S+B: That initial consolidation didn’t “take” well?
FREEMAN: Corning treated the lab business in a very autonomous manner. That autonomy carried through to how the folks who were running the business on the ground in Teterboro would run what they acquired.
S+B: How well did that work?
FREEMAN: When I arrived at Corning Clinical, we were in the news, but not for the right reasons. We were paying fines to the federal government related to Medicare billing. Our customers were unhappy. Our employees weren’t happy to be where they were. And virtually none of them knew the name of the company. They remembered the name of the company they worked for before being acquired.
S+B: How did you get tapped to do the turnaround?
FREEMAN: I was a longtime Corning person, since 1972. I was the controller of the company in the mid-’80s. Then into the ’90s, I started running turnarounds. I ran the television glass business for a while.
S+B: How, if at all, did finance prepare you for general management?
FREEMAN: The numbers give you an important scorecard for how business is performing. If you understand the balance sheet, how revenues are generated, what the cost structure looks like, and how it all interacts to yield cash flow, it gives you important tools to be able to make decisions that, hopefully, will help maximize the value for shareholders.
The flip side is, finance doesn’t really prepare you for the flood of different kinds of decisions all coming at you at once, which you have to choose between as a general manager or CEO. Today, am I going to spend all my time worrying about contracting with our largest customer, or deciding whether to build or shut facilities, or meeting with employees?
What I remember most about the shift from finance to general management was how I felt. In finance, a staff job, I’d have highs and lows, but they’d be smooth, like a gentle wave. A good day might be, “I gave some good advice today, and a senior person took the advice.” You get into the line, you’re running a business, you’re accountable, and it’s a monsoon of emotion, big highs, big lows.
S+B: Did Corning Clinical Labs look like a normal turnaround?
FREEMAN: It quickly became crystal clear that it wasn’t a business that just needed a few tweaks on the radio dial. Everything wasn’t working. All the financial measures were negative, and in the first 60 days, we took a $60 million write-off in the billing area, which was big for us at the time. Ultimately, about a year after I arrived, May of ’96, I got the call from Corning that said, “We’re going to spin you off.”
S+B: Why, personally, take the leap into running such a problem company, rather than return to Corning?
FREEMAN: Why? I love a challenge. And I felt it was fixable. I believe that virtually any business in a three-year time period can be turned around, and sustainably. And here you’ve got a business that is in health care. It’s doing lab testing. As people get older, they need more of it. There was no technology “gotcha” on the horizon at that point that would have said this industry is going to be completely transformed, like going from landlines to cellular phones. And there was overcapacity in the industry. There was a lack of pricing discipline. There were opportunities to grow. What was needed was a focus on the basics of conducting business, a focus on values, process discipline, and execution.
S+B: When did those opportunities crystallize into a strategy?