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A Tough Act to Follow

Following in the footsteps of a good leader is always difficult--people are inclined to measure the new leader against the legacy of the old one. But taking over for a convicted criminal can be even more daunting. According to a recent Knowledge@Wharton article, that was the challenge facing Edward Breen when he replaced Dennis Kozlowski at the helm of Tyco International three years ago.

Late last summer, a court sentenced Kozlowski to up to twenty-five years in prison for diverting millions of dollars in company funds for his personal use. Saddled with huge losses and mounting debt, Tyco was on a path to bankruptcy. Recounting his early days as Kozlowski's successor, Breen told a lecture audience at Wharton, "I knew I was going to be in the fire."

To restore credibility in the company's leadership, Breen fired 290 of Tyco's top 300 executives and replaced the very board that hired him. He moved the company from its luxurious Manhattan digs to a modest New Jersey office, closed hundreds of facilities, and put new acquisitions on hold. He used the savings to help repay the company's $28 billion of debt, keeping Tyco out of bankruptcy in the process. All were tough choices, but Breen was up to the challenge. "I'm not afraid to make decisions," he said, "and I'm not afraid to make a few mistakes along the way."

Not only has Breen turned the company around financially--the company went from losing $9 billion in 2002 to making a $3 billion profit in 2004--he has restored credibility at the top. As he points out, proving that continuously is vital. "The leader must not only always do the right thing," he says. "But the leader must be perceived to be doing the right thing."
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