Thursday, August 18, 2022

Matt Maddox: A Quick But Painful Overhaul Of Wynn Resorts

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There have been, by Matt Maddox’s calculation, “three or four happy months” since he became CEO of Wynn Resorts. Aside from that respite at the end of 2019, it is a never-ending crisis.

Steve Wynn’s signature still shines on the Las Vegas rooftops, three years after the billionaire who transformed the Nevada gambling hub resigned of his casino company for sexual misconduct allegations he denied.

Gambling regulators in Nevada and Massachusetts have opened investigations, a pension fund said the board had “knowingly turned a blind eye” to decades of alleged misconduct, and analysts wondered what would happen to the company without its founder. As it has been bluntly said: “Steve Wynn is the company.”

But in February 2018, Mr. Wynn’s business became Mr. Maddox’s problem. He had been with the group for 16 years, so his first challenge was to explain how he and the rest of Wynn’s leadership missed Mr. Wynn’s alleged conduct and why they then dismissed the allegations when they were made. revealed.

Looking back, he says now, “people were in shock, me included.” The company ended up admitting to regulators that its executives had been “in denial,” but Mr. Maddox, 45, couldn’t stay on the defensive for long.

“The employees were terrified, the activists came after us, the people made offers. We didn’t know if we were going to keep our licenses, ”he recalls.

Regulators in Nevada and Massachusetts ended up fining $ 55 million, but let Wynn keep his gaming licenses. The Massachusetts Gaming Commission also fined Mr. Maddox $ 500,000 after finding that his “clear failureTo investigate an employee’s complaint against Mr. Wynn raised questions about his judgment.

This left Mr. Maddox with the urgent need to prove he was a suitable leader. Authorities were finally persuaded by the steps he took in his first few months as CEO to transform “a one-man business” into one that thought of all of its 25,000 employees. .

He began by resolving to cooperate transparently with investigations and put out as many other fires as possible.

“I realized we had too many wars going on,” said the former banker. In 60 days, he had launched three that involved litigation with large shareholders. He placed Steve Wynn’s shares in the hands of institutional investors, resolved legal disputes with Mr Wynn’s ex-wife Elaine, and settled “six years of horribly intense litigation” with Universal Entertainment, a Japanese gaming group, for $ 2.4 billion.

The cleanup wasn’t painless, but it was quick and accompanied by a radical overhaul of Wynn’s board and management team. Within months, Mr. Maddox recruited a new general counsel, a new human resources manager and new executives for his properties in Las Vegas and Boston. He had inherited a board full of white men over the age of 70, but a quick overhaul left white men in the minority and brought the average age down to 61.

According to Betsy Atkins, one of the three directors he did come, Mr. Maddox is “the reason I joined”. He has, she says, “no ego” and an ability to solve several complex problems simultaneously while remaining focused on solving the more difficult ones first.

“Ultimately, a crisis involves well-informed but swift decision-making, the courage to solve the biggest problems first, and the commitment to put in the effort and time to overcome it,” says Ms. Atkins, who has participated in more than two dozen boards. “He has great clarity on this and that’s fundamental for a leader.”

As Mr. Maddox puts it, “The only way we could survive was to act quickly.”

He also faced the challenge of preserving the best of what Mr Wynn had created, protecting a brand known for its extravagant premium service, while reshaping its corporate culture to guard against future scandals.

He sent out all employees to be trained in sexual harassment prevention, circulated a company values ​​statement, established a committee to independently review complaints, and pushed staff to volunteer in their areas. communities to demonstrate that Wynn can be a good corporate citizen.

Within 18 months, Mr. Maddox had put the crises he had inherited behind him and opened a new resort in Boston, renovated Wynn Macau and developed a new convention center in Las Vegas. In December 2019, as the board extended his contract, he said Wynn’s future “has never been brighter.”

Then Covid-19 struck.

In early February 2020, local authorities closed Wynn’s casinos in Macau. In mid-March, after hiring a Georgetown University health expert, Mr. Maddox also decided to shut down his resorts in the United States.

On the advice of a Georgetown University health expert, Maddox preventively shut down Wynn's resorts in the United States, including Las Vegas.
On the advice of a Georgetown University health expert, Maddox has preventively closed Wynn’s resorts in the United States, including Las Vegas © Adrian Seal / Alamy

The pre-emptive shutdown was controversial, he said, but he resolved to continue paying employee wages and compensating them for lost tips. The move cost $ 250 million, he says, but he saw it as an investment in a culture he has been trying to build since 2018.

“Everyone alive today will remember 2020 and everyone will remember the way they were treated,” he says, “So now is our time to make sure people know we are there for them. I knew the investment would pay off for our shareholders in the long run.

Three questions for Matt Maddox

What was the first leadership lesson you learned?

It’s something I call the dark side of ambition. As a leader you must know that if you want to be in the sun there will be a lot of shade and you must treat that shadow as the shadow behind you and keep walking towards the sun. You are always going to have to face a crisis, and if you let the crisis define your strategy, you will not be a good leader; you will freeze.

Who is your leadership hero?

I’m a huge fan of David Solomon at Goldman and what he’s done. I’m talking to [the banker] Ken Moelis all the time [and] I have always been a huge fan of Mike Milken [the financier]. There are many more, but these are just people who understand adversity and who own it and make a difference – people who understand the dark side of ambition and don’t let it be held back.

If you didn’t do this, what would you do?

I like to create things with creative people. That’s what I like; on the development side, whether it’s on the hospitality side or thinking about what’s next and what people want to do. People always want to come together and they always want to have fun and no pandemic can stop that; it can only freeze it. So being in this fun business is something I want to do.

But shareholders also had short-term concerns, and in mid-April Mr Maddox published a plan to reopen the safety measures of which were widely admired and copied. Comprehensive planning allowed Wynn to reopen in Las Vegas in June and Massachusetts in July, albeit at a much reduced occupancy rate.

He used the days when Wynn’s casinos were quiet to upgrade them, displaying the exacting attention to detail that Mr. Wynn was known for. If an attraction isn’t perfect when it opens, he said, he’ll close it and fix it: “If it’s a B, you don’t keep it, because if something is a B, this B will quickly become a C in a few years. ”

Now, he says, his challenge is to get back to Wynn’s core business of gathering crowds of strangers together for escape entertainment. This will mean making Las Vegas a place to have fun and “the safest place to come and have fun”.

To that end, Maddox recently opened a PCR, or genetics, Covid-19 testing lab for Wynn Las Vegas customers, which can process 6,000 tests per day. He hopes this will allow the company to create “safe zones” – nightclubs, concert halls or convention centers open only to customers who have recently tested negative for Covid-19.

Three years of almost uninterrupted crises have not dampened his optimism about the post-pandemic future. “We have to be with other people,” he says. “It will be like the Roaring Twenties that will come out of it.”


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