Good CEOs are Hard to Find
Sears Holdings
has been searching for a permanent chief executive officer since September
2007. Barneys New York has now been hunting for over a year for a new CEO.
So, what’s the problem?
Many, in
the case of Sears Holdings, say the sad shape of Sears and Kmart along
with the prospect of going to work for Edward Lampert is enough to keep top talent from considering the
job. Mr. Lampert, a hedge fund manager who is
also the chairman of Sears Holdings, gets really low marks for his retail
acumen while having developed a reputation as a micro-manager.
A RetailWire survey
in February found that 86 percent believed it was very or somewhat likely
that Mr. Lampert’s hands-on management style
was keeping the company from hiring a new chief. That same month,
an article in the Chicago Tribune reported that Sears
had met “a
number of very talented individuals” about the CEO job but none had been
made an offer.
In the case of Barneys,
concerns about liquidity have caused many to wonder about the company’s
viability. The company’s owner, Dubai
investment fund Istithmar World, gave Barneys a cash infusion in April to
allay the fears of vendors and lenders alike. Even with this action, Standard
& Poor’s lowered Barneys’ credit rating to CCC (“distressed debt”).
Not having a CEO contributed to the rating.
“When we evaluate
the company from a credit ratings standpoint, one of the key attributes
we look at is management,”
David Kuntz, an associate director at Standard
& Poor’s, told The Wall Street Journal. “Without a CEO in
place, it’s very difficult for us to gauge what the direction and leadership
of the company is.”
David Lord, a search-industry
consultant, said searches that go beyond a year suggests, “the board
does not know what it wants or that something is preventing good candidates
from being attracted to the position.”
On the other hand, there
are those who point to CEO-less companies as evidence that executives
within organizations can do the job needed without having anyone looking
over their shoulders. Imran Amed,
a consultant to luxury goods firms, told The Journal that there
was no “concrete evidence that a CEO-less Barneys is suffering any
more than other retailers in luxury retail.”
Discussion Questions:
What do extended and unresolved searches for top executives say about
companies such as Sears Holdings and Barneys? Does the fact that companies
without a permanent CEO continue to operate suggest that chief
executives are not as important to a company’s success as often assumed?
These extended CEO searches are just one symptom of the ailments facing retailing today. Many major chains have been limping along for the past decade and now are stuck in with the challenge of continuing to reinvent themselves in the worst retail environment of our era.
Retailing is a day-to-day what-have-you-done-for-me-lately business. The stronger players have a bit of patience for waiting for strategies to materialize. The weaker have none.
On one hand, the list of CEOs who have promised the world and delivered nothing is long and still growing.
But in this case, it sounds like two companies that just don’t really want new CEOs, regardless of what they might be saying publicly.
What the article is really talking about but most people do not recognize is that is tougher to hire “A” players today for all positions then it was a year ago. People know what they have and are unwilling to take the risk of moving to a situation that they are not sure of. Just 2 years ago, if the a key executive moved to a new position and things did not work out, there was someplace else to move to. A bad move today means you are most likely out of the game for the rest of your career. Why take the risk?
As I’ve said before on RetailWire, Sears Holdings already has a CEO, named Eddie Lampert. The search for a “new CEO” is a charade, and most credible candidates for one of the biggest challenges in retail know it. Mr. Lampert has a strong (if misguided) point of view about how to run Sears, and an outside candidate is unlikely to have the authority needed for a true turnaround. From its real estate portfolio to its brand image to its lackluster softlines business to its capital starvation-diet, Sears today reflects the management expertise of its boss.
As to Barneys, the financial condition of the company–and the overall weakness of luxury retail–are two good reasons for CEO candidates to steer clear, unless lured by a real challenge and a lucrative contract. Barneys does not have the brand recognition or geographic reach of other key players in luxury retail, such as Saks and Neiman Marcus. These nameplates are likely to rebound sooner as consumer spending recovers, especially if they work harder to establish a “new relevance” with their customer base.
Of course good CEOs are hard to find. Great CEOs are even harder to find. And of course, “nothing good is easy.” There is still no excuse that a company is leaderless at the executive level for so long.
While many industries and businesses are unique, retail is one where CEOs who don’t understand the business often fail (i.e., Bob Nardelli, Eddie Lampert). It’s a business that many other executives don’t understand as there are often too many moving parts – but that is another story.
The CEO position, especially for a major retailer, is fundamental to lead the enterprise and all of its stakeholders–employees, partners, suppliers, lenders and of course, customers.
The “A” CEOs get to pick and choose their company and not the other way around. One thing an “A” wants is the ability to run the business their way and have the liquidity to be successful. Enough said about these companies and others in long-term CEO searches. I guess they could now recruit from the automotive industry!
There are a couple of issues here….
1) Whether or not someone wears the title of CEO or not, the functionality is no less important. There may be a committee that is acting in that regard or it may be a shared role–but someone or some people are doing this role in those companies. How well or how poorly is evident based on results. The ROLE is no less important, and in fact may be even MORE important in times of uncertainty or economic upheaval. Whether or not a single person performs the task is a matter of efficiency, not necessarily effectiveness.
2) Why haven’t the companies found a CEO–most likely because the Board is politically at odds in what it seeks and can’t uniformly agree on the merits of a single candidate to address all constituencies. Of course, without being there myself it is speculation–but other similar situations I am familiar with lead me to believe it is not a dearth of candidates that prevents it, but a failure for a suitor to win the hearts and minds of the Board, or others.
Truly capable CEO candidates rarely wish to swim in the swamps. Companies with secret CEOs rarely want a new solution. Prolonged procrastination can be a cloaked plan, purposeless and unproductive.
I guess most of us BrainTrust Panelists are too busy. Kidding aside, this title says it perfectly. Good CEOs are Hard to Find. Mediocre and poor CEOs are a dime a dozen. I guess we can’t afford anymore mistakes in retail so having the right leadership is key. The view from the field is that anyone who takes over needs to have some major trench time under their belt. Putting in cronies or other non-qualified people will drive your business into the ground (see the past Home Depot and now Chrysler, Sears, Circuit City, Blockbuster).
I have a question, though. Is there not one person in the ops area of Sears that can step up to the job? If the answer is no, then Sears has a huge succession problem and they are feeling the effects of that from the sales floor to the home office.
Good CEOs may be hard to find, but good people are not. While we often read about the great CEOs and more often read about the failures, I have found most CEOs quite mediocre. In most companies the CEO has made it to the top position because he or she has taken the least risks or alienated the least number of decision-making people. The larger the company the more likely this scenario. Look deeper for talented people and you will find them. There are great CEOs out there that will never hold that position with their current company.
I do not buy the argument that in these risky economic times, the best and brightest do not want the challenge. Financial commitments on an employment package certainly could allay any risk. More likely, the reason there is no CEO in place in these companies is that they (1) don’t really want one or (2) don’t really know what they want.
Seesel is right as usual. It’s hard to find “A” CEOs to run “D” companies. Major league execs would rather retire than go work for minor league, failing companies.
Without a CEO, where does the buck stop? Department heads are notorious for blaming failures on each other, and without a CEO, who makes the call and corrects the infighting? On the other hand, being CEO at Sears Holdings is like being head coach of the Oakland Raiders. Lampert runs Sears and Al Davis runs the Raiders. Period. The Raiders haven’t been able to attract a good (forget great) head coach for more than a season or two in decades, and the team is considered to have the worst ownership in the NFL if not in all professional sports. Much like Sears Holdings in the retail industry.
How about the recent CEO “golden parachute” controversies amplified by the media? Usually, hiring a reasonably-talented CEO into a poorly-performing company requires this type of lagniappe. So, no one should be surprised by injury collisions at the intersections of “reasonably-talented avenue” and “poorly-performing road,” along with the resulting bailout insurance claims.
I think retail–or business, in general–is more like marriage than magnetism: like items, rather than opposites, attract…i.e.: good owners find good managers, bad ones don’t.
People interviewing for a CEO position are used to and expect to make their own decisions. Few are even considering a job for money, thus they can pick and choose where they work. In the case of Sears, who wants to put on their resume the demise of the company for a real estate play?
It will take millions of dollars and years to turn this company around. Why expect [anyone to want] a job with a rating of junk? Both companies need a turnaround CEO, not an operating one. Another issue: maybe the job specification requires unattainable objectives. Why accept a job you know you cannot be successful at?
Considering the talent that is out there, as a result of mergers, bankruptcies, and downsizing, you would think that companies would have their pick of the best. I can think of several people who may not fit the corporate profile, but have demonstrated success in retailing, merchandising and running retail operations. Maybe the Boards are looking for someone who looks good to Wall Street, rather than who have the talent to run stores. Too bad! Come on–take a chance, it can’t get any worse!
The absence of a CEO amidst the functioning of a company does not show that CEOs are less important. The task of the CEO is not to micromanage inventory assortment, pricing or promotions, but to:
* develop a vision for the future
* assemble and motivate a team to bring that vision to reality
* represent the company to the outside world and more importantly, to “walk the talk” of the company values to employees
* bring new ideas into the company and make sure that the culture does not reject those ideas before they have been given their due
* attract and retain great talent
The lack of these functions does not show in the short term; however it ALWAYS shows in the long term.
Barneys and Sears are not the only major retailers looking for CEOs or without CEOs. Quite a few major retail chain CEOs already know that they’re fired and are being kept on as temporary figureheads. Additionally, many boards and owners are secretly searching for CEO replacements, without informing their current CEOs. It’s not unusual for first-class executive searches to take 6 to 12 months. Furthermore, interim “leased” CEO’s are sometimes hired, often taken from the board’s ranks or from consulting firms.
Too often CEOs and Chief Merchants are hired based on their new ideas and vision for the future without their thorough understanding of profitable and unprofitable segments of the company.
Change for the sake of change does not always translate into profit and could alienate the current customer base. (Walmart’s temporary decision a few years back to trade up in apparel comes to mind).
Change should be based on thorough research and testing–not on a gut feeling.
Effective leaders seldom make it to CEO because effectiveness requires talents not understood by most boards–the talents of true leadership. Boards tend to hire CEOs that can create short term shareholder value vs. long term sustainability and growth. If the boards of Sears Holdings or Barneys wanted a CEO, they’d have one. There is no shortage of folks willing to be a CEO and given the ownership of these two (financiers, NOT retailers/merchants), there are plenty of folks out there who can drive a short term P&L result.
No, these boards have chosen to go leaderless. Why is anyone’s guess. In any case, it is not healthy for the viability of these companies, and is certain to lead to more talent defection because great people want to work for great leaders.