“No man should escape our universities without knowing how little he knows.”

― J. Robert Oppenheimer

By David Johnson | @TurnaroundDavid

  • Changing Change Management (McKinsey Insights): Research indicates that 70% of change management initiatives fail, with substantial sunk costs and untold opportunity costs.  McKinsey has assessed ways in which incorporating digital tools can increase employee buy-in, and raise the likelihood (by 30%, according to research) of success for change management initiatives.
  • Arch Coal Dispute With Senior Lenders Puts Debt Plan at Risk (Bloomberg): Arch Coal, struggling with a steep drop in coal prices that has forced four coal companies into chapter 11 bankruptcy in recent months, is facing stiff resistance from creditors for a proposed debt swap.  Attempts by the company to swap up to $2.4 billion in debt for new obligations prompted serious concerns by creditors over their secured position, which has caused Bank of America to resign as agent.  With $5.1 billion in debt and the price of coal used in steelmaking down 67% since 2011, Arch Coal has few options but to seek a balance sheet restructuring, either out of court or in.
  • Hedge Funds Think Puerto Rico Should Shut Down Schools to Pay Its Debts (Slate): In a stark illustration of the human costs of the economic devastation that Puerto Rico is facing, a group of hedge funds holding Puerto Rico bonds issued a report recently suggesting that the island commonwealth does have the capability to service its $72 billion in debt.  The report reached this conclusion by identifying opportunities to increase revenue and decrease spending, including by curtailing education spending.  The frightening realization for creditors of Puerto Rico and  all distressed local governments is that when this species of debtor comes to the point of choosing to favor bondholders or citizens, the bondholders have found their legal protections to be less robust than many had once assumed.
  • J. Crew Enters Danger Zone (Robin Report): In the hyper-competitive apparel retail industry, the margin for error is slight, even for the most accomplished leaders.  Mickey Drexler is living this reality as he seeks to return J. Crew to a growth path as fast-fashion purveyors Forever 21, H&M, Zara, Uniqlo and others set an operational pace that would have been unimaginable until recently.  As J. Crew fumbles toward a plan to address its challenges, Robin Lewis of the Robin Report argues that the company is making the same mistakes of many retailers in the space, (rampant cost cutting and permitting brand erosion) and that as a result the company close to losing hold of its customers, which would be the death knell for any future growth ambitions.
  • Oil’s Below $50 and About to Get Worse (Bloomberg): As the slump in oil prices continues, analysts are becoming increasingly vocal in their view that the global oversupply of oil will continue to exert downward pressure on oil prices for some time.