NEWS ANALYSIS : CEO Tries to Show Quick, Tough Action


William J. Popejoy's move to dismiss two Orange County officials, while publicly nudging two others to resign, is typical of corporate turnaround specialists who want to be seen as taking dramatic action to demonstrate that substantive change is underway.

In firing former county administrator Ernie Schneider and arranging the dismissal of Assistant Treasurer Matthew Raabe, while calling for the resignations of County Counsel Terry C. Andrus and Auditor-Controller Steve E. Lewis, Popejoy was not only moving to rid government of several tainted officials.

The newly appointed county chief executive officer also was acting to restore the image of county government locally, among state officials in Sacramento and with the Wall Street firms whose goodwill can make or break the county's recovery plans.

"What (Popejoy) has done is good, and I would have done the same because he needs to instill confidence in county government," said state Sen. Quentin Kopp (I-San Francisco), a member of a special Senate committee that had grilled these same officials over their handling of the county's financial debacle.

"Fish rots from the top down," Kopp remarked. "The only thing Mr. Popejoy cannot do is get rid of those three left-over supervisors," he said, referring to Roger R. Stanton, Gaddi H. Vasquez and William G. Steiner, who were serving on the Board of Supervisors as the county slid into bankruptcy.

Appointed by the supervisors less than three weeks ago, Popejoy, the former CEO of American Savings & Loan, had been operating in a remarkably low-key manner.

But last week, he launched his bid to remove those he believed responsible for the bankruptcy, and to open the way for a new team to lead the county.

"I think it's necessary," Popejoy explained, "to get the attention of the policy-makers in Sacramento, (as well as the) support we need from Orange County citizens, to show remedial action fast--to show there's leadership, to show we're making hard decisions--and one of them is to jettison these people."

One of Popejoy's chief competitors for the CEO job said he has done exactly what any top executive should do when asked to lead a company--or in this case, a county--out of trouble.

"The first thing you do is put your team together," said B.J. Rone, a corporate work-out specialist from Dallas. "Who on your team can you trust, and who has the confidence of the constituency? One person cannot do it all by himself or herself. If you push these people off to the side but don't get rid of them, they are still sucking cash out of the county."

Rone said outsiders are watching Popejoy carefully.

"People in Sacramento and people on Wall Street are looking for heads to fall. Some have fallen. And more will fall," Rone predicted. "As Mr. Popejoy gets into this thing more deeply, he'll figure out who is part of the problem and who is part of the solution."

Management experts say Popejoy needed to act quickly to show who was boss and to demonstrate that crucial decisions could be made right away. The Board of Supervisors has given Popejoy great latitude to do whatever he believes is necessary to make sure the county pays its bills and continues to provide services.

"He is in command, and we have given him a great deal of authority," said Supervisor Marian Bergeson. "We have delegated that authority in him with the idea that we are sending a strong message to the community and Sacramento that things are under control.

"The county is trying to gain the support and confidence of the public," Bergeson said, and these moves should persuade the public "it's not business as usual in the county" and "we're moving in a new direction."

Because he has declined to accept a salary, Popejoy is less likely to be criticized, some say.

"Nobody can question his motives," said Tom Uram, the county's health care director who was acting county administrative officer until Popejoy was hired. "He has no ax to grind. His motives are pure. I think he's going to have a honeymoon phase that is longer than most."

But many believe that Popejoy's first major decision was a relatively easy one, something of a small stepping stone to more unpopular choices down the road. After all, Schneider, Raabe, Andrus and Lewis had all come under attack in recent months for failing to issue warnings about the ill-fated county investment fund.

"A CEO who is starting out is looking to establish his own credibility," said Arvind Bhambri, an associate professor of management and organization at USC. "So he delays the really controversial decisions until he can build upon the first successes. In the short-term he wants to build confidence in himself as a leader and the organization itself. He is looking for the tangible, the visible, the high probability of success."

Dennis Aigner, the dean of UCI's Graduate School of Management, agrees that Popejoy's biggest challenges are yet to come.

"In the case of Raabe and Schneider, these are not big decisions, because those individuals were already marginalized in some way," Aigner said. "But the hard decisions will come in a couple of months."

Popejoy's next big step comes today when he presents to the Board of Supervisors a specific plan for paying off bonds coming due this summer, trying to patch a gaping budget deficit and trying to repay outside investors in the county's investment pool, which lost $1.69 billion. Popejoy said that more layoffs and the sale of county assets are inevitable.

Popejoy sees no difference between running a troubled county or a beleaguered corporation.

"I'm treating this county as if it were a company that has to be answerable to the shareholder, or in this case, a constituency. The difference here is we're not trying to create profit. We're trying to eliminate losses, and we have a corporation that has debt it cannot pay."

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