Ideally, one would want a newly appointed Chief Executive Officer to enter their proverbial corner suite with a full deck of cards, all 52 in fact. In reality, of course, some have less than a full deck—either because their CV does not accurately portray their qualifications, their experience is limited, or they are merely succeeding someone for whom they have worked. As unfortunate as it is sometimes the case, they have limited or no skill or positive experience but have somehow hoodwinked whoever it was who considered them into giving them the job. Maybe it was a board that simply sought an easy way out of an organization’s failed performance.
A turnaround is a bumpy ride, complete with false starts, exhilarating successes and disappointing failures. A new CEO must have the personal fortitude to recognize the successes and failures of their efforts and be willing to course correct as necessary.
52-Card Pickup
On the other hand, a newly appointed CEO may have the benefit of significant and relevant experience and may have the good fortune to be given the helm of an enterprise that is already doing well. One example is the appointment of Tim Cook as CEO of Apple. He was a senior Apple executive with consequential knowledge and experience of all things Apple, and he took over as its chief executive at a time when Apple’s performance was ascendant. This “perfect” succession path is rare, maybe never in a company in need of a turnaround.
Our new turnaround CEO’s deck of cards should ideally consist of four suits:
- Leadership skills, which include personal integrity, interpersonal and communication skills
- A deep understanding of the enterprise’s past and present condition and performance.
- Industry insight
- Competitive insight
In unpacking the deck, a new CEO lacking in leadership skills is a nonstarter. Can a new CEO missing any or all of these suits in their deck acquire them or surround themselves with people who can make up for their absence? I don’t think so. Are there retail CEOs who have found their way into a top job despite these deficits? You bet, and in fact, you probably know who they are. Have they succeeded? Few, if any, that I’m aware of.
Shuffling the Deck
Now focus on the added challenge of leading a retail enterprise badly in need of a turnaround. To pull that off successfully, a new CEO absolutely needs a full deck of cards. They need relevant experience, vision, strength of character and sense of purpose. They also need a modicum of good luck. I know this, having led and participated in a handful of successful turnarounds such as Lazarus, Sears Roebuck, Sears Canada and one notable failure, Bradlees.
To lead a retail turnaround, you must have a starting point as well as a sense of what future success will look like. In my view, you must start with everything that a customer comes into contact with. Your stores may not have the right merchandise or go-to-market and pricing strategies, but there is one dealbreaker. They must be neat, clean and friendly and have merchandise available for sale. That includes parking lots, restrooms, and pick up docks. That includes clean floors, clean fixtures, functional HVAC, elevators, escalators and lighting. This calls for immediate physical remediation efforts in advance of any necessary renovations. It requires housekeeping standards and associate behavioral standards. Your stores cannot be described as a place customers feel is unsafe, unfriendly and unattractive. On the ecommerce side, this calls for clear and concise web presentation, pricing information, delivery standards and delivery execution. Your ecommerce deliveries cannot look as if your packages fell off the truck on the way to your customers. These remedial efforts must start on day one. This may sound awfully simplistic to you, yet how many failing retailers (even your favorites) have been guilty of dark, dirty, disorganized, poorly stocked and downright unfriendly stores?
Merchandising 101
More complicated and challenging in a turnaround is getting a store’s assortment right, as in having the merchandise customers expect to buy from you on hand. Again, awfully simplistic but, in fact, enormously challenging. First, you have to start with an accurate understanding of who the store’s legacy customer is. Next, where does the store hold and where has it lost market share to competition? Unlike the lunacy that went on years ago at JCPenney, it is vital to not precipitously walk away from existing customers and the businesses they support. On the other hand, it is also vital to liquidate old age and outmoded inventory and cull and curtail investment in assortments that clearly are outliers. Think, for example, of the irrational decision to put home furnishing merchandise into Banana Republic.
Successful assortments are the codex of successful retailing, but successful assortments require enormous effort to deliver and sustain them. To that end, I have always been devoted to an enterprise-wide, repetitive “style out” or “line review” process. This is where all things that make up assortments, past, present and future, are examined in tremendous detail. That means looking at actual merchandise, including touching, feeling and trying things out and on. It also means analysis of merchandise performance, merchandise presentation, marketing and marketing effectiveness and last but certainly not least, customer satisfaction or the lack thereof. During this process, leadership’s vision, intent and need for enterprise-wide congruity becomes alive and in full view to the organization.
The Insidious Challenges of Managing Change
A turnaround effort at both the HQ and in the field (read that to mean stores and facilities) requires tremendous articulation, buy-in and support from the myriads of people in the organization who will make or break the outcome. I have never been associated with an enterprise that wasn’t comprised of large numbers of talented, ambitious and motivated people. On the other hand, the missing link, in my experience, has always been a lack of capable leadership. But not everyone in an organization is ever truly aligned. There is a need to move promptly to remove “active blockers” who aggressively oppose change, as well as passive aggressive “surreptitious blockers” who seem to sign up for change but balk at it at every turn.
You can only succeed at influencing an organization’s actions, point of view, behavior, and buy-in through dedicated contact and relationship building. This can’t be achieved remotely: period. Further, a CEO, mounting a turnaround, must become a physical presence throughout the entire organization. That means sitting with teams throughout, including regular “town halls” that are open to freewheeling Q&A, and extensive travel to the far corners of the enterprise. Some failed retail CEOs famously never traveled to stores or facilities or only traveled to the places where they were guaranteed to have a good visit (or in one case, were adjacent to a favorite golf course).
Field Report
A turnaround is a bumpy ride, complete with false starts, exhilarating successes and disappointing failures. A new CEO must have the personal fortitude to recognize the successes and failures of their efforts and be willing to course correct as necessary.
Macy’s is currently led by a new CEO who knows, by virtue of his pronounced past success at Bloomingdale’s, how to clean up the company’s “act.” He is following years and years of incompetent senior managers and appears to be making good progress in that regard. It remains to be seen, however, if he can successfully chart a new strategic path for the future of Macy’s.
Can a new CEO at Target, who has been a senior executive at Target for 20+ years, and bore witness to and participated in, the company’s recent poor performance, mount a turnaround? Color me cynical. We’ll have to wait and see.
And finally, as for Kohl’s, like Target, the company is presently lost in the wilderness. In Kohl’s case, the company has been lost for many years. Kohl’s poor performance was masked for years by the ongoing collapse of competition like Mervyns, JCPenney and Macy’s, among others. Can an interim CEO, who also bore witness to the company’s long-standing poor performance, preside over a turnaround? We’ll also have to wait and see.
