Toy Story: Mattel CIO Joe Eckroth Tackles Company Turnaround

Joe Eckroth says that he was instrumental in Mattel’s success long before he became the toy company’s CIO in August 2000. He estimates that over the years he has bought hundreds of dollars’ worth of Barbie dolls for his girls, now ages 11 and 16.

Eckroth’s joke contains more than a grain of truth. Long before he joined the troubled company, Eckroth was honing the management skills — an ability to make tough decisions coupled with an awareness of the need to take care of people — that have made him a key player in the attempted turnaround of Mattel, the world’s largest toy company.

“Joe is that unique combination of tough-minded and tender,” says Chairman and CEO Bob Eckert, who made Eckroth his first new hire after taking the reins in May 2000. “He makes decisions very clearly, and he’s not at all soft when it comes to what needs to be done. But he is soft in understanding situations from an individual employee’s point of view.”

Eckroth came to Mattel from that cradle of CIOs, General Electric. When a headhunter called him two years ago about the Mattel opening, both the products and problems piqued Eckroth’s interest. “I’m a big kid, and this was a product I could totally relate to,” laughs Eckroth, who is 43. But the company had as many troubles as toys — it was losing market share, gross margins and profitability were declining, overhead expenses were rising, the stock price and morale were at all-time lows, and an ill-advised acquisition was dragging the company further under.

But after a trip to the company’s El Segundo, Calif., headquarters to meet with Eckert, Eckroth decided that he was up for the challenge. “What I saw was an extremely creative, fast-paced company in a world I had never played in before,” he says. “It was exciting.” Eckert sweetened the deal with a few collector’s edition Barbies, board games and Matchbox cars for him to take home, and Eckroth became the new CEO’s right-hand man.

When I Grow Up I Want to Be…

When Eckroth began his career as an engineer, his thoughts weren’t so much on what he wanted to be but who. After receiving an MBA from Pepperdine University in 1994, he worked in operations at Los Angeles-based Northrop Aircraft (now Northrop Grumman). He had no immediate plans to get into IT or even a long-term goal of climbing the corporate ladder. “I didn’t go in saying, ’Hey, I want to be a top executive.’ I went in excited about a new job,” Eckroth explains. “But as I moved through jobs, I started saying, ’OK, I want to be that person.’” Among those people was his first boss, Vice President of Operations Marion McCue. “I loved him,” says Eckroth. “He was a tough manager, but he was always a values-based manager. He cared about the people that worked for him.”

In 1993, Eckroth, then the functional IT leader in the operations division, was offered the CIO job at Northrop’s aircraft division. Although he hadn’t been aiming to become CIO, Eckroth — who craves change and has never stayed in the same job for more than a couple of years — took a stab at it.

Three years later, he left Northrop for General Electric, starting as CIO for GE Industrial Control Systems in Plainville, Conn., then switching in 1998 to CIO of the successful GE Medical Systems unit in Madison, Wis. There he worked with another one of those people he wanted to be — Jeff Immelt, then CEO of GE Medical Systems and now Jack Welch’s successor as head of GE. “At GE, the core values were such that you couldn’t just execute, you had to be a good people manager. There were great examples of that everywhere,” says Eckroth. “Jeff Immelt knew people’s families. He had you over to his house. He put a lot of stock in people.”

While Eckroth continued to pick up on those people skills espoused by his own leaders, he also grasped the importance of thinking on his feet and making decisions as quickly as Welch and Immelt. “I work from the gut a lot,” says Eckroth, inadvertently referencing Welch’s recent autobiography, Jack: Straight from the Gut. “I make decisions using the 80-20 rule, and I like to move aggressively.”

It wasn’t the promise of Barbies or balmy weather that convinced Eckroth it was time to make another change in his career. It was the presence of Eckert, another one of those leaders Eckroth could look up to. “He’s got a very quiet energy about him,” says Eckroth, who tends to be more intense and assertive. “He understands the power of people that work for him, and he’s able to bring them together toward a common vision. And you wouldn’t even know he’s the CEO. He acts like just another member of the team.”

As for Eckert, he saw some of those same people-pleasing qualities in Eckroth. But just as important, he knew his first hire could bring one thing that Mattel desperately needed — discipline. “This has always been an innovative, fast-moving company,” Eckert says of Mattel, which changes 80 percent of its product line every year. “But I saw the opportunity to improve the discipline here, and for that we needed someone like Joe.”

A New Place to Play

The combination of discipline and sensitivity in decision making has been the hallmark of Eckroth’s year-and-a-half tenure as CIO, as the company has moved from tenuous ground to turnaround. Mattel returned to profitability in 2001 after two straight years of net losses, and the company’s stock price recovered from a low of under $10 in 2000 to $21 per share in March 2002.

As part of the senior management team, Eckroth has gone far beyond the walls of IT (where he completely reorganized the 600-person global IT department, for starters) to swiftly set and execute new strategies for the toy manufacturer’s recovery. He worked with brand managers to relaunch product websites. He initiated a “bullet train” effort (a formula used at GE to cut costs by 15 percent in seven of a company’s spending categories) with Mattel’s CFO. He instigated the launch of an employee performance rating system, in which the lowest 10 percent of workers are actively managed — another practice imported from GE. And he spearheaded formation of a new management training center and an institutionalized development program for all Mattel employees.

Eckroth has made his boss’s priorities his own. Eckert had three goals from the start: Build brands, cut costs and develop people. “Joe’s great strength is that he’s a strong player in each of those efforts,” Eckert says. “What he does is way beyond normal IT efficiency. He’s an initiator. He makes things happen. He’s a much faster trigger than I am.”

But Eckroth found that shaking things up as a self-described “change catalyst” was initially not as popular with the general Mattel staff as it was with Eckert. “There was a lot of nervousness and apprehension with people wondering, Who is this guy?” Eckroth recalls.

Eckroth worked to assuage employee concern, drawing on the people proficiency he developed at Northrop and GE. “When you’re trying to turn a company around, it’s not just shareholders and numbers that you need to be concerned with,” he says. “It’s your people.” He eased tensions by creating an open-door policy for any employee, IT or otherwise, who wanted to talk. “Actually it’s an open-door, open-voice-mail, open-e-mail policy,” says Eckroth, who peeks over and around a lot of cubicles each day just to say hi to people. “I’m an open leader.”

Eckroth was similarly direct with his employees, telling them what changes were taking place and why. “Change was not something that they were familiar with, so I tried to keep my arms around people,” says Eckroth. “And six or seven months in, they began to get more comfortable with it.”

Eventually the IT staff began to see the benefits of having a leader so involved in the companywide transformation that was taking place. “I had developed a tight relationship with Bob and the CFO, and my other counterparts here early on. So IT had a real voice in the business, and that began to show to the IT staff,” Eckroth says.

Toy Story 2

Eckroth has brought discipline and GE management methods to Mattel. But Mattel has also taught him an important leadership lesson: Respect the exceptions that make a company unique. “When I came to Mattel, everyone kept saying, ’The toy industry is just different.’ And I would say, ’It isn’t any different than other industries, you just make it different,’” recalls Eckroth.

A year later he realized his mistake. Several factors combine to make toy-making incredibly complex: the creativity required to generate successful toys, huge turnover in the product line, the seasonality of sales and the dependence on the most fickle of audiences — kids. “The toy industry is different, and I have to respect that, but the business can benefit from some discipline,” Eckroth says. “Now that we’ve recognized both of those things, I’m trying to put standards, structure and discipline on top of the creativity, complexity and speed involved in creating toys without crushing the unique spirit of Mattel. It’s a struggle. The creative people here come from a very different place than me, but we’re having good success.”