The
‘Country Cowboy’
Turnaround Artist
by Jill
Maunder
Don ’t let the folks wa s of this Plant City native fool
ou. Peers say David Hawthorne is brilliant at returning distressed
companies to profitability.
Turnaround
expert David E. Hawthorne learned the hard
way that one shouldn’t take a new job over a weekend.
When he discussed taking the CEO’s job at troubled Lodgian
Inc. late one week in the fall of 2001, he’d been assured
that the hotel company – almost devastated by the Sept.
11 tragedy – had a $20-million line of credit. He reckoned
it would help him put Lodgian’s 106 hotels back on track
and pay its 9,000 employees.
But
once he accepted the job and took charge the next Monday,
Hawthorne learned that the bank had frozen the credit line
and all he had to work with was $200,000 in cash. Such are
the predicaments of the ailing companies – private
and public – that Hawthorne rescues, restructures and
in some cases, captains through bankruptcy proceedings.
“You
don’t need to do bankruptcies if you can get everyone
to cooperate,” says Hawthorne, a Plant City product
and
resident known for straight talk as well as keen insight.
“All
bankruptcy does is give you an environment to negotiate.”
The turnaround is a specialty that seized Hawthorne’s
attention when he was in his twelfth year at French-owned
Gardinier Inc., a Tampa phosphate mining company that he
joined as a junior accountant while in college. Gardinier
declared bankruptcy in the mid-1980s after its owner’s
death.
Because of that, company treasurer Hawthorne spent day
after day working with Texan Joe Freeman, the court-appointed
trustee, whom he came to revere and calls his
mentor.
“Eleven
months later, we were out of bankruptcy and I thought it
was magic,” Hawthorne recalls. Lessons learned from
Freeman and specialists from Zolfo, Cooper & Co., a
New York consulting firm (he later joined it), had whetted
his appetite. Hawthorne was hooked.
He since
has built an impressive
freelance career on his
ability to transform starving or
strapped companies and make
them solvent. Lodgian, which
owns hotels and resorts in 32
states and Canada, is the sixth
major firm at which he has
served as chief executive officer,
executive vice president or restructuring officer on a contractual
basis. (To limit liability,
Hawthorne
prefers to be “acting” chief executive officer.)
Whatever the title, he works for a salary that equates to
a CEO’s, plus either a lump-sum “success fee”
or stock options upon conclusion of a contract. (“I
want a piece of the action,” he says.) He sometimes
takes “sabbaticals” – from seven months to
a year – between assignments to relax, enjoy other
interests (for instance, living on a boat or helping his
mother on her ranch) and blue-sky about what might tempt
him next.
He is
“approached” about future
prospects and doesn’t have to look hard
to find the next commitment. But “I
don’t market myself, send out
brochures or call people,” Hawthorne
says.
He places
no restrictions on what
type of company he’ll take on, other
than it may not have even a hint of
fraud. He is adamant about that. He has
worked in entertainment, music and the
cruise ship industry as well as hotels. “I
want it to be something I have some
semblance of a chance for success,” he
explains. “I want it to be something that
I can contribute to. (But) I don’t want to
run something I don’t know anything
about.”
He has
remained with a company for
as short a time as six months – when he
was CEO of Port Canaveral-based Premier
Cruise Lines – and as long as five
years. That was the period for which he
was with Servico Hotels and Resorts
Inc., an independent hotel owner/operator
that was the predecessor company
to Lodgian. It had been in bankruptcy
for a month when Hawthorne became
its chairman and CEO in 1990. During
his tenure, Servico’s stock rose from $2
to $18 per share.
“I
consider all business problems to
be management related,” Hawthorne
says. “The first thing I look at is senior
management of a company.”
Companies become troubled due to
“poor choices” by management. “It
rarely happens with one thing. If you
get in big trouble, you usually are in it
due to bad management. There has
been a series of bad decisions made.”
Upon joining a company, he gets rid
of bad managers promptly. At his first
meeting with a company’s top 10 or so
executives, he warns, “The higher you
are, the more scrutiny you’re going to
get.” Other factors that help him decide
who to dismiss – “how long you’ve
been on the job, if you lie, cheat or
steal, if you are too dumb or too lazy.”
Then he tells them: “Having said that, if
I think I can work with you, you’ll probably
have a job.”
He slices
into large departments of
attorneys and accountants. (Remember
he is one.) “If I go into a company and
see seven lawyers, why would I need
that many?” he asks. “Maybe I need
one.”
He increases
the duties of executives who remain, cutting one $200,000
salary, and giving the survivor twice the work. He figures
that, if he works 60 hours a week, the executives under
him ought to work at least 70. The broad swipe of terminations
stays near the top and at headquarters. “I don’t
believe in trying to finance a turnaround on the backs of
the working people,” Hawthorne says. “Rarely have
I ever cut pay. I have frozen pay. What people need is to
be properly directed.” His first speech to executives
incorporates this mantra: “You work for the people
in the field. They don’t work for you. Your job is
to give them objectives and give them resources. I want
headquarters to support operations and marketing. The people
in the field are the keys. The least important are the headquarters
guys.”
It should
come as no surprise, then,
that everyone on the Lodgian payroll –
including executives – is called an
“associate.” This dovetails with
Hawthorne’s belief that a company
must give employees a sense of ownership
to boost morale and motivate
them.
What’s
the CEO’s role in this relationship? “I consider
myself chief cheerleader.”
Hawthorne
is gifted at “identifying
valuable people and bringing them on
board” and then leading them, says
Richard Cartoon, an ally from the Servico
turnaround who Hawthorne chose
as Lodgian’s chief financial officer. “If a
person’s got what he wants, he will get
him onto the team,” Cartoon says. “He’s
very good at sizing up situations and
deciding on the direction to go.”
Miami
bankruptcy attorney Harold Moorefield Jr. considers Hawthorne
brilliant and admires Hawthorne’s can-do attitude.
“He rolls up his sleeves and gets involved in the company
from the bottom up,” says Moorefield, who also met
Hawthorne during the Servico bankruptcy. “He will ask
for the moon for his company.”
In recent
years at Lodgian, which
owns hotels affiliated with Marriott,
Hilton, Holiday Inn and Crowne Plaza
among other brands, “he has done
things and pulled off things that his
creditor committee must have thought
would never get done,” Moorefield says.
While
at ease in corporate boardrooms and high-stakes financial
circles, Hawthorne also remains plainspoken, down-to-earth
and very much the Plant City boy. (“He likes to convey
the country cowboy image,” Moorefield says.) He loves
to tell long stories laced with humor and intriguing twists.
He alters language to create some unusual expressions. “It
will do as it does” is one of his favorites.
Hawthorne
and his wife, Victoria,
live in the historic district of Plant City,
where he also owns a 40-acre farm near
the ranches of his mother and his aunt.
His ancestors homesteaded in the area
in the 1850s and 1860s. He attended
Plant City High School before the University
of South Florida (B.A.) and University
of Tampa (MBA).
The
Hawthornes live in a 91-year-old house of 3,000 square feet
on Collins Street, not far from 13 historic buildings that
they bought in 1996 and redeveloped. They have sold several.
Victoria Hawthorne oversees three retail spaces for antiques
and an indoor flea market as well as five apartments (with
six more in renovation) that the couple continues to own
and lease. They like the “Old Florida” style and
later this year will move to a larger, older, three- story
house that recently was a bed-and- breakfast establishment.
“I
really like Plant City,” Hawthorne says. “It’s
very comfortable. What are we – 17 miles from downtown
Tampa?” He and his wife also enjoyed living in Sacramento
when he developed a restructuring plan for Tower Records;
he still is a devoted Sacramento Kings fan. He commutes
each week by airliner to Atlanta, where Lodgian has its
headquarters in the tony Buckhead neighborhood.
This
means rising before
dawn each Monday morning to catch
an early flight. If he’s not on the road to
visit properties and lenders, Hawthorne
stays at a Marriott Courtyard owned by
Lodgian. His usual routine is to fly back
to Tampa each Friday evening,
although occasionally he makes it home
by Thursday night.
Hawthorne
admits that he has tired
of the travel, but not of the urge to
orchestrate turnarounds. “There is a
great sense of accomplishment getting a
company back on its feet,” he says.
Still, he wonders if there isn’t something
more, something different, something
that he hasn’t tried.
“I’m
at a stage where I want to reinvent myself, to get out of
such high-stress work and spend time with my grandkids and
to start to make a transition,” Hawthorne says. “I
want to ease my way over to a different role.” He is
considering opportunities to serve on boards of directors
of public companies as well to try the public-speaking circuit.
