If this company were a reality show, it might be called Extreme Makeover: The Business Edition.
John Ward, chairman and CEO of the $1.2 billion Russell Corp., played the role of host and architect to the company’s rebirth as a major player in the athletic wear and sporting goods industry. He did it through a series of methodical acquisitions and by letting good people do their jobs.
But before the company could grow, it needed to go through a severe teardown. Step No. 1 was to become a competitive global player, and according to Ward, that meant moving from Alexander City, Ala., to the urban and more urbane Atlanta.
“I told them upfront, to be a global consumer products company, the headquarters needed to be in a larger city where transportation was easier, you could recruit from a more diverse work force,” says Ward, who was named chairman and CEO in 1998. “These were some of the issues and, of course, we relocated to Atlanta about six years ago.”
That was the start of a number of changes Ward directed to get Russell back on a growth track.
“The first three or four years (I was with) the company, we went through a massive restructuring – closing poor businesses and opening many operations down in Mexico and Central America,” he says. “We achieved over $150 million of cost savings over that first four years. Yet almost all of that was passed on to our customers in lower prices.”
As Ward got the physical assets in order, he also began an overhaul of the company’s strategic approach. His intention was to take the company from a mere athletic wear company to a provider of sporting goods equipment, and today, the company markets sporting goods brands including Russell Athletic, Jerzees, Spalding, AAI, Huffy Sports, Mossy Oak, Discus Athletic, Moving Comfort, Bike, Dudley and Cross Creek.
While Ward officially took the top leadership role in March 1998, he began wielding an influence long before that. The company had been searching for a CEO and had approached Ward several times.
After taking early retirement from Sara Lee — where he had served as president and CEO of several of its divisions – and happy to set his own schedule as a consultant, Ward had no interest in giving up his more relaxed lifestyle and he repeatedly declined overtures from Russell Corp. to take over as its top executive.
It wasn’t until a board member visited with him over the holidays in his Winston-Salem home that he agreed to consider it, and even then, the company had to agree to some radical changes.
“There were a number of things I said the company needed to do to be successful, and they had to feel comfortable to do those,” Ward says. “That meant a revolution of a company, and if they weren’t prepared for a revolution, not an evolution, then I didn’t think the company could be successful. Therefore I was not their candidate — because I was not out looking for a position. I was very comfortable.
“Ultimately, the board agreed that these things needed to be done, and we got together and came in and did them.” Ward instituted a three-part plan to get the company back into growth mode, a plan consisting of restructuring, acquisition and cost management, and finally, leveraging the new assets.
“The plan itself constantly changes based on the market,” Ward says. “Just like acquisitions, we can’t say exactly who we’ll be able to acquire. The first phase was massive restructuring of the company to get competitive so that we would have an opportunity to be successful long term.
“That required physically restructuring operations, getting out of businesses that lost money, moving operations, recruiting a different management team, doing an extensive amount of research.”
Acquisitions
With the company free of nonperforming assets and with a management team on board with the growth plan, Ward headed into phase two of the operation.
“If we had not done it, it is very unlikely the company would survive more than a couple years,” Ward says. “We then, in 2002, said we’ve got a lot better cost position.”
The goal now was to compete long term, and to do that, the company needed to expand its offerings.
“This is where we made the strategic decision that we needed to be a broader company but also to concentrate more on performance products – broader categories, but the products that we went into should have a performance element versus just more basic products,” Ward says. “We didn’t want to get away from basic but we wanted to grow with performance. And that could be performance within Russell Athletic or within these new companies.”
To accomplish that, Ward led the company through a series of carefully researched acquisitions. He says finding the right fit starts with doing your homework.
“We’ve been told by both companies that we have acquired and companies that we haven’t that we do more due diligence than virtually any other company,” Ward says. “We devote an awful lot of our time to evaluating acquisitions, both on the business side but also from the culture side and the capabilities of the management team.
“Once we say, ‘OK, it’s a good business, and we really feel comfortable with the management,’ then we can move very quickly. I spend a lot of time on acquisitions.”
These were lessons he learned while at a previous employer.
“Acquisitions were important at Sara Lee,” says Ward. “And we did a number under the businesses that I had responsibility for. Through that, I’ve learned a great deal that we do apply at Russell. You’ve got to respect the culture and the people in the company being acquired. They often have great ideas.”
One such deal was Spalding, which Russell Corp. acquired in 2003. Spalding is a perfect example of how two companies can benefit from an acquisition, Ward says. Spalding is an innovative company known for its basketballs; the company has dozens of patents on its infusion technology, an in-ball pump that allows the ball to remain inflated without the cumbersome pin/pump combination.
“We could really help them leverage that, providing additional support, financial support and other support to help them build that even larger domestically and even globally,” Ward says. “We wanted to make sure we had companies that had product innovation, that were leaders in their respective segments, that were bringing the product knowledge, because that part of it we didn’t have.
“We had the customer relationship knowledge, we had an understanding of marketing, we had the team of dealers, but the company we acquired was bringing this extensive product knowledge so that we could combine the two together and have a win-win.”
Before any acquisition is sought, Ward sits with the management team and looks at several key factors.
“We have a lot of sessions,” he says. “We look at the industry, we look at trends, we look at the consolidation of customers, and ultimately, we discuss it with the board of directors. We have involvement with a lot of people in the organization, but generally it’s the senior management team, in combination with the board of directors, that ultimately makes that decision.”
Russell seeks successful companies, Ward says. The goal is to find a company that fits, acquire it and then let the management team that made it successful do its job.
“You don’t come in and try to change everything they are doing,” he says. “You want a common value system, but you want to leave the culture of each individual business. So often people will come in and destroy the good things about a company — the culture, the entrepreneurial spirit. Over my career, I have seen businesses really damaged by mishandling of acquisitions.” Fit is a huge factor, Ward says. Russell must be able to leverage its existing operation with any acquisition.
“We go into it with the intention that this business combination can grow faster than it would by itself. Spalding (has) one of the top four highest awareness of brands of sporting goods in the United States,” he says. “What the research told us was that the consumer thought it was a great name for backboards and anything in basketball. Two plus two should equal five and not equal four or equal three.”
Moving forward
Russell will continue to consider acquisitions if a company provides the right fit, but Ward is ready to move the company to the next stage.
“Now we’re in our third phase, which is how do we leverage this,” Ward says. “Each of those were strategic phases. Now, did everything happen exactly the way we planned? No, but there were strategic decisions that we were going to accomplish these major goals.”
To do that, Russell Corp. must remain true to its core competencies. Ward makes sure that even though the company continues to look at acquisitions, it doesn’t stray from its area of expertise.
“We have been a sporting goods company, but we’ve just been in one segment of it,” he says. “All our major competitors were in multiple categories, and it was hard to compete from just one segment of this industry (apparel). For instance, when we were making an arrangement with a major school, if you could make that arrangement for more products, you could provide more financial resources.
The company’s second area of expertise is its dealer network, which had the capability of selling everything to schools. Yet, Ward says, it was only selling uniforms to those schools.
In other words, Russell Corp. was leaving business on the table.
“We had probably the largest uniform business in the country,” Ward says. “What else could we sell through that core competency? We’re selling through major retailers; how can we become more important to our major customers, such as a Dick’s or a Sports Authority?
“These were really extensions of and leveraging of some of our core competencies we had, even though they were in different product categories.”
Russell acquired shoe manufacturer Brooks at the very end of last year.
“They really didn’t have the sourcing capabilities we had,” Ward says. “They didn’t have the size of organization that they could really call on the high schools for track (teams), so Russell could really help them.”
Russell’s core competency – its retail and distribution reach – meshed nicely with Brooks’ manufacturing expertise. And true to his approach Russell purchased the company, with changes coming primarily on the back end of the company.
“They generally stayed alone,” he says. “They are run as a pretty independent part of Russell Corp., but the financial people work with the legal. Everything, like diversity, we provide on a corporate basis.”
HOW TO REACH: Russell Corp., 678-742-8000 or http://www.russellcorp.com
