Within six hours of James Cantalupo’s death from an apparent heart attack, McDonald’s Corp.’s board promoted Charlie Bell to CEO and named Andrew J. McKenna chairman.
The speedy, decisive action won widespread acclaim.
But history shows that a fast succession does not always translate into a successful one. And perhaps the most foreboding comparison for Bell, 43, comes from a company that is a twin of McDonald’s in many ways: the brand-centric, globally active Coca-Cola Co.
Coke’s board won acclaim, too, when it swiftly placed M. Douglas Ivester into the CEO slot in 1997 after lung cancer killed chief executive Roberto Goizueta.
But Ivester lacked the strategic vision and common touch to succeed. He barely lasted two years in the top job.
Dana Corp. also put an insider, Bill Carroll, in charge last September after Joseph Magliochetti abruptly succumbed to a pancreatic illness. Carroll fought off an unwelcome takeover bid for the auto parts giant but could not hold on to his job.
Instead, Dana’s board in February tapped an outsider, former General Motors Corp. executive Michael J. Burns, as the new president and chief executive. Directors felt it was important to conduct a thorough search before designating a permanent replacement, a company spokesman said.
Those who applaud last week’s quick action by the McDonald’s board said any delay would have jeopardized the company’s fragile recovery and also would have undermined Bell by perhaps signaling a lack of confidence.
But taking more time before making such a key decision can have its merits.
For instance, Gillette Co.’s directors waited a month in 1991 after CEO Colman Mockler died of a heart attack before appointing Alfred M. Zeien to succeed him. The delay did not prevent Zeien from launching a successful tenure highlighted by the introduction of the Mach 3 razor.
So why the rush at McDonald’s?
Sources close to the board say directors saw no need to look elsewhere. They had considered Bell as heir apparent since Cantalupo was brought back from early retirement in January 2003 to succeed the ousted Jack Greenberg as chief executive.
But Bell had not received the grooming directors had expected when they informally anointed him by naming him chief operating officer on the day Cantalupo returned.
And sources say directors knew Bell was still a work in progress. One source who worked closely with Cantalupo said the McDonald’s chief executive last year developed some misgivings about Bell’s readiness for the top job. In particular, the source said, Cantalupo had focused on Bell’s rough treatment of subordinates.
Hand-picked for job
Still, Bell remained Cantalupo’s top pick.
“He made a decision, and he was going to stick with it,” the source said. “But he was also going to line up a couple of alternatives just in case.”
Indeed, Cantalupo had considered moving Michael Roberts, president of McDonald’s U.S. operations, to Europe to broaden his experience, sources say.
A company spokesman denied that Cantalupo had any second thoughts or that he had considered moving Roberts.
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“It is ridiculous speculation,” the spokesman said.
Bell won a fast vote of confidence when McDonald’s directors met in Orlando just hours after Cantalupo died early Monday. Even so, one source close to the board said directors did raise questions about Bell’s age and Bell’s readiness for the wide-ranging responsibilities of a modern CEO.
Those concerns, in part, were behind the move to name McKenna, 74, as chairman. Even though McKenna’s Schwarz Paper Co. is privately held and its annual sales amount to only 3 percent of McDonald’s $12.8 billion, directors felt McKenna could help Bell in other ways.
McKenna’s company supplies paper products to McDonald’s–though his company’s $1.9 million of sales was small enough that directors were comfortable no conflict-of-interest concerns would be raised by promoting McKenna. Board members felt Bell could benefit from McKenna’s boardroom savvy and knowledge of the McDonald’s system, sources said.
Don Keough, a retired McDonald’s director best known as Goizueta’s longtime second-in-command at Coke, said the Bell-McKenna arrangement was key to promoting Bell.
“You had Andy McKenna as lead director, which played an instrumental role in reassuring the board,” Keough said.
Corporate governance experts agree. And Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware, said the board gave itself a fallback position by splitting the chairman and CEO jobs.
“The board gave itself some wiggle room by keeping the two roles separate,” Elson said. “They could have named Bell as acting CEO, but they’ve effectively done the same thing by splitting the jobs.”
Besides, Elson added, there was virtue in moving quickly because McDonald’s needed stability after Greenberg’s ouster and Cantalupo’s broad-based turnaround program.
“McDonald’s has gone through a lot of challenges lately,” Elson said. “They don’t need any more instability.”
Midway through recovery
Indeed, the McDonald’s system is midway through a recovery that Bell now must complete. Those who work with him say Bell has the knowledge of the McDonald’s system and the hard-driving ethic that will be necessary.
To succeed, he will have to demonstrate strategic vision and an ability to inspire McDonald’s 1.6 million employees in 119 countries–skills at which the plain-speaking, unpretentious Cantalupo excelled.
Matthew Paull, McDonald’s chief financial officer, expects a smooth transition. Much of Cantalupo’s turnaround plan–with its emphasis on timely service, refurbished stores, and diversifying the menu–were lifted from programs Bell instituted while running McDonald’s European operations from 2001 to 2003, Paull said.
Keeping score
Bell’s attention to detail is symbolized by the “scoreboard on wheels” in his office. On the oversized cork board–which can be rolled into colleagues’ offices for presentations–Bell tracks how McDonald’s fares in 13 key markets on 21 significant success factors.
Different skills, different jobs
Such detail obsession works well for a chief operating officer. Coke’s Ivester was famous internally for a videotape he made showing all the missed opportunities for Coca-Cola sales while on a 70-mile drive from Coke’s Atlanta headquarters to Rome, Ga.
But whereas Ivester never did fill the role of CEO, Bell now will have to show he has vision that will help McDonald’s succeed at a time of slow growth for fast-food restaurants, the threat of lawsuits from the health lobby, demand for more diverse tastes and a backlash against American brands in many parts of the world.
Keough thinks Bell can succeed.
“Charlie doesn’t need me to tell him this, but he needs to tell everyone [at McDonald’s] that the system is on the right track. We’re focused. Everybody has bought into our plan, and there’s passion in play to keep this marvelous system of ours moving,” Keough said.
“Then he needs to show the flag. He’s just got to hit the road and show everyone that they’re just at the beginning” of a recovery.
Absorbing the shock of Cantalupo’s death, Bell spent much of the week at the McDonald’s franchisee convention in Orlando huddled with his team, smoothing relations with Roberts and discussing whether he needs to appoint a chief operating officer to replace him in that role, company sources said.