Taking Stock / The Turnaround at Supersol

Yes, that's the hottest story today in the business sector - how Nochi Dankner bought IDB Holding Corporation and immediately set about rehabilitating the supermarket chain, which is one of the group's key assets; how he appointed new management headed by Avraham Bigger; and how the new management this week announced a plan to reverse the company's fortunes on the upside, within a year or two at most.

Simple enough, right? But a question nags. When exactly was it decided that Supersol needed to be turned around? Since when is the supermarket giant considered a categorical failure crying out for far-reaching reform?

Unless our memory is playing tricks on us, just a year ago, the chain was considered one of the country's strongest corporations, and the stock market held its manager, Ami Sagis, in the highest esteem.

Just in April 2002, the chain's board under chairman Dalia Lev gave Sagis a NIS 2 million cash bonus so he wouldn't jump ship for a sexier job (which he did in any case). Just two years ago, analysts and reporters were lavishing accolades on the revolution Sagis had initiated at Supersol by establishing a central logistics hub.

Yet suddenly, in the blink of an eye, Supersol morphed from a colossus into a cripple, and Sagis turned into the man who ruined it. Suddenly his shoes must be filled by some expert on turnarounds.

Supersol's brand-new chairman, Bigger, and other cronies of Dankner are the ones vigorously promoting Supersol's tarnished new image. Based on the company's second-quarter operating loss, its second in history, their work was easily done.

Let us ask it straight: Is Supersol really in such dire condition? And if it is, was it in such great condition two years ago?

Maybe the truth lies in the middle? It wasn't doing that great then, and isn't doing that badly now?

New sheriff in town

The most important part of a great turnaround is replacing the management, Bigger explains. That is true: To instigate a true turnaround, the kind that has everybody whipping off their hats and bowing in awe, first you must demonstrate just how awful the starting point is. And you can't do that with the original management in place. To do that, you need a new chairman, CEO, and preferably new owner too, to serve as the "good guys" who ride in, yodeling "Yahoo! Turnaround," and drive the bad guys who ruined the company out of town.

The day Sagis resigned, half a year ago, we wrote that he was leaving at the last possible minute, the second before the chain's profits would start to collapse. But even Sagis couldn't have figured that in just six months, his image would be transformed from a stellar success who cured Supersol, into the loser who ruined the company and ran. We may assume he's livid, and feels that Dankner, Bigger and Effie Rosenhause, Supersol's new CEO, are taking a ride on his good name.

Sagis can't complain too much, though. He probably remembers what he said at the first interview we held with him when he took over the job five years ago: "I have come into a company that had been suffering from diminishing profits for years. When you're implementing a strategic plan, a partly new one, the answers will become apparent over time, not in a day or two."Asked how he felt about his inheritance from his predecessor, David Alfandri, Sagis said: "I don't think the finger of blame should be pointed at anybody. Everyone, including my predecessor, made a contribution to the company's success."

Nicely put, Sagis. Nor are Bigger and Rosenhause pointing any fingers at him; they're just saying that what the company needs is a turnaround. They are just drumming home the message that Supersol is a bad company that had bad managers.

From tiger to dog and back

Sagis can't complain too much, though. He knows that all such revolutions, all managerial upheavals, all image changes from tiger to dog and back, ultimately serve the managers. These revolutions, whether genuine moves or pure hot air, provide legitimacy for the giant salaries managers draw.

The NIS 15 million that Sagis got from Supersol over his 4.5 years of work compensate to some degree for the mud he's fielding these days in the press.

And here's a forecast for you. Bigger and Rosenhause will deliver the goods. They will bring about a revolution. They will present another lousy quarter or two, they will thoroughly scrub out the stables, and by next year will be proudly presenting fine results.

Why are we so confident of our forecast? First, because Supersol's condition isn't as awful as is being presented. Second, because accountancy always helps management at times like these. Third, because Bigger has a history of restructuring companies, and Rosenhause is a marketing powerhouse. And fourth, because the business cycle is stronger than any manager.

Sure, en route we'll be hearing that word "turnaround" an awful lot, not to mention "new strategy" and conceptual change. But at the end of the day, Dankner, Bigger and Rosenhause all know that success or failure IS inevitably due to the combination of factors: timing, timing and timing.