(FORTUNE Magazine) – TRUMP, CAMPEAU, Wang, Eastern -- hardly a day passes without news of some business in need of a rescue. ''In the 1980s, LBOs, takeovers, and global competition left a path of destruction out there. Now somebody is going to have to fix it,'' says Leo McKernan, who is doing his part by reviving Clark Equipment, near collapse just four years ago. Little wonder that in executive circles, turnaround experts, managers who can transform a wheezing company or division into a robust winner, have become as popular as beer at a Teamsters picnic. Don't be confused, though: Companies aren't looking for turnaround artists of the old school, who solved problems mainly by closing them down or selling them off. The demand today is for a new strain of corporate doctor who can cure a sick business by making it bigger and stronger, not by bleeding it like some medieval physician. Explains John Gabarro, a professor at the Harvard business school and author of The Dynamics of Taking Charge, a book on turnarounds: ''Starting in the last part of the 1980s, managers were being asked not just to fix a business, but to turn it in the right direction and grow it. The days of the slash-and-burn turnaround are over.'' Gerry Roche, a veteran headhunter at New York's Heidrick & Struggles, reports that over the past six months his phone has been ringing off the hook for exactly the kind of executive Gabarro has in mind. Says Roche: ''It's a reaction to the myopia of the 1980s and the popularity of the fast-buck artists who wanted to slim a company down, take the dough, and run. Now there's a new groundswell of people saying, 'I'm not going to participate in the looting. I want someone who's in for the long haul.' '' Anybody else in the game for the long haul can learn from this new breed. The most notable of the emerging turnaround champions include Burger King CEO Barry Gibbons; Wang Laboratories' new chief, Richard Miller; General Foods USA President Richard Mayer; Stephen Berkley, head of Quantum, a disk-drive maker; and Clark's McKernan. What drives them? Pride, among other things. Says the gravelly voiced McKernan, who has spent most of his career with the equipment manufacturer, based in South Bend, Indiana: ''Who wants to be CEO of a company that fails?'' They are also animated by pride's flip side, fear and guilt. During the darkest days at Clark, when Japanese competition nearly sank its forklift business, McKernan would go home at night and worry about what would happen if his plan didn't work. Corporate profits paid for retirees' medical insurance, for example, and if the company tanked, many elderly people who had given their careers to Clark would be without affordable health care. THE BEST turnaround managers also show a greater than average willingness to lay everything on the line -- to pull the plug on a business or to gamble hundreds of millions on new products while the company is losing a mint. Says Richard Miller of Wang: ''It takes an iron gut.'' These executives tend to get paid like most top managers, except that during the bleakest patches, when the stock is in the cellar, they load up on options. If the turnaround works, bingo. If it doesn't, all those gains are just a dream. Says McKernan: ''The promise of money has to be good when the going gets tough, and the going does get tough.'' Columbia business school professor John Whitney, whose course on turnarounds is the school's most popular offering, believes that most such revivals go through three stages: crisis, stability, and transformation. In the crisis stage, managers must find the trouble's root causes and stop the bleeding. In achieving stability, they must return the business to profitability. In transformation, the most important phase, they must make the business grow. Handling Whitney's first two stages -- crisis and stability -- doesn't take a genius. Old-style turnaround artists were masters of it: plain-vanilla cost cutting and a lot of hard work. Reduce those ten layers of management to three or four, slim down the headquarters staff, sell the jet. The new champs appreciate that you have to do this carefully, though, and that other minds than your own may have something to contribute. When Miller, a man with impressive turnaround credentials from stints at Penn Central and GE's consumer electronics division, got the call to become CEO at Wang in the summer of 1989, the company was hemorrhaging money. One of the first things he did to gain stability was to put together the Wang turnaround team, a group of 70 or so middle managers from all parts of the company. Among their mandates: Find assets that could be sold to raise cash. After 40 days the team turned up salable computer leases, small subsidiaries, and Scottish real estate that would bring $800 million. So far % Wang has sold $600 million of the assets, reducing an emergency bank loan to a mere $63 million. But Miller made sure his managers cut nothing that might weaken the company in the long run. For example, a manager suggested selling a small subsidiary that provides voice-mail services to big corporations. Miller rejected the idea on the ground that the business could someday fit into Wang's strategy of offering customers information in any form, text, data, image, or voice. Says the CEO: ''I have not laid off a single development engineer, and I won't sacrifice R&D, which is the future of this company.'' Once the worst bleeding is stanched and the balance sheet tidied up slightly, it's time for Whitney's third, most important, and most difficult stage, the transformation. What sets this apart from the normal process of building a business, and the main reason it's so tough, is that you have to move fast. Even if you have managed to stabilize the situation temporarily, investors, customers, and suppliers won't be willing to wait long for you to figure out what you want to do. So you must make decisions without as much information as you would like, and you don't have the luxury of building a consensus. At times you may have to be a bit of a dictator, a role that doesn't go over well in this age when everybody is talking empowerment. BUT WHEN TIMES are bad, people look for decisive leadership. Says Whitney: ''People need a central figure to provide direction. You can't say, 'I wonder how Joe will feel if I do this?' '' This past winter, for instance, Gibbons of Burger King ignored roars of protest from his marketing department and launched a broiled-chicken sandwich without the usual 18 months of market tests. Today the chain's restaurants sell a million of the sandwiches a day. During his first months on the job at Wang, Miller ordered a total reorganization of the beleaguered office equipment maker that shifted its focus away from technology toward the customer. Says he: ''You can't wait for every analysis to be finished. You have to trust your gut and go.'' The next step in transformation: Getting employees, often already demoralized by the company's plight, to buy into the program that you have hurled down like a thunderbolt. Barry Gibbons accomplished this at Burger King by applying his theory of vacuum management, which, he says, ''I invented after several beers one night.'' The Liverpudlian exec, whose boyish face, Beatles mop cut, and sharp wit make him seem far younger than his 44 years, | reasons that when you make a major change, you create a kind of corporate vacuum while employees wait to see what happens. The trick is to fill that vacuum with positive ideas before others fill it with negative ones. Says Gibbons: ''This means telling people what's happening to the organization, where it's been, who you are, what you're going to do, and what you stand for.''

He reminded the troops that despite Burger King's problems, the operation had a proud 35-year history, first on its own, then as a subsidiary of Pillsbury, which in turn was acquired by Britain's Grand Metropolitan in 1988. He pointed to the chain's size: 6,000 outlets worldwide. There's no reason, he argued, why the home of the Whopper can't be an industry leader again. ''It's a bit like a snake oil salesman,'' he allows, ''but underneath people want to believe.''

COMING TO BELIEVE that Burger King employees had never been encouraged to excel, Gibbons unearthed the old ''Have it your way'' theme. Originally it had applied only to ordering hamburgers, but Gibbons traveled the country spreading the word among 36,000 workers that ''Have it your way'' would now apply to everything Burger King did. Example: A man recently called the company's toll-free 800 number and said that a light was out at the Miami Burger King where he and his wife had just dined. The operator notified the restaurant manager of the problem by computer, and the manager, aware that the brass were dead serious about customers having it any way they wanted, drove across town, picked up the couple, and brought them back to Burger King for free Whoppers and fries in the now well-lit restaurant. Says Gibbons: ''We got those customers for life.'' Another way turnaround managers can encourage employees: Don't always fire them in hordes. That may seem obvious, but too often a manager confronting trouble assumes the problem is with the workers. In most cases, the new turnaround champions find, you can succeed with the people on hand if you make clear what you need from them. When he arrived at Wang last summer, CEO Miller, a Harvard MBA (class of 1970), found he had plenty of leadership talent already aboard. ''To find the stars,'' he says, ''all you have to do is provide the vision to let the good ideas and bright people surface.'' He believes that examining a manager's past performance does little good -- you have to go by instinct. In most cases, he says, you can pick out a company's real leaders in the first 60 days of a turnaround. Putting them to work may entail breaking with old habits, in ways that genuinely do empower people. Miller called a middle manager to his office (something that would not have happened under the prior regime) and gave him the biggest assignment of his career: analyzing Wang's computer pricing worldwide. In just three weeks the manager surveyed pricing for the company and its competitors on six continents. He not only found where the problems were, but also suggested how to fix them. In the process the man happened to hear some complaints about service, so he suggested that with some of the computers Wang sells, it should give away a fax machine and a number for a fax installed on Miller's desk. If a customer had a complaint he could fax the CEO directly. Miller promptly bought the idea. He claims that so far he has received only compliments, and he likes feeling more in touch with customers. The larger point, he says, is that the middle manager took the initiative, acted fast, and came up with creative solutions: ''In my book, that's leadership.'' AT CLARK, TOO, McKernan succeeded in part because he depended on insiders, people who knew the ins and outs of the business. He learned this lesson the hard way: At one point in the turnaround a relatively new management team, some of whose members came from outside the company, was running the axle and transmission operation. The newcomers told McKernan that consolidating the company's four plants into two was impossible. Disagreeing, he picked four old-timers and shut them in a room for three long days with only occasional brief breaks. In that time they figured out how to consolidate the four plants not just into two, but into one. Because the four understood the business, they knew exactly how to rearrange the work process, installing just-in-time inventory, adding and subtracting automation. When the plan was subsequently put into effect, the number of machine tools in use dropped from 4,000 to 400. Today this single plant, in Statesville, North Carolina, produces more axles and transmissions more cheaply than the original four plants combined. If an ailing business is to grow again, tinkering around the edges won't make it happen. You've got to challenge the deepest assumptions on which the business is based. When Richard Mayer took over as president of General Foods in July 1989, earnings and sales had been performing below the expectations of parent company Philip Morris. Mayer recognized that GF was trapped in what you ! might call a matrix mind-set. He explains: ''One of the travesties in American industry has been that, starting ten or 15 years ago, managers began to classify their businesses according to the growth/share matrix. If you had a cash cow, you should milk it; a rising star, feed it; and a dog, sell it.'' Mayer, who had been hired away from the CEO spot at Kentucky Fried Chicken (another successful turnaround), brought a new philosophy to General Foods. ''I thought, why not leverage some of the best-known brands in the world, Jell-O, Maxwell House, Kool-Aid -- monster brands, monster equities that were capable of growth?'' Consider Jell-O gelatin, which for years had been considered a cash cow to be milked for profits, not a business to invest in. As a result its sales over the last two decades had been allowed to shrink about 2% a year. Believing Jell-O to be a star in disguise, Mayer broke with the old wisdom and last year invested most of the product's $50 million marketing budget in Jigglers, a new form of Jell-O you can hold in your hand and eat as a snack. He launched a marketing campaign that included point-of-purchase displays, premiums, and a new series of Jigglers TV commercials starring Bill Cosby. By April, Jell-O sales were up 40% over the year before, and profits were wiggling upward. Mayer says, ''A year ago no one would have imagined that kind of growth possible.'' John Luther, a consultant at Marketing Corp. of America, agrees: ''The General Foods turnaround is starting to bear fruit. There's been a dramatic change. They're more responsive to the market, the analysis- paralysis syndrome is over. They're really moving.'' BUT WHAT IF Jell-O really had been a mature business with no growth left? That $50 million was a big bet to place, and it demonstrates one of the turnaround manager's most prized talents: the ability to decide, fast, whether to get into a business deeper or get out. Clark's McKernan suggests breaking a business down into its basic parts and then analyzing how many of them need fixing. He developed the idea in the late 1970s while trying to turn around Clark's money-losing crane division. Then a vice president, he did his analysis and found the business needed a total overhaul: upgraded factories, stronger distribution channels, and a new generation of product. His conclusion: ''The cost of fixing that business was too high. With only a 50% chance of turning it around, it wasn't worth it.'' Instead, Clark liquidated the division. When the board appointed McKernan CEO in 1986 with a mandate to save the company, he applied the same formula to Clark's money-losing forklift business -- this time with different results. In those days Japanese competitors like Toyota and Nissan had launched an all-out invasion of the U.S. forklift market, and the strong dollar was giving them a critical price advantage. From 1985 through 1987 Clark lost $163 million. Some directors and top managers, thinking the situation hopeless, recommended that Clark get out of forklifts. Using his formula, however, McKernan found that the company's forklifts had strong brand recognition, a good distribution system, and high quality. Only one thing needed fixing: Their prices were too high. So he swallowed hard and authorized a $100 million capital improvement program in 1986, the same year the company lost over $60 million. McKernan had the forklifts redesigned with fewer parts, making them cheaper to assemble. After the savings were passed on to customers, sales climbed steadily. Clark's stock has nearly tripled, and its earnings grew 50% last year. McKernan made a similar heart-stopping bet on another business. Clark was manufacturing front-end loaders when Komatsu, the Japanese manufacturer, decided to enter the U.S. market with a full line of earth-moving equipment -- front-end loaders and dump trucks. McKernan feared that his 70 independent dealers would dump him in favor of Komatsu and its broader product line. To the amazement of many in the industry, McKernan used Clark stock to buy Euclid, an Ohio truck company that was losing $1 million a week, from Daimler- Benz. The move seemed crazy because Clark was already strapped for cash. But it worked. By adding trucks, McKernan secured the right mix of products to keep his dealers from defecting to Komatsu. Clark got another benefit as well: Pointing to his strong distribution system, McKernan persuaded Volvo, which wanted to get into the American market with its line of front-end loaders, to form a fifty-fifty joint venture, which also sells Clark front-end loaders and dump trucks in Europe. Today, with sales of $1.2 billion, the venture is piling up profits. A successful turnaround requires moving mountains, and you can't always move them alone. Sometimes you have to look to another company for help. Quantum, a Silicon Valley disk-drive maker, got in trouble in 1987 when its competitors came out with a better mousetrap. Sales stalled at $120 million a year, and losses started to mount. To reverse the slump, new CEO Stephen Berkley decided to bet the future on a high-performance 3 1/2-inch disk drive. For Quantum this meant dropping its entire line of 5 1/4-inch drives and learning a completely new technology. In a way the decision was easy. Says Berkley: ''If we had continued what we were doing, we wouldn't be in business today.'' The hard part was learning to manufacture the new device. As usual in turnarounds, there wasn't much time: Berkley feared that soon the competition would bring to market comparable drives. So he turned to MKE, a manufacturing subsidiary of Japan's Matsushita, and formed a partnership. Matsushita not only made many of Quantum's drives in Japan, but also sent engineers to the U.S. to analyze Quantum's manufacturing processes and designs. ''We learned a whole new manufacturing philosophy,'' recalls Berkley. ''Our engineers used to design a product two or three times. Matsushita taught us that 20 times was better.'' Although design took longer, the extra care meant fewer time- consuming problems during manufacturing. Since the low point, Quantum's sales have nearly quadrupled, to $446 million, and profits in the fiscal year that ended in March reached $47 million, up fourfold from the year before. Often a turnaround manager stepping into the midst of a mess can spot the problem immediately. Sometimes he can't. If you have to ask what's wrong, there's no one better to ask than the customers. In 1985, when Durk Jager became head of Procter & Gamble's Japanese division in Osaka, the business was a disaster. With annual sales of $100 million (mostly Pampers diapers and Cheer laundry detergent), it was suffering Mount Fuji-size losses. Competitors like Lion and Kao were hitting the market with superior products. Advertising flopped. No one in Japan seemed to want to work for P&G. In fact, no one knew it existed. At the time, the division's name was Sunhomes, and most Japanese thought it was a building company. Jager, an affable Dutchman whom Raymond Chandler might have described as 6- foot-4 and not much wider than a beer truck, looked at the situation through the customer's eyes. Advertising for Pampers showed a stork carrying a baby -- mildly amusing if a bit baffling for the Japanese, to whom the stork has nothing to do with birth. To his amazement Jager discovered that Japanese consumers often buy not by brand but by the parent corporation's reputation. With a name like Sunhomes, the sub got none of the benefit of the reputation P&G had built elsewhere in the world. Jager changed the division name to Procter & Gamble Far East and put the name and logo on all his products and at the end of every TV commercial. Today, with sales of over $1 billion, the unit is P&G's fastest-growing international division and one of its most profitable. Finding out what customers like and dislike isn't just a matter of talking to a few of them; it may entail setting up an extensive system to gather the information. When Gibbons arrived at Burger King a year ago, he knew the fast- food chain had lots of problems -- bad marketing, dirty restaurants, an unimaginative menu, and poor service -- but he didn't know which were doing the most damage. During his first three months on the job, he set up an intelligence network that included employee and supplier surveys and installation of an 800-number hot line for customer comments. The company gets thousands of calls a day. Gibbons also hired mystery customers -- not regular employees -- to go into every Burger King restaurant once a month and report back on their dining experience. In all, he gets 80,000 snapshots of his business every month. IT'S TOO EARLY to be sure whether Gibbons's turnaround will have staying power, but the early signs are encouraging. In the last quarter of fiscal 1989, operating earnings rose 25% from the year before, and in this year's first quarter the company posted its best same-store sales growth since 1986. Says Emanuel Goldman, a food and beverage analyst at Paine Webber: ''Gibbons is right on track.'' But the journey is hardly over, which underlines another important difference between the new turnaround champions and their counterparts of a few years back. Then managers looked at a turnaround as an event. You went in, fixed the problem, and said sayonara. ''The danger,'' says Gibbons, ''is that after you've turned around, people will think it's over, we've done it, and we can sit back for the 1990s.'' You can't, of course. When you've turned a company around, you haven't climbed onto a cloud on which to float into a sunny future. You've climbed out of a hole. The job then is to get back into the race.