CASE STUDY: Metal Recycling Executive Attempts to Salvage Martha Stewart Living

For several years, Martha Stewart Living Omnia-media Inc. (MSLO) had been losing money as amedia company despite the fame of company founder Martha Stewart. As a result, company management decided to recast itself a merchandising company, particularly because of its former success in home-décor retailing.

The company had also been involved in a pro-longed lawsuit between retail chains Macy ' s and J.C. Penny Co. Macy ' s filed suit because it contended that it had the exclusive right to sell Martha Stewart branded merchandise in certain categories, including bedding and cookware. However, Martha Stewart Living also signed an agreement with Macy ' s competitor J.C. Penney. As part of the settlement, Martha Stewart Living shortened by four years, the length of its con-tract with J.C. Penney. Also, J.C. Penney agreed not sell certain Martha Stewart products, such as bed and bath products, but would sell others including lighting and rugs.

During these troubled times, MSLO decided to appoint board member Daniel Dienst as Chief Executive Officer (CEO) of the company. Dienst was a metal industry veteran who had recently been CEDO of Sims Metal Management, the largest metal recycler in North America. Dienst had turn-around experience in the metals industry, plus corporate finance experience from positions he held on Wall Street.

Upon joining MSLO, Dienst said, " I have long been a fan of Martha Stewart, the person and the brand, and believe there is enormous untapped opportunity for this organization and a terrific base of talented people to help us realize that opportunity. " He also mentioned that the company had already embarked on a turnaround plan that is expected to produce good results quickly. Dienst also said, " I look forward to rolling up my sleeves, getting to work, and helping write the next few chapters of this remarkable Company ' s story. "

During the ten years previous to Dienst, six different people served as CEO of MSLO. Other senior executives have departed also, often because they clashed with Martha Stewart, the company founder and nonexecutive chairman.

Questions: 1. To what extent do you think Dan Dienst was facing a crisis leadership situation when he was appointed the CEO of the Martha Stewart Company?

2. So what leadership steps should Dienst take tobegin " rolling up his sleeves? "

3. What steps do you recommend that Dienst take to avoid becoming another senior executive who departs the company?

4. What situational factors might make running a media and merchandise business quite different from running a metal recycling company?

5. Based on current media reports, how successful has Dienst been in turning around MSLO?