if the company is allowed to execute its restructuring plan it will be able to keep most of its employees.

That is great to hear, but we’ll see in 90 days.

I am not one to tell anyone how to run their business. If Kelly looks back in time he’ll know to take a page out of Lou Gerstner’s book (Who Says Elephants Can’t Dance). Gerstner became the CEO of IBM on April Fool’s Day in 1993, when it was perilously close to becoming insolvent.

IBM had glaring overspending problems. Getting costs in line was one thing, but Gerstner also made a bet on IBM staff and set up divisions that were autonomous but had incentives to work together. The message was clear, although considered cruel. Everyone needed to produce. He created a sink-or-swim culture and it paid off in spades for Big Blue.

Gerstner also brought in a plan where employee salaries would be rewarded based on the overall performance of the company.

Remember too, Gerstner was an outsider. He came from RJR Nabisco. Gerstner told the employees he would shed money-losing divisions and products. There were some IBMers who did not believe Gerstner would do this. That all changed early in 1994 when he shut down OS/2, the only competitor to Windows.

This new direction caused IBM’s workforce to roll up their collective sleeves and work. It also pretty much ended the country-club atmosphere at the company.

I’m not saying Kelly should be replaced. What I am suggesting is that Kelly and his strong management team should encourage employees to drive the success of the company.