Imprinting of Brandon as CEO of a private equity-held company
I have been holding off on this one since I don’t know Dave personally, but having worked with large Leveraged Buyout Firms who have competed with or partnered with Bain Capital in addition to advising their portfolio firms, I figured it was worthwhile to paint a snapshot of what it is like being the CEO of a company (Dominos) held by a large LBO firm like Bain since I am sure it would have influence the way Dave operates. Not sure if the board is interested by this type of stuff.
First, when a LBO firm buys a company, they typically change the CEO, CFO or both. The reason is to bring in “their” management that will be unencumbered by previous operating norms who can hit aggressive targets. This was how Brandon jumped from Valassis to Dominos, with a considerable amount of diligence completed regarding his ability.
Second, Brandon would be offered a less than industry pay package that would be skewed towards large incentive bonuses to be realized at exit (sale or IPO) and an average career length that is shorter than a NFL running back’s. Since LBO firms typically hold portfolio companies for a 4-6 year window to monetize the exit to increase the return of their fund, an underperforming CEO is often replaced at the 2-3 year mark. Also, tying compensation to performance ensures strict alignment of goals unlike CEOs of public companies that can be paid very, very well while their company falters. It is an incredible amount of pressure that pays off handsomely in the end for those that make to exit.
Third, unlike a public company, he would have been evaluated on a monthly basis by ownership. The first task after acquisition is the distribution of the new financial reporting package. I have seen some finance groups take over two weeks just to prepare the monthly reports. Progress is closely monitored, part of this is due to the need to ready the company for exit and partly to stay within any debt covenants since it was a leveraged buyout. Surprises are not suggested during reviews with ownership.
Last, as the new CEO, you would be given very aggressive profitability targets to meet. This would be achieved via cost cutting and revenue expansion. Forming your “go-to” team of individuals is crucial for success since you may need to deploy some very unpopular strategies in a short amount of time. Being a great communicator and consensus builder is paramount to moving the company with new, aggressive targets.
What does this all mean? It means Brandon spent 1999 through 2004 (IPO) under the management of Bain Capital. He survived the gauntlet and remained the CEO post-IPO for another 6 years. He would be a person that believes in:
- Pay for performance
- Strict monitoring of progress
- Taking chances by changing the status quo in order to achieve results
- No surprises
Take all of the above for what it is worth, just a thumbnail based on my previous experience. I will let you read into it what you may, if anything at all. I only wanted to give you window into the man who is calling the shots.
December 31st, 2010 at 4:32 PM ^
well, i read all of that and your last bullet points say one thing to me:
Harbaugh
January 3rd, 2011 at 2:21 AM ^
Including the short career with the lucrative result at the finish line, right?
Right?
December 31st, 2010 at 4:34 PM ^
January 2nd, 2011 at 9:17 PM ^
And I would agree with iawolve's assessment of the overall approach.
I think what a lot of people are assuming is that W-L is the only metric. Brandon has been pretty consistent that he's interested in a lot of things: recruiting, overall improvement, graduation rates, etc. He's also said that the bottom line is: are we moving in the right direction?
The question is, is RR meeting the benchmarks DB has in mind? We all have our own opinions and our own benchmarks, but we aren't in DB's mind as to what *his* benchmarks are.
December 31st, 2010 at 4:44 PM ^
...on the business environment Brandon operated under while at Domino's and its impact on his managerial priorities and methods. His repeated mantra that he will evaluate all coaches and programs annually against a variety of metrics certainly squares with this analysis.
One thing's for sure: Brandon is one of the most dynamic ADs in the NCAA right now. Michigan fans should brace themselves for a regime that will do anything but stay static and calcify.
December 31st, 2010 at 5:57 PM ^
just because the guy has mastered CEO speak doesn't mean he's actually dynamic, or even that he knows what he's doing [note, I'm not actually suggesting he doesn't know what he's doing, just that nothing he's done on his tenure so far would allow anyone to make a call one way or the other].
December 31st, 2010 at 7:05 PM ^
...dynamism is related to the factors mentioned by the OP, I just stated my opinion that he's quite dynamic. I note the disagreement elsewhere on this thread but stand by my statement.
I hazard to say that most who've been watching him since he took over (early) from Bill Martin would see his actions related to:
- The NCAA practicegate investigation
- The Michigan Stadium rededication game
- The Big Chill
- His appearances at various public forums, his radio appearances, and his multiple interviews
- The ND night game decision and the Alabama game decision
- His public movement toward the addition of men's and women's lacrosse as varsity sports
- His continuation of the modernization and expansion of the entire south campus
- His leadership in the Big Ten expansion derby and aftermath
...as particularly dynamic. That's not to say you have to agree with all or most of what he's done or advocated for. But to say he hasn't been dynamic is pretty moronic, IME.
December 31st, 2010 at 4:49 PM ^
So once Coca-cola tried new Coke and it didn't work out, what did they do -- they brought back Old Coke. One might extrapolate this to Michigan and Brandon's view of the football program. We tried New Coke and while it may catch on, it hasn't yet. It's time to go bring back Old Coke. He can't resurrect Bo -- at least I'm pretty sure he can't do that -- LLo and Mo are too old -- what's the next best option? I'll let the reader decide that.
January 1st, 2011 at 12:44 PM ^
In blind taste tests back in the '80s, consumers chose New Coke over Old Coke, and by a significantly wide margin. In other words, despite New Coke being actually better than Old Coke, people still wanted Old Coke. I can't think of a better analogy to describe Michigan Football "fans."
January 1st, 2011 at 1:08 PM ^
new coke apparently tasted better. we can't possibly prefer our current win/loss record.
December 31st, 2010 at 4:50 PM ^
that post and this what I got out of it
- Pay for performance
- Strict monitoring of progress
- Taking chances by changing the status quo in order to achieve results
- No surprises
unless my sarcasim detector is malfuntioning. i didn't see the coach at Standford mentioned or any coach for that matter
December 31st, 2010 at 5:23 PM ^
Nor does anyone else. Just giving insight, take it for what it is worth.
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January 1st, 2011 at 12:59 AM ^
That you didn't actually step out on a limb and make a prediction based on your experience and analysis of "who is David Brandon".
And so what insight did you really provide that isn't already known?
I think your post is very good at explaining why David Brandon has been successful, and the way that he's been successful in his actions to date as the Michigan AD. And that is an interesting point of view.
BUT, you did leave it hanging out there to open the debate on the fictitious coaching change. Now, maybe you are attempting to clarify that you weren't trying to promote anything about the coaching change, but I think you did a poor job at stating that while posting something at the last possible moment for people to draw that conclusion.
For me, I take what you have stated to add to what David Brandon has already stated on the matter, which is that he hasn't said he's firing anyone. That he reviews all the coaches at the end of their season. And that he uses more than wins and losses are factors in his evaluation of a coaches performance.
So I will go out on the limb, farther than even Brian and state, "David Brandon is not firing Rich Rodriguez, because once you look past the wins and losses, Coach Rodriguez has done an excellent job." The only mistake is the NCAA violations. And if Brandon felt those were something that factored into firing Rich Rodriguez then everything you put into your post points to the fact that Brandon would already have done fired him.
No organization makes an announcement that they are "Not Firing their Head Coach". All this talk about, "if Brandon was sure he would have issued a statement" is complete crap. Brandon has stated during the questions on the NCAA violations if he would fire Rich Rodriguez and he repeatedly answered, "NO". And what has the result been? People believe what they want to believe.
So I ask you, why would Brandon, this proven dynamic CEO, spend anymore time stating what he has already stated to people who refuse to accept his answer?
The answer is he wouldn't. And he hasn't. He hasn't said anything after the Ohio State game other than he's sticking to what he stated, which is "leave the Football program alone until after their season is over.
Then, it's likely that the speculation will start anew or not based on what people want to believe, but since the season is over, it no longer has any effect. Which is probably why it will no longer generate click through for the local media. And everyone will move on to Basketball.
January 1st, 2011 at 10:39 AM ^
The reason DB has not made a decision is that he said RR earned the bowl game. If he makes him a lame duck coach, RR would probably have left early. He is doing it this way to be respectful to RR and what he has earned. It is very unlikely he is retained, because RR would at least have been told by now and he acts as though he has no idea. The only thing leading to any delay at this point is the inability to find an upgrade.
December 31st, 2010 at 4:52 PM ^
What has he done so far?
- Scheduled a night game against ND and a neutral site game against Alabama.
- A bunch of fireworks at the Big Chill.
- Insisted upon a unique timeframe to evaluate his football coach.
Not saying this is bad or good, but it doesnt make him one of the most dynamic ADs.
Btw, Dominos was the number 2 pizza company in the world when he took over trailing Pizza Hut. It was number 3 when he stepped down, trailing Pizza Hut and PapaJohns.
December 31st, 2010 at 7:12 PM ^
I think his handling of the response to the NCAA allegations and the preparation for the Seattle hearing has been his biggest achievement. It seems like he directed the whole thing with great skill.
December 31st, 2010 at 11:08 PM ^
He did the absolute best job with that situation anyone could ask for. The freeP was clearly out to get the athletic department and he eventually prevailed in the PR battle.
I would also add the various capital improvements (planned or completed) to Crisler, Yost, and the Big House. I'm hurting for those bigger HD scoreboards and I hope they're in by next season.
January 1st, 2011 at 9:13 AM ^
Brandon did an excellent job with the NCAA issue and generally when being the face of the M organization.
As for the capital improvements, I think Bill Martin gets the credit for those. He drove the Big House expansion and I think the Crisler one as well.
Go Blue today!
December 31st, 2010 at 4:56 PM ^
Dominos Stock Price:
07/16/04 $13.83
01/05/10 $8.76 (the day Brandon was announced as the new athletic director)
The high during those roughly six years was $33.10. Link: http://www.morningstar.com/1/1/28562-dpz-dominos-pizza-inc.html
His political career: won spot on the board of regents for U. of M. in 1998. Lost in 2006.
I don't think he is ever going to threaten Don Canham as perhaps the greatest athletic director in the history of college football.
December 31st, 2010 at 7:52 PM ^
Yeah, the stock market as a whole in 2004 was pretty much identical to what it was at the beginning of 2010.
Brandon must suck as a CEO.
December 31st, 2010 at 9:04 PM ^
I think it's better to comapre Dominos' stock price to other pizza company stocks. Can't really compare to Pizza Hut since it's part of YUM and has other brands.
And Dominos is the second largest pizza chain behind Pizza Hut.
January 1st, 2011 at 9:15 AM ^
I could swear I read that PapaJohn's had passed Domino's but I looked today and there market cap was $700 million compared to $1 billion for Dominos.
They arent really even gaining ground if you adjust for the one-time dividend.
Go Blue!
December 31st, 2010 at 9:31 PM ^
http://247wallst.com/2007/05/07/dominos_pizza_d/
Haven't done the mkt cap math, but I'd be surprised if DPZ shareholders aren't better off in 2010 than they were in 2004.
December 31st, 2010 at 10:53 PM ^
It hurts when you walk into the office Monday morning and see that your company stock has fallen 38% over the weekend even if you are receiving a special dividend of $13.50 a share. You could say "it’s a wash" but you have to question, is it really worth the price? Domino’s Pizza Inc. (DPZ) reported quarterly profit fell 68% last Wednesday and that’s just the begininng.
That was part of the link. Also noted same store sales were down 2.9% nationally year over year (international were up, however). Probably that can be attributed to how lousy the pizza tasted at Dominos which resulted in their famous "Our Pizza Sucks" campaign. It took Dave Brandon 10+ years to figure out his pizza (their main product) was horrible?
So they lauch this great "Our Pizza Sucks" campaign and you get reviews like this one:
http://www.chicagonow.com/blogs/off-the-markley/2010/04/dominos-new-pizza-still-sucks.html
Guess what? Our pizza still sucks.
P.S. I, too, would like to see market cap but too lazy to look that up.
December 31st, 2010 at 11:17 PM ^
If memory serves, the source of that dividend was an opco-propco real estate spinoff & refinancing that basically extracted all the value from owned R/E and gave it to shareholders.
Bold transaction.
As for the entire "our pizza sucks" debate, it's an open question as to whether Bain allowed him to address the deficiency in the core product while the business was still profitable and they hadn't exited their investment.
I'd love to have been a fly on the wall at some of the board meetings airing both sides of that strategic decision.
January 1st, 2011 at 6:38 PM ^
They may have kept a few shares, but it was nothing controlling by that time.
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January 2nd, 2011 at 12:56 AM ^
My point was more along the lines that until Bain exited in 2004 re-IPO, "our pizza sucks" may well have been known but ownership wasn't willing to address it.
Obvsly it was about 5 years after the IPO that the "our pizza sucks" campaign came out, but the argument that it took DB 10 years to figure out their pizza sucks is simply inaccurate. I'm sure they've known it sucks for a long time. It's not until sales tanked that they had to deal with it, and sales tanked about the same time the rest of the economy did, so it's debatable as to whether they thought there was a unique need to take such radical steps until they were damn sure that their sales sucked because their pizza sucked, not because the economy sucked.
December 31st, 2010 at 5:37 PM ^
What we know for sure is that Brandon (as the OP noted) survived in a very competitive environment. Compare his career to that of the guy in East Lansing:
https://secure.wikimedia.org/wikipedia/en/wiki/Mark_Hollis_%28athletic_…
Have you seen Hollis interviewed? He seems like a nice guy, but I think Brandon could run circles around him in most contests. Ditto for the OSU AD.
December 31st, 2010 at 5:39 PM ^
Nice job. I think your post provides a better view into the mind of DB than the constant wailing we're hearing on the CC posts. I think his public stance on coaching evaluation is 100% consistent with your summary.
For all that effort, I give your post a big positive vote. Call it pay for performance.
December 31st, 2010 at 6:52 PM ^
the executive qualifications. I am very familiar with executive practices and this approach on his part is rarely employed without good reason.
The only scenario which would extricate Brandon from a pending disaster is he replaces RR with a qualified coach. ANY OTHER decision (i.e. retain RR for another year) will undermine the football program because uncertainty will permeate the staff, players and recruiting.
It may be that the delay on his part is directly related to the candidate he is pursuing. If JH or any other individual has asked DB to wait until after the Bowl games to discuss the job, his inaction is justified. Additionally, Brandon can maintain his credibility by stating his is waiting to evaluate his coach (smoke screen) and has not selected a replacement.
January 1st, 2011 at 7:37 PM ^
How do you define "qualified coach?" Obviously you don't want RichRod around for another year. However, what happens if Harbaugh isn't available? Would you accept Brady Hoke as a "qualified coach?"
Why does it have to be a smokescreen to say when he's hired that he'll evaluate all coaches at the end of their seasons then hold himself to that? Just becuase he doesn't follow yours or the media's time frame doesn't mean that he's dithering or smokescreening.
December 31st, 2010 at 5:47 PM ^
I think you make some pretty serious leaps to come up with your conclusions, but interesting all the same. Success under an LBO firm can come in many shapes and sizes, but I won't argue that one of those paths to success could be the one you laid out.
December 31st, 2010 at 5:53 PM ^
Just have a composite of "like" people. My disclaimers above definitely apply.
December 31st, 2010 at 6:41 PM ^
my folks just talked to DB (and MSC) at an M donor thing in jax and came away with the impression that DB will do what his instincts have been telling him, whether or not that's in line with the majority of the input he's been getting. i'm not going into more detail than that, though even the direct quotes didn't give me any impression about whether that means he's definitely RR or definitely JH right now. but if any of you have a theory about what DB's gut would say given the picture iawolve painted, you can probably ignore whatever you think the input he's been getting is in coming to a conclusion about what you think he'll do.
this is probably a low-information-content comment, but i thought the instinct > input bit is worth mentioning.
December 31st, 2010 at 7:16 PM ^
Having had to listen to many of DB's quarterly and yearly earnings calls for my job, one thing in particular about what he has said in those calls sticks out to me... DB has consistently stated he is a marketing guy. Having attended the Big Chill, like many of you, we have all seen the type of shows DB is capable of organizing. While none of us know for sure what is going to happen in the coming weeks, my bet is that there will be some type of fireworks involved and that any message/decision relayed will have carefully considered the PR/media buzz that will be created. Whomever the coach is next year, lets all continue to support the buys in blue.
December 31st, 2010 at 10:49 PM ^
December 31st, 2010 at 8:22 PM ^
January 1st, 2011 at 10:26 AM ^
Here's to RR coming back in 2011
December 31st, 2010 at 10:38 PM ^
This gives a different and interesting perspective on how he might be making his decisions.
December 31st, 2010 at 11:03 PM ^
... no one is going to B-S David Brandon, and he will do things on his schedule, and not be pressured into decisions on someone else's schedule...
December 31st, 2010 at 11:36 PM ^
Interesting post in terms of learning more about LBO firms. I feel like one conclusion of this post is that DB will make his decision based on the short-term. IMO there are good arguments on both sides of this debate as to which coach, JH or RR, would be better for Michigan's short-term prospects.
January 1st, 2011 at 2:46 AM ^
In this situation, unlike an LBO, results will not be measured in dollars but in some combination of fan appeasement and success on the field. If you think DB will be driven by short term success you have to ascertain which success is most important to him. If he wants to win next year his best choice is probably RR. If he wants to make certain segments of the fan base happy next year his best choice may be JH. Without further insight into his motivation we just don't know where it will go.
Also, if he is thinking beyond the next year or two JH carries the substantial risk that he bolts for the NFL before really getting things stabilized here. RR is a college lifer.
January 1st, 2011 at 8:59 AM ^
Blue in Seattle, you state that you're gonna go out on a limb and say " DB is not going to fire RR". If he doesn't, he's made a major mess of recruiting. Zettel to PSU, Hart leaning to Ala, and God knows how many more recruits hanging. If RR was the man, DB would have stated and recruiting would not be in this state. He may very well bring RR back, but I see that as a, "no other option', IMO.
January 1st, 2011 at 9:18 AM ^
in this bit of insight into DB's previous work environment is that he is used to working within strict deadlines for making decisions. That would likely involve setting an evaluation period and then planning how to use that time to figure out what to do. Sounds familiar, right? I'll guess one major lesson one learns is to resist the urge to panic and make a move before the deadline -- trust your process, and when the time comes to make the decision, make it and don't look back.
Another thing that seems pretty clear is he likely won't allow the status quo for another year -- I mean, it's possible if he thinks the program is on the right track, but the problems on defense argue against that. The question is, what to do about it?
January 1st, 2011 at 10:51 AM ^
But if he hires Harbaugh the day after the Orange Bowl (particularly if RR wins today) can we all agree that the so-called evaluation period was nothing more than a delaying tactic to get through bowl season? I say this because if this comes to pass, it will most likely be because DB and JH have been in contact for some time, leading me to believe that RR's ouster was a foregone conclusion, and that this talk of his supposed sticking to timetables and what-not is simply bullshit. If instead he fires Rodriguez and begins a coaching search immediately, then at least I can respect the guy for living by his word. Of course, we will be royally screwed to the 15th power should that happen.
January 1st, 2011 at 11:19 AM ^
I think DB made the decision when he took his job that he would never change coaches before the end of the bowl games. This way the teams get to play their bowl games with their present coaches without all the ugliness of the transition. The mess that happened the last time was ugly for Michigan, West Virginia and LSU.
This is why he says he will not evaluate a team till after its season is over.
If Brandon has decided to make a change, it is already a done deal and will be announced the day after Stanford plays their bowl game. Short and Sweet.
January 1st, 2011 at 8:58 PM ^
No, you can't say that "for certain". What you say makes alot of sense. It's very reasonable. It probably will be what I believe. But going from what makes sense to claims of fact is what I think has been driving all these baseless rumors. I'm making my stand.
January 2nd, 2011 at 12:20 PM ^
The options you describe are not mutually exclusive. There is nothing about utilizing the advantages of waiting out the bowl season, preemptively exploing alternatives based on expected outcomes, and adhering to a strict timetable that are in conflict with each other.
January 1st, 2011 at 10:23 AM ^
But in that evaluation period, things can go wrong that need attention immediately (recruiting). No one recruit is above the team, but multiple recruits is telling.
January 1st, 2011 at 12:42 PM ^
Happy New Year. I'm drinking one to DB and our future.
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