Leadership’s Three States of Grace

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Leaders of organizations fall into three categories: pontificators, remediators and transformers.

Pontificators

Pontificators spend much of their time opining as to their past triumphs and important experiences which enabled them to ascend to the throne they are perched upon. They sermonize often, surrounded by acolytes who affirm their authority and wisdom.

They preside over their organizations but have long ago given up the responsibility for actually leading them. They occupy the podium at town halls, introducing, then passing the baton on to subordinates, calling upon them to accomplish whatever it is they deem important. They luxuriate in the unwavering support of boards that they have carefully assembled who through fealty or ignorance support whatever it is placed before them for review and approval. They enjoy media which lavishes attention on them with endless rounds of celebratory coverage and interviews where only the softest balls are hurled their way. They willingly give speeches to business groups, community organizations and graduating classes, especially if awards are to be granted to them.

Their presence is often a harbinger of upcoming calamities as these kinds of leaders have only one abiding motivation: celebrating and holding onto their personal success. You’ll know when you are in the presence of a pontificator when they interview you, and all they do is talk about themselves. Whatever they did to achieve their current position, they are frozen in place — and heaven help anyone who tries to dislodge them from their personal state of grace. Though some have their tenure cut short through M&A activity, or another calamitous event, many last a surprisingly long time in their hallowed corner offices.

Pontificator in Practice

Many years ago, at the persistent request of a headhunter, I interviewed with the then preeminent (and now almost completely defunct) national discounter, Kmart, seeking a CEO to run its recently acquired portfolio of specialty businesses.

You’ll know when you are in the presence of a pontificator when all they do is talk about themselves. Whatever they did to achieve their current position, they are frozen in place — and heaven help anyone who tries to dislodge them from their personal state of grace.

The CEO I interviewed with sat at an overlarge desk mounted on a raised platform. He proceeded to spend the better part of 90 minutes telling me how great he and his company were. My sense, having done some due diligence ahead of time, was that his company was fast being eclipsed by Walmart and Target. He didn’t seem to have a care in the world. No recognition that his stores were becoming irrelevant. Well, he didn’t offer me a job and if he had I would not have accepted it.

There are no good pontificators, which is to say pontificators don’t often run successful businesses.

Remediators

There are two kinds of remediators, good remediators and bad ones. Good remediators readily accept that the organization they have been charged with operates in an ever-changing state of flux. Changes are constant, internally regarding its own activities, as well as the behavior of customers, competitors, and the marketplace. And then there is the often incomprehensible and unpredictable universe of things that surround them that they have no control over. Good remediators don’t spend much time celebrating. Rather, they constantly scan the horizon for issues that may need to be examined and dealt with. They look for better ways to protect and enhance success, often on the lookout for emerging technology solutions and best business practices that may not have been invented for their own market. They challenge their teams, without threat, to find ways to do things more effectively. They seek to delight customers more consistently, while keeping keep their competition at arm’s length.

Again, years ago, while serving as a senior executive at a growing West Coast based junior department store chain, I got an upfront and personal view of good remediation. This company was knocking the cover off the ball, easily maxing out its corporate parent’s bonus program year in and year out. Despite that ongoing success, the company’s CEO insisted that expenses be reined in anticipating what he perceived to be a future need to strategically reduce gross margins as more aggressive price cutting competition became increasingly intrusive. He also believed that the company’s balance of sale (BOS), regular to promotional pricing, then 65 percent to 35 percent be assiduously maintained.

Then, there are bad remediators, leaders whose principal focus is to mindlessly root out expense, often in an effort to prop up a flagging P&L. They engage internal “strategy” groups as well as outside consultants whose only real purpose is to eliminate people, processes and operations that are deemed superfluous — without regard to consequences. These efforts, rather than undertaken episodically, often become a constant focus of the organization. Needless to say, this churn becomes a source of disruption, distrust, and disenfranchisement within the organization. To further compound this, under the public banner of “restructuring” efforts, these leaders sometimes receive accolades from short-term investors who could care less about the long-term health and well-being of the enterprise. Some of these bad remediators spend their entire tenure at the top of their organizations presiding over endless restructure.

Remediators at Risk

The last CEO of Sears Roebuck, the one who after five years of declining performance turned the company over to a hedge fund operator, spent his entire tenure mindlessly cutting expenses and outsourcing internal activities. The hedge fund operator who took over started where he left off slashing and burning without regard to outcomes. As we now know, he destroyed what was once a truly iconic brand. Yes, this is the same hedge fund operator that did in Kmart as well. Whether activist owners or feckless bean counters, remediation run amuck is always a bad movie with the same crappy ending.

Transformationalists

Just as there are good and bad remediators, there are good and bad transformational leaders. Transformation represents risk personified. Knowing the difference between issues of concern that warrant examination and threats that warrant prompt action is an artform unto itself. A good transformational leader knows when to put issues under review before action is called for, while at the same time rings an alarm when something truly disruptive has been identified. Transformation always, however necessary and appropriate, comes with risk. Transformational strategies always should be means tested. Good transformational leaders always consider the downside of whatever it is they are contemplating doing.

In the early 1980s new leadership at Minneapolis based Target, then a division of Dayton Hudson, argued for board support to wage a price war against then surging Walmart. “Who were these upstarts based in Bentonville to think they can seize the high ground on Lowest Prices – Always,” they asked? The former Target CEO, CEO of Dayton Hudson at the time, advised caution. He pointed out that in a war there are winners and losers and that he felt that Sam Walton who controlled Walmart could choose to do whatever it would take to prevail. Widely held Dayton Hudson shareholders might not have the same view. Target’s CEO authorized a test in which 200+ items sold in stores in the Texas, Oklahoma, New Mexico south central part of the country be offered at prices lower than available at Walmart. Walmart immediately became aware of this stratagem and promptly crushed it by lowering their prices accordingly. In the face of an eventual resounding test failure, Target immediately pivoted to develop a transformational plan to elevate the quality and fashionability of its assortments and stores’ presentation while remaining at parity with Walmart’s pricing. Then called trend-based merchandising, this became the underlying basis of what we now refer to as “Tarjay.”

Bad transformational strategies, even at best, accomplish very little. In fact, transformational efforts often prove to be catastrophic. Chasing a competitor’s success by playing copycat as an expression of transformational leadership doesn’t work. It certainly didn’t work for Federated Department Stores. Historically managed as a loose collection of semiautonomous operating divisions, Federated in the 1990s attempted to emulate the command-and-control-led May Company. You really can’t copy another organization’s behavior by merely aping its processes. You must have the leadership capacity and will to succeed. Federated’s “Team Strategy” attempt to become May Co. didn’t work very well. Federated, now merged with Macy’s, subsequently went on to homogenize and nationalize its entire portfolio of stores as an ultimate transformational act. That too, as we all know, hasn’t worked particularly well.

Transformational Failure

Then of course, there is the mother of all transformational failures which occurred at JCPenney in 2011-2013. A flagging company, ripe for badly needed remediation and transformation, JC Penney was put in the hands of an inexperienced and essentially unprepared manager. Rather than towing the company off to the side of the road and carefully mounting a new set of temporary wheels on the company to rehab it while still in business and then eventually to be repositioned, he mindlessly set the company on fire. In the span of 13 months, his incompetence transformed the company from a functional failure to an out and out catastrophe causing it to drop $3.2 billion in volume and disenfranchise millions of long-standing customers

The history has been written on this spectacular failure. The company dropped assortments that the CEO found irrelevant, while at the same time adding vendors and merchandise that in no way resonated with JCPenney’ customer base. High/low promotional pricing, which admittedly was out of control from a Balance of Sale point of view, was abruptly jettisoned for what was described as “Everyday Fair Pricing.” Unfortunately, JCPenney’s customers wanted no part of this. Was any of this, along with a whole host of other transformational changes tested in any way? No, this CEO was convinced he knew better. He most certainly did not.

Leadership Tested

In conclusion, I would point out that remediation and transformational efforts are almost always called for in leading a business. These approaches must always be managed with a healthy dose of information, awareness, care, and caution. When this process is evident, success often prevails. When its lacking, failure lurks in the shadows.

Aligning with careful and thoughtful leaders who can remediate and transform their organizations is a good idea. As for organizations led by pontificators: avoid, avoid, avoid.

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