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Articles with HMA Quotes 
Who’s the Boss? New twists on filling the corner office
By David P. Schulz
January 2005
Being the very model of a modern major retail chief executive requires serving multiple constituencies: directors, shareholders, regulators, employees and the ultimate arbiters Ñ customers. It’s not that the position is all that much different from what it was way back in the 20th century; it’s just that the job is much more difficult, thanks to the information explosion and demands for transparency in management decision‑making.
“There is so much pressure today on CEOs to show results,” says Bobbie Lenga, managing director and head of the retail practice at Russell Reynolds Associates. “They have to have a good relationship with the board of directors. They have to be better at communicating the value of the company, and there is more emphasis on team building.”
Searching for directors and c‑suite executives from her Chicago office, Lenga says, ”Autocrats need not apply. He or she must be much more team builders and have the right people. They have to show continuous development.”
Another executive recruiter describes the modern chief executive as “a full‑entity CEO.” Hal Reiter, chairman and CEO of New York‑based retailing and fashion industry senior executive search firm Herbert Mines Associates, describes that full‑entity CEO as “somebody who understand leadership and management and finance, merchandise and everything else.”
A number of STORES Top 100 Retailers have recently brought in new chief executives; a handful of others are actively searching for one. Kmart hired restaurant industry veteran Aylwin Lewis in October. Just a month later, while Lewis was still learning his way around headquarters, his responsibilities were shuffled when Kmart announced it would spend $11 billion to acquire Sears, Roebuck and Co.
Now Lewis will oversee only the retail operations, while Sears chairman and CEO Alan J. Lacy will hold the same positions with Kmart Holding once the transaction is completed.
Rotating executives
Even more complicated were the corporate and executive office machinations involving OfficeMax and parent Boise Cascade. The forest products company had combined OfficeMax with its Office Solutions division, then sold off its forest products business, moved headquarters to Itasca, Ill., and changed its name from Boise Cascade to OfficeMax with Chris Milliken installed as president and CEO. One of OfficeMax’s major competitors, Office Depot, is searching for a CEO after Bruce Nelson left the company last fall.
The transition at JCPenney should be smoother, with Allen Questrom stepping aside for Myron E. (Mike) Ullman III, the former Macy’s and DFS Group executive. Also new to the retail CEO ranks is Heywood Wilantz at Retail Ventures, the Columbus, Ohio‑based company controlled by the Schottenstein family that operates chains such as Value City Department Stores, Filene’s Basement and DSW Shoe Warehouse.
That companies such as Gap and Kmart would not only look for, but hire, CEOs from outside the retail industry is not so surprising to Reiter. “There’s not enough retailers,” he says. “The inventory (of CEO prospects) does not exist.”
Reiter says a major concern in going outside retailing to recruit a chief executive is one of compatibility. “Will the body reject the organ?” he says.
Retail CEOs like to chant the mantra that they need to listen to their customers. One chief executive who takes this to heart is Gap’s Paul Pressler. Coming from Walt Disney, where he ran the Disney Store retail operation before moving to theme parks, hotels and ocean cruise liners, Pressler says the first thing he did after joining Gap was “learn everything I could about the company’s culture and our customers.”
Speaking to a gathering of retail apparel executives, analysts and other industry observers, Pressler said he found that, throughout the Gap organization, there was a need to “better understand our customers and to use that knowledge as a filter when interpreting the trends and developing ideas.”
The result is that after a little more than two years at Gap’s helm, Pressler says decisions are based on “a balance of 50 percent intuition and 50 percent customer insight.”
Focusing on customers is also important to Lewis, another retailing industry newcomer. When his appointment at Kmart was announced in mid‑October, the former Yum! Brands executive declared his intention to “jump in, do a lot of learning, visit a lot of stores and talk to a lot of customers.” Lewis says the feedback gleaned from Kmart shoppers would be important in battling Wal‑Mart’s industry dominance. “They compete very well,” Lewis says, but “at the same time, our goal is to win, relative to our strengths and serving our customers’ unmet needs.”
Customers are always right, as the old retailing axiom goes, but employees are the people a CEO interacts with most frequently. Therefore, Lenga suggests, the modern CEO “needs phenomenal leadership skills. He or she needs to develop people and listen to employees at every level. Boards do put pressure to put up numbers; there are pressures for both the short term and long term, but CEOs need leadership skills. These are so critical.”
CEOs can accomplish this, Lenga says, by “developing a full understanding of the corporate culture: Meet the store managers, the store employees; become involved. Boards want CEOs who get much more involved.”
Reiter agrees, adding that today’s retail chief executive “has to be able to get everybody on board. He or she needs to be a compelling personality so the employees want to get on board.”
Advice for chief executives is not scarce, and a trio of consultants has written a book on the topic of team building. “You Don’t Have to Do It Alone: How to Involve Others to Get Things Done,” by Richard M. Axelrod, Julie Breeden and Robert W. Jacobs, maintains that the way a team is put together is as important as performing the task it is charged with accomplishing. This means, they say, that team members should be of diverse opinion, have a stake in the outcome and possess the abilities or authority to get things done.
Glued on track
Perhaps one of the best examples of team building throughout an organization is at Trader Joe’s, the eclectic grocery retailer owned by the reclusive Albrecht brothers. Dan Bane, who has been CEO since 2001, says “one vision” has been the glue that holds the team together both at Trader Joe’s headquarters in Monrovia, Calif., and across the 200‑plus stores nationwide.
“We focus on doing better than the day, month and year before,” he says. “Every employee of the company is held to a certain set of values, which they base their decisions upon. It’s about keeping people on track.” Bane visits stores two or three days a week, getting to each location at least four times a year.
In the wake of accounting scandals, the Enron mess, new federal legislation and increased vigilance by the Securities and Exchange Commission, Wall Street‑savvy chief executives are at a premium.
Larry Bossidy, former CEO of Honeywell, published a book this year on the subject of corporate governance. He says one of the major pieces of legislation covering corporate governance, Sarbanes‑Oxley, has placed emphasis on building quality boards of directors. The result, Bossidy says, is that “the attentiveness and involvement of the board is probably better than it was.”
The emphasis on transparency in accounting and corporate governance has probably been the death knell for the era of the chief merchant moving into the CEO’s chair, suggests Reiter, whose firm is currently involved in the search for a new chief executive at Mervyn’s.
“The days of finding a great merchant and hoping he or she can learn the rest of the job are history,” he says. “A merchant CEO will not have the same broad range of familiarity with all aspects of the job that someone with operations experience will.
Talk the talk
The modern CEO, Reiter says, has “to be able to talk to The Street, know the SEC inside and out, Sarbanes‑Oxley. Both sides of the brain – left brain/right brain – have to work equally well at the same high level.”
Lenga concurs. Describing the relationship between a chief executive and the board of directors, she says, “There will be more tension, more pressure. It’s a tough environment. When you’re under that pressure, you’re tempted to take shortcuts. It is so tough, the fiduciary responsibility. What the boards want is someone who is fully and totally committed and who can still communicate the value of the company.”
Lenga also says the days of companies run by a strong CEO and a weak board of directors are numbered. Newer directors “are very active participants Ñ not that they want to do the CEO’s job on a day‑to‑day basis Ñ who can sit back and ask objective questions. It’s about checks and balances.”
Rather than viewing this as a challenge or a threat, Lenga says a good chief executive “should want a strong board that questions business practices. A CEO who can work with this kind of board provides a much better chance for a win‑win situation. If the CEO controls the board, it’s not a healthy situation.”
Another potential change in the CEO profile is involvement in outside endeavors. “Philanthropic activities are less important than they used to be,” Reiter says. “In addition, today’s CEOs are sitting on fewer outside boards than they used to. CEOs have to devote 110 percent of their time to the job.”
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