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The Fight Of His Life


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THE FIGHT OF HIS LIFE

Stacy S. Dick, senior vice-president for strategy at Tenneco Inc., mainly remembers the silence. It was so different from the charged bustle that had accompanied Tenneco Chief Executive Michael H. Walsh when he arrived 17 months earlier to turn the misdirected company around. On Jan. 20, Walsh bluntly told the world that he had been diagnosed with an inoperable form of brain cancer. The stunned office fell into stillness.

Dick's mother had died of cancer when he was a child, so perhaps the shock was especially poignant for him. It took a few days before he slowly began to accept what had happened. The first time they spoke after the announcement, Dick decided not to raise the subject unless Walsh raised it first. The conversation ran through business as usual until Walsh tried to put his halting lieutenant at ease. "Everything's O.K.," the boss said simply. "Don't worry about it."

Eight months later, it's hard not to. Walsh, 51, has clearly been battered by his cancer and its treatments. His shock of thick brown hair is gone, except for a wispy fringe at ear level. He walks unsteadily, with a pronounced limp in his left leg. In conversation, he gestures animatedly with his right hand while the left lies still in his lap.

But get past outward appearances, and Walsh's confidence and candor remain startlingly intact. With the same intensity that propelled him from the U.S. Attorney's Office in San Diego to the world of corporate turnarounds, the hard-edged, "no-excuses" executive is now managing the fight of his life. Walsh's unrelenting optimism has also served to calm a $13 billion conglomerate smack in the middle of a wrenching reorganization. "A situation like this has to be the hardest thing a person can go through," Walsh remarks in his raspy voice. "You wouldn't wish it on your worst enemy."

IN THE SPOTLIGHT. Few top executives will ever face such a life-threatening trauma, and those who do typically shun the spotlight. Reginald Lewis, chairman of closely held TLC Beatrice International Holdings Inc., died of brain cancer only a day after the world learned of his disease--and coincidentally a day before Walsh's announcement. Time Warner Chairman Steven J. Ross announced he had prostate cancer in 1991, but the company routinely downplayed the seriousness of his condition until the disease overtook him a year later.

Walsh doesn't relish the publicity he's gotten, either. But he decided early on to stay at Tenneco's helm and manage the situation with brutal honesty. The question is whether the can-do culture he's instilling at Tenneco can handle both the trauma of a restructuring and the tragic implications of his disease. Says prominent management psychologist Harry Levinson: "There has to be all kinds of anger, depression, fear, worry. Ideally, one needs to deal with these with more than a stiff upper lip."

For Walsh, cancer is just another turnaround situation. "Human beings manage their way through these things," he says, "and it's not miraculous, or it's not all miraculous. It's about 90% discipline and sweat." Given that the median survival rate for someone with his type of tumor is five to six years, Walsh doesn't deny that there could be "a very unpleasant outcome to this." But his attitude is simple: You have to get on with it. It helps that Walsh's doctors have lately given him some hope: They say the tumor appears to have stopped growing and may be breaking up. Walsh isn't trumpeting the news, since he knows the disease can take sudden and unpredictable turns. But it's good news, nonetheless.

In any event, Walsh never seriously considered stepping down from a job he loves and one that he paints in grandiose terms as a chance to prove America's industrial might. The board never questioned his decision, and with the solid backing of his doctors, he has continued to shepherd the restructuring he began two years ago. In March, only weeks out of exhausting radiation treatments, he orchestrated a $1.1 billion equity offering to help pay for the makeover of Case Corp., Tenneco's long- troubled farm-machinery maker. And along with trusted President and heir apparent Dana G. Mead (page 64), he is pushing quality and cost-cutting programs that added $215 million to operating profits in 1992 and an additional $112 million through June 30 of this year.

GRUELING SCHEDULE. But those close to him have had a much harder time with his decision to stay at his post. Initially, Joan Walsh struggled quietly with fears that the cancer treatments might take their toll on her husband of 26 years. In the retelling, the force of her feelings surprises her. "I was outraged he was going to the office," she says now. "As a matter of fact, I was furious. I'd forgotten all that."

She also knew, though, that her husband could do nothing else. His attempts to handle both his own recovery and that of his company have been pure Mike Walsh. Calibrated, methodical, he managed the crisis exactly as he would any business situation. There was no room for undue emotion. The hurdles were met with rational dispatch. Pushing ahead, he notes, "is not such a courageous thing or so terribly meritorious. But, practically speaking, if you don't, what the hell do you do?"

The cancer itself crept up on Walsh just as he was hoping to lighten a grueling schedule at Tenneco. By the end of last year, the company turnaround was gaining momentum and Walsh's confidence was growing. But one day last fall, as he walked around a jogging trail near his Houston home, an eerie sound stopped him short: Although he hadn't really noticed, his left foot was dragging in the dirt. When he looked down, scuff marks confirmed that he'd been limping.

At first, Walsh attributed the problem to back surgery he'd had in February, 1992, for a ruptured disk. As the weeks went by with no improvement, it was increasingly clear that something else was wrong. There were no headaches, no vision problems--none of the symptoms that would have pointed to a brain tumor. So doctors tested Walsh for everything from Lou Gehrig's disease to multiple sclerosis before their suspicions slowly turned to cancer. After a brain scan and biopsy on Jan. 13, they told Walsh it was 80% likely that the tumor was malignant, but more sophisticated tests were needed. In the six painful days of waiting that followed, Walsh clung to the hope that he would beat the odds.

Planning for all contingencies, he also started to chart how he would disclose the news, whatever the outcome. With his head partly shaved, he never considered hiding the matter. ("What would I say, 'The barber slipped?'" he laughs.) He called the chairs of the board committees, seeking their advice on disclosure. And he alerted key staff members so they could prepare alternate press releases over the weekend and plan communications for employees.

Meanwhile, Walsh and his wife started calling friends nationwide, choosing designates in each city to notify other friends. "We hadn't had one day to ourselves," says Joan, who compares those first weeks to a surrealistic play. "Mike masterminded the whole thing. He said, 'This is what we have to do, and how we have to do it.'"

When Walsh made a heartfelt videotape for employees two days after the announcement, he spoke for 22 minutes without a script. It was Vince Lombardi urging his team to victory. "Sure, there's some small risk that you become somewhat fatigued," Walsh said after a frank assessment of his illness. "But I'll tell you, working 80 hours a week for the last 18 months, I'm somewhat accustomed to fatigue as I know all of you are....The kind of momentum we've built, we will and we must sustain.... Keep up the good work. Don't look right or left. We're going on." Tenneco's British chemical unit decided not to show the tape to its employees, deeming the speech too emotional.

DOSE OF HUMOR. The first month of intensive radiation was grueling, but Walsh insisted on attending critical meetings. With his chemo pump slung over his shoulder, he quickly broke the ice at the monthly operating review of his six division chiefs on Jan. 27. "O.K., guys, you all realize I'm having short-term memory problems," he joked. "Would you all introduce yourselves?"

Walsh handled his hair loss with a similar dose of humor. "We went three weeks with no hair loss, and we were so cocky," says Joan. "Then one morning, he woke up and there it was, all over the pillow." Walsh wore a wig for a few national TV appearances and a board meeting, but soon scrapped the hated hairpiece. Tenneco Director John B. McCoy, CEO of Banc One Corp., remembers teasing Walsh that he could certainly afford a better wig, considering his $975,000 annual salary. Walsh's response: "He ripped his hair off and threw it at me," laughs McCoy.

Walsh says he has learned to pace himself and to focus his energies on tasks where he brings "added value, as opposed to unnecessarily and impulsively sticking my nose in." He's delegating more to Mead and the rest of the senior team he assembled well before discovering his illness. Several had worked with Walsh at either Union Pacific Railroad Co. or Cummins Engine Co. Joan sees a change at home, too. Walsh used to insist on being part of nearly every household decision, from choosing carpet colors to buying antiques. Now, she says, "he wants to focus on the important parts of the business and his health. What does he care what color carpet we've got?"

Company managers have taken their cues from Walsh. They quickly abandoned any efforts to treat him with undue tenderness after he showed his annoyance with those who would open doors for him or carry his briefcase. They maintain that despite their boss's physical limitations, Tenneco hasn't missed a beat in its restructuring effort. In sickness as in health, Walsh is unrelenting in his demand for bottom-line results. Morgan Stanley & Co. analyst John J. Mackin expects Tenneco's operating profits to climb 41% this year, to $1.2 billion, despite a slight drop in revenues to $13 billion.

BUSY FAX. Although Walsh remains a strong presence at the office, he has had to scale back somewhat. Bouts of fatigue are the main side effect from a regimen that now includes chemotherapy pills and 10-minute intravenous treatments twice a month. That means he travels far less and works at home more. (His house in Houston's lush Memorial section is only 10 minutes from the office.) But his phone and fax machine are always busy, colleagues say, and he leads the senior staff meetings each Monday.

Walsh's recent appearance in front of a group of analysts and investors at New York's Waldorf Astoria hotel highlights how his life has changed. At a rehearsal for the meeting the night before, Walsh was as feisty as ever. Running through the 10-minute slide presentation, he pointed out an annoying shadow at the edge of the screen. He questioned the colors used in the slides and complained bluntly about the speech that he was supposed to deliver. "The problem is, it's boring as hell," he said.

But when he stood at the podium to practice his delivery, he had to pull a chair behind himself for support. And when he left that evening to take his 24-year-old daughter Kim to dinner, she tenderly took his arm to lead him from the room. During the next morning's session with the analysts, none ventured a question about his health, although he had prepared his answer--a crisp "fine, how are you?" In whispers, they queried a reporter later: "How's he doing?" Noted one institutional investor sadly: "He's really a much diminished figure." The tumor has left Walsh with some weakness in his left side. But he's determined to compensate for that. A former high-school football star who attended Stanford University on an athletic scholarship, he has always been a fitness fanatic. While he hasn't been running, skiing, or horseback riding lately, he swims, lifts weights with a trainer, and rides a stationary bike at a club near his home four times a week. "I'll be right back to where I was within a maximum of six months," he says confidently. "I'm absolutely committed to skiing at Christmastime" at his home in Steamboat Springs, Colo.

That's typical Walsh. His life has been defined by the singular wealth of self-assurance common to turnaround specialists. As far back as grade school, friends and acquaintances remember him as supremely confident, even cocky. He was never shy with his opinions.

He was the third of four children born to Betty and Tom Walsh. His father,

a stern, imposing man, grew up in the hardscrabble town of Butte, Mont., and eventually made a career of managing movie theaters. Mike was a fair, though not brilliant, student. But he was a natural leader, becoming student-body president and an All-State football player at Lincoln High in Portland, Ore. At Stanford, he suffered his first real disappointment: A boyhood dream to play pro football was cut short after repeated operations for dislocated shoulders. Then, in his junior year, his father died of cancer--colon cancer, Walsh is quick to point out. "Obviously, that would be a hard blow for any kid," he acknowledges plainly.

After Stanford, Walsh hit the fast track early. He was chosen for the first class of White House Fellows in 1965. While in Washington, he started dating Joan Royter, who was an assistant dean of foreign students at American University. He went on to Yale University Law School, and after graduating in 1969, he landed a job as a public defender in San Diego. There, he worked with John Gardner to help found the citizens' action group Common Cause.

When he was named U.S. Attorney for the Southern District of California in 1977, Walsh set out to reform an office that was losing about a third of its cases. His public pronouncements that he would recruit only the best and brightest struck some veteran assistants as arrogant and high-handed. But Walsh's team improved the conviction rate and tackled more complex cases involving organized and white-collar crime.

When Walsh was recruited by Indiana-based Cummins in 1980, at the ripe age of 37, friends thought he was crazy to leave behind a prestigious legal career, a potential future in politics, and an old Spanish house with a 180-degree view of the ocean. Joan, meantime, had to give up her career: She had become dean of the international center at the University of California-San Diego.

BACK ON TRACK. Both welcomed a change, however, and Mike saw the corporate world as a new challenge. He quickly learned the ropes at Cummins and moved rapidly through jobs in manufacturing, marketing, and international operations. By 1984, he was an executive vice-president and was named to the board of directors.

But it was at Union Pacific Railroad in Omaha that Walsh hit his stride as a corporate leader. Although the railroad posted record earnings in 1985--the year before he arrived as CEO--its return on assets was a dismal 4.8%. In dozens of "town meetings" with employees across the country, Walsh drove home the message that the railroad must change. To cut costs and boost efficiency, he centralized 10 regional dispatching centers into one sophisticated command post. He surveyed customers for the first time and initiated far-reaching quality programs. By the time Walsh left for Tenneco in September, 1991, productivity and net income had doubled. Return on assets had jumped to 6.7%.

In Houston, he discovered a company in far worse shape than he had been led to believe. Earnings and cash flow were falling short of targets in nearly every unit. Case was awash in inventory and furiously discounting to jam products down dealers' throats. Tenneco's debt was a crippling 70% of capital. Worse yet, few executives showed much urgency to solve the problems. In the midst of this gloomy introduction to the company, Walsh telephoned Joan to say he was thinking of backing out. "I was totally discouraged," he recalls.

Walsh put a fix-it strategy to work immediately. He halved the long-sacred dividend and sold $700 million worth of assets by the end of 1991. Then, he organized an effort to sift through Tenneco's manufacturing processes unit-by-unit to eliminate quality problems and inefficiencies that bloated costs. He axed 10,000 jobs in 1992 and cut expenses by $250 million.

But his biggest push has been to instill a new corporate culture at Tenneco. Called "no-excuses management," it requires that executives meet targets despite outside economic forces. Progress against plan is reviewed weekly and monthly. "We still talk better than we play," Walsh says. Progress has been made, however. And Walsh is determined he will not let his personal misfortune interrupt Tenneco's momentum.

So far, the rest of Tenneco's managers seem to have joined Walsh in this resolve to push forward. In interviews, they talk freely about the continued challenge Tenneco faces, though they politely keep their feelings to themselves when the topic turns to Walsh's future. Not surprisingly, Mead is especially unwilling to dwell on the odd position he finds himself in. He doesn't duck questions about his status as heir apparent. But he doesn't like to talk about it, either. "The succession thing will take care of itself," he says simply.

"RUTHLESSLY RATIONAL." Some organizational experts wonder whether such a business-as-usual approach is sustainable. They commend Walsh for dealing with the issue openly but worry that the psychological impact may demand more attention than Tenneco is giving it. "Most people pretend that if you just deal with [what's out in the open], that's enough," says Ian I. Mitroff, director of the University of Southern California's Center for Crisis Management. "But with the emotions of an organization, you only see the tip of the iceberg." Ralph H. Kilmann, professor of organization and management at the University of Pittsburgh's business school, agrees. He suggests that companies facing a crisis like Tenneco's need forums, formal or informal, where people can talk about the problem. "This is a topic where there often can be high levels of denial."

Walsh and his lieutenants scoff at the suggestion they're in denial. And they've made no plans to bring in outside counselors. Walsh doesn't pretend that his employees don't have feelings about his disease. But he thinks the issue can be handled internally through clear communication. Says Arthur H. House, vice-president of corporate affairs: "He honestly believes that most people who think they know how organizations are run are wrong."

As far as counseling for himself, Walsh hasn't pursued any, although he has confided in a broad network of friends and family. Likewise, Walsh has never reached for answers in spirituality or religion. "He really gets his strength from his family, from what he's doing," says Joan, who shares his feelings. Says college buddy T. Robert Burke, a San Francisco attorney: "He's thoughtful about it but also determined. He's almost ruthlessly rational."

Walsh does spend more time now relaxing with Joan and visiting with his three grown children. "We go to movies and go out to dinner a lot more," Joan says. And the couple spends every weekend at their 85-acre ranch in tiny Round Top, Tex. They read, listen to music, cut roses. "It sounds so trite," Joan says apologetically. "'You smell the roses more.' Well, you do."

Joan definitely sees a gentler side to Mike since his illness. She recalls a recent trip to Washington where, on a postdinner walk near their hotel, they encountered panhandlers on virtually every corner. Walsh stopped at each one, often engaging in conversation and pulling out his money clip. "All of a sudden it dawned on me, this is the new Mike," Joan laughs.

And the future? "Listen, we're not stupid," she says. "Some people make it. Some people don't. There are no contracts." For the time being, she's just focusing on Mike's getting through this year's treatments. As for the company, the board of directors has complete access to Walsh's medical records. "We will know if things go in the wrong direction," comments audit committee Chairman Peter T. Flawn. Walsh figures that the future will take care of itself. "I have a feeling there are a lot of chapters yet to be written," he reflects. Right now, it's just a matter of getting on with it.TENNECO'S MENAGERIE OF BUSINESSES

TOTAL 1993* SALES: $13 BILLION TOTAL 1993* OPERATING EARNINGS: $1.2 BILLION

CASE CORP. At 29% of sales, Tenneco's biggest unit--and problem. This maker of

farm and construction machinery took $920 million restructuring charge in 1992.

Slashing capacity, jobs, product lines. Reduced discounting. Should turn small

operating profit in 1993.

TENNECO GAS (17%) One of largest U.S. natural-gas pipeline companies.

Solidly profitable but highly regulated. Cutting costs while seeking new

nonregulated projects. Also expanding ventures in electric generation while

financing oil and gas exploration.

NEWPORT NEWS SHIPBUILDING (17%) Backlog still big at $4.1 billion, but

defense cuts hurting. Cut 4,000 jobs while streamlining operations. Pursuing

Navy's Sealift program and expanding to commercial building and repair.

PACKAGING CORP. OF AMERICA (16%) Hit hard by eroding linerboard prices.

Reducing plant down time and scrap to cut costs.

TENNECO AUTO (14%) Walker mufflers, Monroe shocks. Solidly profitable.

ALBRIGHT & WILSON (7%) Chemicals. Market slow in Europe. Cutting costs

aggressively.

*Estimates DATA: MORGAN STANLEY, COMPANY REPORTS, BUSINESS WEEK

Wendy Zellner in Houston


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