New Costco Prez Seen as Sinegal’s Successor, Maybe
In some cases it’s hard to separate certain chief executives
from their companies. You don’t think about Whole Foods without John Mackey
coming to mind. The same is true with Costco where Jim Sinegal is synonymous
with a mention of the retailer’s name.
Eventually, however, the seemingly
bigger-than-life CEO moves on and gets replaced. At Costco, there
has been some concern in recent years as to who might be named to take Mr.
Sinegal’s place once he chooses to step aside. (He is 74).
This week’s promotion
of Craig Jelinek from vice president in charge of merchandising to president
and chief operating officer has many thinking that he is the heir apparent.
David
Strasser, retail analyst at Janney Capital Markets, told The
Seattle Times that investors should be more comfortable
now “about a management transition when Jim Sinegal decides to step down.”
Not
everyone will be happy, however, as some were hoping that Mr. Sinegal’s eventual
replacement would be more concerned with raising margins and reducing costs, perhaps by reducing labor costs. The Costco culture of paying its employees above market
rates, offering generous benefits packages and not going the union-bashing
route has led to criticism of Mr. Sinegal’s management in the past.
While talk
of succession is in the air, Mr. Sinegal has not indicated that he’s looking
to retire and find something new to do.
“Being very, very agile with the numbers is a very important element of the
business, and being able to go out and travel and visit the warehouses and
make sure you go to every opening,” he told the Times. “I’m
healthy and enjoying things and still working hard and reasonably adept at
what I’m doing.”
Discussion
Questions: Should Costco make its succession plans public? Do you
see Craig Jelinek as a good choice to replace Jim Sinegal when he eventually
steps down from Costco? What qualities would you like to see in the next leader?
What CEO wants to retire when he/she is highly respected in an industry and is loved within their company? Nobody–or maybe only a few honchos. Their blood demands they keep leading.
Jim Sinegal and Costco have become synonymous over the years and that’s not what induces an easy retirement in a healthy environment with a productive dude. Craig Jelinek may be Sinegal’s eventual successor but mostly likely only after Jim tires and feels a new guy can do a better job for Costco…perhaps in 2012.
Speculation regarding Mr. Sinegal’s departure seems premature (the key word IS “eventually”). I don’t see him letting go of the reigns anytime soon and when he finally does, a new cast of candidates, both internal and external, will no doubt come to the fore. Retail moves fast and so do retail executives when they get tired of waiting.
Any company with a legendary leader faces a problem with succession. The Bill Gates to Steve Ballmer succession worked well. But it took a couple of leaders at Wal-Mart before Lee Scott brought Wal-Mart back to the Sam Walton roots.
Legendary leaders have visions. Visions are hard to transfer. Personal visions are often hard to even write-down. Sinegal has grown an admirable company. He hasn’t done it by anything close to what might come out of a Harvard case study.
While I don’t know anything about Mr. Jelinek, I am disturbed that there is even talk that he might make some changes in corporate philosophy. Costco did not get to where it is today by maximizing its margins or paying its people below market rates. That is what everybody else does. Does Costco want to be like everybody else? I sure don’t want them to be.
Bigger-than-life CEOs don’t often want to leave, and don’t often fully relinquish control when they do leave. That makes true succession planning nearly impossible, often leaving a trail of disappointed execs in its wake. I think the best planners make the plan, including contingencies, crystal clear internally but sufficiently vague externally that people like us aren’t constantly supposing slights where none exist. Witness Berkshire for a good example of this.
The idea of succession plans for Jim Sinegal’s future is interesting, however the new structure formed by Costco–“The Office of the President”–is even more curious. The Office of the President in their structure is now held by three people. Personally, I think that’s more interesting than the transition itself.
While I understand that there is dithering and consternation over succession, I am surprised there hasn’t been more discussed in retail media about the process they have chosen to make that journey. I’d certainly think it’s a fascinating move and would be much more interested in finding out how that will work and what the leadership process will be in the Office of the President.