A CEO BAKE-OFF AT PILLSBURY William Spoor was a smash as CEO, then left the company, hoping to start a new life. That didn't work. Now he's back, purportedly to help his successor. Some help.
By Brian Dumaine REPORTER ASSOCIATE Susan Caminiti

(FORTUNE Magazine) – ON THE 40th floor of Pillsbury's corporate tower in Minneapolis, the sounds of hammers and buzz saws echo through the hallways as workmen busily prepare a cavernous office for the return of William Spoor. The official story is that the irascible, iron-willed Spoor, who retired as chairman two years ago, is coming back at the behest of Pillsbury CEO John Stafford to dabble in a few small matters. Pillsbury refused FORTUNE's request for interviews, but Spoor issued a statement just before the magazine went to press: ''Jack asked me back to work with him on special projects. I've agreed to do so but with great reluctance. Once I've completed the projects, I will return to my retirement office in the IDS building.'' Sources close to the company tell a different tale, however. They report that in mid-September a group of Pillsbury directors held a secret meeting in Chicago without Stafford. Shortly after that meeting, Spoor was made chairman of the executive committee of the board. Wall Street analysts and former Pillsbury executives speculate that the directors were disappointed with Stafford's efforts to turn around Burger King and the company's other ailing restaurants. Says one analyst: ''The board forced Stafford's hand to bring back Spoor.'' At stake: Stafford's position and the fate of Pillsbury's lackluster restaurant business, which accounts for nearly half the company's operating profits. CRITICS CLAIM that Stafford is the wrong maitre d' for the restaurant division, which includes the Steak & Ale and Godfather's Pizza chains as well as Burger King. Operating earnings have fallen 28% in the last year (see chart), the result of management turmoil, a clunky advertising campaign for Burger King, and flat sales throughout the fast food industry. The profit slide in restaurants has undermined Stafford's superior performance in the packaged goods and frozen food division, where operating earnings have been rising steadily. As a result, in the fiscal 1987 year ending in May, the company had net earnings of $182 million, down 13% from 1986, on revenues of $6.1 billion. For about a year security analysts have been urging that Stafford whip the restaurant businesses into shape, or dump the losers. Behind that advice is an implied threat: Pillsbury stock has been trading at only two times book value, compared with most other food stocks, which trade at three to four times book value; this has made the company an attractive takeover target. When word got out in early October that Spoor was coming back, investors responded by bidding Pillsbury shares up $4. Many analysts are now recommending the stock, recently selling at $32, especially after the market's recent gyrations made food companies, with their relatively dependable earnings, more attractive. Says Nomi Ghez, a food analyst at Goldman Sachs: ''I think bringing in Spoor is a positive move. Pillsbury is a company that could benefit from restructuring; they need change.'' Spoor, 64, who remained a director after retiring, replaces Stafford, 51, as chairman of the executive committee. Stafford, a former advertising executive with the wholesome good looks of anchor man Tom Brokaw, remains chairman and CEO. Says Craig Carver, an analyst at Dain Bosworth, a Minneapolis brokerage house: ''The whole building is going to explode one day when these two egos collide.'' The two men differ radically in their styles of leadership. Stafford, a Yale graduate, favors participative management: He runs a decentralized shop, lets fellow executives have their say, and operates by consensus. Stafford also likes to be liked, and for the most part is. By contrast, Spoor, a Dartmouth man, often acts like a petulant autocrat. When things go wrong, he yells, screams, and is quick to fix blame. On one occasion, when an executive heard then-CEO Spoor come raging down the corridor shouting the man's name, he hid under his desk, only half in jest. Unappealing as Spoor's style may be, Pillsbury flourished under his rule as CEO from 1973 to 1985. An aggressive acquirer, he transformed Pillsbury from a sleepy grain concern into one of the nation's largest food companies. Spoor acquired Steak & Ale and Godfather's Pizza, and made the restaurant division thrive, to the point that it accounted for 60% of the company's profits. In 1979 he also bought Green Giant, the vegetable company, where Stafford was executive vice president. Stafford came along with the purchase, carrying a high recommendation from Thomas Wyman, then Green Giant's CEO. Spoor was impressed by Stafford's marketing skills and, after Wyman left the combined companies to go to CBS, started to think of the young exec as CEO material. Stafford got the nod in 1985, when Spoor decided to step down, supposedly to pursue other interests. The former CEO is an avid tennis player and likes golf -- his first time out he shot a hole in one. The prospect of leisure may not have been the only thing on Spoor's mind. Sources in Washington say that around the time he retired, he was in the Capitol talking about a post in the Reagan Administration. But Spoor never did go to Washington. ''And ever since,'' says a former Pillsbury executive, ''he has been dying to get back into the company.'' At first Stafford seemed the ideal chief executive for Pillsbury. Having been successful as a marketing man at Green Giant, he felt comfortable with the packaged food side of Pillsbury. Under his management, the division's operating profits grew 20% in fiscal 1987 to $246 million. Says John McMillin, a food analyst at Prudential-Bache: ''If he were running just the food business, he'd look like a million bucks.'' Unfortunately, as CEO Stafford also had to run the restaurant business, which was heading into trouble even as he assumed the top job. ''Stafford has been given a bum rap,'' says June Page, a vice president at E.F. Hutton. ''When he took over, the restaurant industry took a dive.'' For the past two years, the entire fast food business has been hurt by overexpansion. Nevertheless, at least some of Pillsbury's problems with restaurants can be pinned on Stafford. Burger King accounts for nearly 20% of the $25-billion-a- year burger market, but it has lost its sizzle thanks to management turnover and a disastrous advertising campaign. In contrast, McDonald's, the market leader, has seemed unfazed by the tough environment for eating out; last year it enjoyed a 12% increase in sales and an 11% jump in profits. Industry analysts say Stafford's biggest shortcoming has been his failure to build a solid management team able to cope with a tough, competitive market. Says a former executive in the restaurant division: ''The fast food business is very customer oriented. You have to develop managers or you've got nothing. You need sensitive people and if there's too much turnover, it kills the business.'' Burger King, which has had three presidents in four years, increasingly has a reputation for slow service and messy restaurants. Worse, it has not come up with exciting new products to draw in the customers. STAFFORD also allowed Pillsbury managers to split into two camps, with the staid packaged food people on one side and the flamboyant fast food folks on the other. Managers at Burger King headquarters in Miami, with their taste for tans, slick suits, and flashy cars, barely speak the same language as the button-down, Middle American food executives in Minnesota. The two groups are sometimes known as Miami Vice and Minneapolis Ice. J. Jeffrey Campbell, the man Stafford picked last June to run the restaurant division, has not exactly been cooking with gas. Steak & Ale is losing money and Burger King's profits slid 40% last year. Campbell, chief executive of Burger King until he was promoted, epitomizes the Miami Vice gang. A handsome six-footer and a charismatic type, he is a cult figure at Burger King. He has boasted that he will be the next CEO at Pillsbury. At one franchisee convention in Reno a few years ago, Campbell gave a rousing speech titled ''Take It to the Limit,'' complete with inspirational music and a film starring, yes, Jeffrey Campbell. There's nothing wrong with such high-profile management if it works, but it didn't seem to at Burger King. Campbell was responsible for the ''Herb the Nerd'' advertisements, featuring a fellow named Herb who was considered a rube because he had never visited a Burger King. The campaign not only failed to attract customers, but also managed to insult just about anybody who wears white socks and everybody named Herb. In September Pillsbury fired ad agency J. Walter Thompson, the creator of Herb, and gave Burger King's $200-million advertising account to N.W. Ayer, in what was the largest account switch ever. Despite Campbell's track record, Stafford rewarded him last June with a position that had not been filled for two years, and transferred the maverick manager from Miami to Minneapolis. As one analyst quips, ''Maybe he brought Campbell back so he'd have someone to yell at.'' Charles Olcott, Burger King's former chief financial officer and an excellent numbers man, was placed in charge of Burger King, but some analysts fear he may lack the restaurant savvy needed to have it his way there. Watching all this happen, Wall Street got indigestion, and apparently so did the Pillsbury board, which met in Chicago in September. After Spoor had ( been summoned to the rescue, Stafford made the mistake of failing to announce the move to his staff or to the public. When word of it leaked to the Minneapolis press in early October, Stafford finally sent his senior management an upbeat memo saying that he was inviting Spoor back, and that the new chairman of the executive committee would be helping out on some unspecified tasks. EXECUTIVES inside and outside the company who know Spoor were not convinced, especially when he accepted a title and a big office on the same floor as Stafford's at Pillsbury's headquarters. Were Spoor really just dabbling in a few projects, it would have been easier for him to stay in his current office in the IDS building only three blocks away. Indeed, former employees and industry analysts are betting that Spoor, a veteran corporate infighter who handpicked ten of the directors on Pillsbury's 14-member board, will wind up in charge again. Says one ex-employee in the Twin Cities: ''Jack Stafford has lost credibility. He was boss. Hell, he's bringing back a CEO who ruled with an iron fist.'' If Spoor does take charge, some analysts speculate that he might sell off parts of the fast food division to raise cash to buy packaged food companies. Beatrice, they note, has a number of properties for sale. But with the fast food industry depressed and the stock market dismal, these are not the best of times to peddle restaurant chains. Says McMillin of Prudential-Bache: ''I don't see a company that wants to get smaller. Spoor is an empire builder.'' If Stafford is to survive as CEO, he will have to change the growing perception in the investment community that Spoor is back in charge. This won't be easy. Says one Pillsbury executive: ''Spoor's appointment may be temporary, but the parquet floor they're laying in his new office looks awful permanent.'' Predicts a former company executive: ''It's going to be a funny farm up there. Nobody knows who the boss is and a lot of people are already choosing sides.'' A sad truth of corporate life: There's nothing like a power struggle at the top to distract executives from the job of running the company. The sooner Pillsbury decides who's in charge, the sooner its management will be able to put the bounce back into the dough boy.

CHART: NOT AVAILABLE CREDIT: ILLUSTRATION BY ANDERS WENNGREN CAPTION: The Dough Boy's Profits Stop Rising Pillsbury's restaurant businesses generate nearly half of the company's * operating profits. But earnings declined 28% in the 12 months ended May 1987, due to problems at Burger King and Steak & Ale. This ruined a tasty performance in packaged foods, where profits rose 25% to $250 million. DESCRIPTION: Operating profits for Pillsbury compared to its restaurant and food businesses' profits, 1983-1987.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: INVESTOR'S SNAPSHOT Pillsbury DESCRIPTION: Pillsbury's sales, net profit, stock price, share price, return on common stockholders' equity, price/earnings multiple, total return to investors, 12 months to 10/26/87.