Posted on: Tuesday, January 18, 2005

McDonald's mourns death of 2nd CEO

By Delroy Alexander and Barbara Rose
Chicago Tribune

CHICAGO — McDonald's Corp. executives will focus on maintaining the momentum of the burger giant's turnaround, the company said yesterday, as employees mourned former Chief Executive Charlie Bell, who died Sunday after a seven-month battle with colorectal cancer.

That's hard enough for the few large companies that have ever dealt with the loss of an influential leader to illness. Oak Brook, Ill.-based McDonald's — on its third CEO in 10 months — has had to do it twice since April.

Bell, 44, announced his cancer in May, just three weeks after succeeding predecessor James Cantalupo, who died of a heart attack during an April convention of 12,000 McDonald's franchisees. Bell, an Australian who began working at McDonald's at age 15, was Cantalupo's hand-picked successor and was appointed to replace him hours after his death.

The two leaders were the architects of a lauded revitalization plan that extended hours, added new menu items and employed a back-to-basics sensibility that ended two years of slumping sales.

Since Cantalupo first launched the plan in 2003, McDonald's has logged more than 20 consecutive months of growing sales in the United States and six consecutive quarters of earnings growth, with profits up 42 percent in its most recent quarter.

"Charlie was an incredible leader," recently appointed CEO Jim Skinner said shortly after Bell's death. "Charlie was a role model for each of us and we are better off, as individuals and as a system, because of him."

Skinner, who took over in November after Bell returned home to Sydney, Australia, in a medically equipped plane, said he plans to stick with the long-term plans set out by his predecessors.

Management experts and counselors said that's a good strategy when the unexpected or untimely loss of a leader sends shock waves of sadness and worry through a company.

"It takes time to grieve the loss of someone you like," said Gary Cohen, chief executive officer of Employee Resource Systems Inc., a Chicago-based employee assistance consulting firm. "In addition to feelings of sadness and loss, there's uncertainty about what the change will mean."

Cohen said people start to second-guess what's going to happen, adding, "It's a self-protection instinct, to ask, 'How is my job going to be affected?' "

Bell, like other executives who suffered health problems while in office, faced a range of emotions and uncertainties, while trying to project an upbeat message that their companies were on track. Bell, even when weakened, talked to analysts when he could and tried to rally the troops with companywide voice mail.

CEOs often find there's no set playbook on how to deal with organizational issues when faced with a health crisis.

Tenneco's Michael Walsh, diagnosed with brain cancer in 1993 while he was leading a turnaround, remained a high-profile figure until months before he died in 1994.

Meanwhile, Time Warner's Steven Ross, diagnosed with prostate cancer in 1991, announced his successor six months before he died in 1992. Knight Ridder's James Batten, diagnosed in 1994 with brain cancer, stepped down as chief executive three months before he died in 1995, but retained the chairman's title.

Even more unpredictable is how shareholders will react to the news.

Tenneco's stock fell sharply on the news of Walsh's illness. But Time Warner's stock reportedly gained more than $2 following the company's announcement about Ross, who said at the time that he would continue his schedule.

The ability of McDonald's to cope, initially, was helped by its practice of fostering strong long-term relationships with a large network of entrepreneurial operators and its tradition of grooming executives internally, giving it a ready pipeline of successors.

McDonald's also was relatively open about Bell's illness in an attempt to minimize disruption and help employees unite.

In each case, the company swiftly named a successor who articulated a "stay-the-course" message while acknowledging the company's loss.

"The really good organizations that endure have enough stability in the center of the organization, in that big fat middle ground of operating managers" to weather sudden changes at the top, said James Schrager, professor at University of Chicago's Graduate School of Business.