Going Dutch

Chief Executive (U.S.), September 2006 | Go to article overview
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Going Dutch


TURNAROUNDS

As the company's first woman and non-Dutch CEO, Nancy McKinstry was both an insider and an outsider.

For years Walters Kluwer, the $5-billion Amsterdam-based publisher of law, medical and professional books and journals, had a basic strategy: Buy a family-run publishing company, strip out a lot of costs, generate a lot of cash, and buy the next company. The 117-year-old Dutch company operates in 25 countries but derives half its revenues from North America.

Through the 1990s that strategy worked well until the industry started to consolidate in 2000. Competitors Reed Elsevier and Thomson began buying in earnest, leaving few properties left. Multiples went up; quality went down. Along the way the Internet happened, forcing everyone to invest in order to offer their products electronically. At the time, Walters Kluwer failed to recognize that it was at a crossroads and started to see a drop in net income. Facing a crisis in 2003, the company passed over a number of European executives and turned to its North American operating head, Nancy McKinstry, an American who had held various executive posts over the previous 10 years. Earlier in her career she had been a consultant with Booz Allen.

"Being the first non-Dutch CEO and being a female running a Dutch business has helped me in the sense that I've been able to make some decisions about the business that would've been harder for a European who was entrenched," says McKinstry, whose first job after graduating from the University of Rhode Island was pricing telecom services for New England Telephone. She changed the company from a holding company to an operational-centered business, allowing for better integration of the some 300 distinct businesses it had acquired. Some euro150 million in cost saving? from sharing services was stripped out and plowed into new products.

Now in its third year, McKinstry's transformation plan is showing promise. When she took over in 2003, organic growth was minus 2 percent. In 2005, it was plus 2 percent. Profit warnings tanked the share price. Over the same period it has reclaimed some ground, moving from euro8.66 to euro17.45. Still much has to be done. CE spoke with McKinstry, who moved her family, including her physician husband, to Amsterdam when she took the job three years ago. She splits her time between the two continents.

What do you see as your advantage going forward?

We have several. One, we have recognizable brands. We're number one or number two in our respective markets. Good positions to hang your hat on. Second, we're the only information provider that has a good balance between North America and Europe. As a result, we have more opportunities to globalize our business.

How much in terms of your revenues and profits comes from North America versus other markets?

About 50 percent of revenues and a bit more of our profits come from North America. Europe is a big part of the other 50 percent. Asia is a growing market for us, but it's still on such a small base that the business is roughly 50/50 North America and outside of North America.

Every company, no matter how good it is, can't be good at everything. What are you least good at and need to fix?

We have to move beyond restructuring to operational excellence. We're still learning those skills and beginning to institutionalize the efficiencies so that we can plow savings back into organic growth. We've hired a bunch of ex-GE managers. And when you talk to these folks from a GE or a Cisco, this skill seems ingrained in their DNA. This wasn't part of our culture at Wolters Kluwer. We were good at bottomline management, but not always doing it in a way that was structurally geared to driving the business.

Is SOX-related work a significant income stream for you?

We have an expression here that any change is good for us. Anytime something as fundamental as international accounting standards, SOX or change in tax codes, such as when Reagan changed the tax law back in the early 1980s, it was good for us.

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