The suitcase CEO: extended Stay America has its headquarters in Charlotte, but how N.C. can the company be when Jim Donald lives in Washington state?

AuthorCampbell, Spencer
PositionCover story

Eighteen years ago, Jim Donald got his first shot at CEO when he became president and chairman of Pathmark Stores Inc., a 143-supermarket chain with $4.1 billion of annual sales. He had spent most of his career running grocery stores--known for his knack of pinpointing problems in them --so on his first day on the job he visited a few of Pathmark's near its Woodbridge, N.J., headquarters. He started at a Newark location at 1:30 a.m. "Welcome," a sign near the entrance read. "We're glad you're here." The razor-wire fencing said otherwise. Inside, an employee was stocking cereal. Donald, often described as charming and personable, asked how he was doing. "What the eff is it to you?" came the reply.

"It was really messed up," Donald says of Pathmark. Nearly a decade earlier, a $1.8 billion leveraged buyout had thwarted a hostile takeover but left the company with debilitating debt. The novice chief executive faced dwindling market share, neglected stores with leaky roofs and embittered employees. Frank Vitrano, then the chain's vice president and treasurer, recalls the first meeting Donald held. "I think his opening slide was "We're a sick, sick company/" His remedy: grow sales, increase margins, cut costs and get better returns on capital. Nothing revolutionary, Vitrano admits. Donald also launched GREAT --an acronym, but Vitrano can't remember for what--Service, a customer-relations program. "Initially, you'd look at this, and you'd say, 'Is this almost too folksy?' But Jim had a way at continuing to reiterate it and continuing to drive home the message."

During his third month, Donald took his carousel of slides to the company's largest creditors. Three months passed. No help came. So he arranged a breakfast meeting of top vendors, creditors and management at the Newark Hilton. "Good morning," he told the nearly 2,000 people there. "I have bad news today." Pulling on a pair of gloves, he yanked the lid off a box and removed an enormous, dead fish. "We are the salmon swimming upstream in the final days of its life." Competitors, holding in the current, were laughing at Pathmark's upstream struggle. Bankers were bears ready to pounce. "We're that salmon, and we're in the lake, and we're dead. I need your help." He thanked the audience and walked off the stage.

"It was well-received," says Vitrano, who became chief financial officer in 1998 and is now CFO of Camp Hill, Pa.-based Rite Aid Corp. "He just has a way about himself of being able to get the message across. And the fish story was pretty good. From an investor's standpoint, from a banker's standpoint, they're looking for what's new, what's going to change, what's exciting, what's creative, and clearly they saw that in Jim."

Donald told the tale to Elon University students shortly after becoming CEO of Charlotte-based Extended Stay America Inc. in 2012. His point was that every leader needs a "fish story" to communicate his vision. The title of the lecture was "Take the Job No One Wants," a fair summation of his career. Even before Pathmark, companies summoned him when sales slumped and morale plunged, and his energy and ability to connect with every rung of the corporate ladder earned him a reputation as a first-rate fixer. "There are certain traits you need to have in order to be a successful turnaround guy," Vitrano says. "And I think Jim has a lot of those traits." The problem came when he took a job every exec--well, many of them--wanted. In 2005, he became president and CEO of Seattle-based Starbucks Corp. He was fired almost three years later, after the stock plummeted. He declined to be interviewed for this story but told Fortune magazine in 2008: "First phone call was to my mom. Probably the toughest day I've ever faced, ever. Ever, ever, ever!"

He was relegated back to the role of corporate renovator, and Extended Stay is his latest fixer-upper, having emerged from bankruptcy in 2010. It also gives him a shot at redemption. Between 2009 and 2013, revenue per available room in midpriced extended-stay hotels, which target business travelers or displaced lodgers who need rooms for longer than a night or two, outpaced the industry. Under his leadership, the chain is renovating more than 90% of its hotels and increasing efficiency by, for example, opening call centers to handle reservations. "Others took credit for the initiatives of Jim and his team at Starbucks," says Burt Flickinger, a New York-based retail consultant who has followed Donald's career for decades. "He wants to leave a lasting legacy. At ESA--in terms of that turnaround and then having great success--is a great way to have that legacy."

Of...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT