Making sudden, surprising shifts in direction is something of a hallmark for Mindy Grossman, CEO of HSN, Inc. While in college, she recalls, she woke up one morning only to realize "I was living someone else’s life.” She promptly dropped out of school, broke off her engagement, and moved to New York City “to try and figure it out,” she said.
Such dramatic changes aren't for everyone, but they've worked out well for Grossman, who has held high-level positions at fashion companies such as Ralph Lauren, Nike, and Tommy Hilfiger. When she was offered the top job at HSN in 2008, Grossman hadn’t even heard of HSN’s parent corporation, IAC/InterActiveCorp, and didn’t know it had gone through seven CEOs in 10 years. Nevertheless, she left a high-level position at Nike and set out to reinvent the faltering shopping network. Since then, she's helped turn HSN into a major commerce presence on the Web, as well as on cable television; redefined the brand; improved its demographics; and boosted the value of its stock from $10 to $55 a share.
Here are five lessons about managing a corporate turnaround that Grossman shared with Stanford Graduate School of Business students last month.
Engage With Your Employees
Before joining HSN, Grossman asked the head of its HR department what employees typically did on their first day of work. They attend orientation, she was told. So Grossman did just that, and news of her unexpected presence quickly got around. On her second day, Grossman decided to hold a town hall meeting. “I was letting people know that things were going to be different," she said. "It humanized me, and people saw that I was accessible and that they could have a future at HSN.” To this day, she still meets with employees over lunches and breakfast.
Avoid Casting Blame
Too many CEOs join a company that isn’t performing well and assume it's because there aren’t many talented people, says Grossman. But more often than not, the problem is uninspired leadership, which is why it's critical to assess your team early on. Grossman learned there were three types of employees at HSN: evangelists, or people who are enthusiastic and show it; those who said “this sounds interesting, but let’s see”; and “blockers,” who are “toxic.”
“I believe you have to get rid of toxicity in any company," she told students. "Don't care how smart, how talented, how long they have been there. If someone is going to create a toxic environment, you have to make a change." Grossman quickly pushed out the blockers and held on to the top executives who impressed her. Five years later, they’re still on her management team.
Disruption Is Your Friend
Grossman learned early on that customers were disappointed with the quality of HSN's products and its customer service. As a result, she dropped products that were a poor fit for the brand and eliminated offshore call centers, which had saved the company money but irritated customers. Those moves cost HSN money at first, but “I'm willing to lose profits in the short term,” she said. “We spent more when we weren't performing as a business.”
HSN founded on shopping, but the way it was done was old-fashioned: Customers watched programs, then called to place an order. To disrupt the process, that meant restructuring the company, redeploying assets, creating digital content, and seeking out new partners. But, Grossman said, it was worth it. “I believe that if you don't disrupt yourself, you will be disrupted by someone else," she said.
HSN went public in August 2008, around the time of the financial crash. The company’s stock, which debuted at about $10 a share, fell to $1.42, with a market cap that was smaller than its accounts receivable balance. “It had nothing to do with the fundamentals of our business; it had to do with (the fact) that the world was falling apart," said Grossman. "It was one of the toughest leadership times I ever had, because I knew I had the fate of 6,000 people and their families at stake.”
Knowing that her customers shared the feeling of a world crumbling, Grossman changed her selling strategy. “Instead of selling [the customer] high-end jewelry, we're going to tell her how to save money and cook at home for her family," she said. "We’re going to tell her how this heater will save money on the fuel bill. We're going to respect her and make her feel great even if she can't buy anything. How we managed that period was a big part of our success."
This piece was originally published by Stanford Graduate School of Business and is republished with permission. Follow Stanford GSB: @StanfordBiz