BHS and the Demonization debate

April 28, 2016

BHS

 

BHS, not unlike Boots, is a British icon of the High Street.  Its decline makes it open season for demonization of its current owners and more significantly for Sir Philip Green, who sold it for £1 a year ago

A year ago, Philip Green signalled a tough time ahead for BHS with his peppercorn sale of the retail stores, throwing in a modest sweetener towards its huge pension liabilities. The new owners were either a brilliantly visionary group of entrepreneurs, or a bunch of body snatchers. As BHS heads for administration, the second looks the more realistic.

Its new leader, Dominic Chappell, was described by The Mirror as an ex-racing car driver and former bankrupt. In a last desperate effort to rescue the company, Mr Chappell was reported to have moved £1.5 million from the company in an imaginative but ill-fated manoeuvre more suited to the racing track. He has since paid most of it back.

As the Mirror explained:

Representatives confirmed the news today [April 25th 2016] after talks with Sports Direct – owned by Newcastle United billionaire Mike Ashley – to sell some of its 164 stores collapsed at the weekend. A formal announcement is expected at around noon.

The collapse of BHS would be the biggest retail failure since Woolworths folded in 2008 with the loss of almost 30,000 jobs. It is understood any buyer would only step forward if it did not have to take on the £571m pension deficit.

The Financial Times

The Financial Times offered a rather half-hearted defence of Philip Green. Its article was headed The demonization of Green, arguing this was a result of the prerences of the tabloid press. Then it got down criticisms of the commercial judgement of the life style and financial practices of the tycoon which could be seen as something of a demonization of itself.

These included a charge of ‘Pensions dumping … as the entrepreneur was taking delivery of his third superyacht to his Monaco bolt hole’.

The Daily Mail

The Daily Mail, one of those tabloid media, did indeed give Philip Green a thumping, although the ‘demonization’ was as much it that newspaper’s style than its substance. Its headline ran Can the man who milked the millions from BHS really be allowed to keep his knighthood?

The Mail added to a chorus of demands that Sir Philip be banished to the naughty chair, be relieved of substantial amounts of Moola, and be stripped of his knighthood.

The main points were covered in more robust terms than was found in the Fnancial Times, although the Mail actually cited the FT as for one of its sources for ‘a staggering billion or so moved from BHS into the family coffers under the Green machine’.

The Guardian

The Guardian having done a right royal anti-royal piece on the Queen’s knees-up, last week kept the top on the vitriol bottle.  The article was pretty much like the Mail’s, with perhaps more distain for Green’s life style and the milking of BHS assets.

Mary Portas

Mary Portas was more dismissive. In a radio interview [Monday 25th April 2016] she talked of the lack of vision by BHS over the years, and its failure to grasp a future more like pound savers and the need for more visionary leaders. [Note for business students: can you see some tiny flaw in the reasoning of the person charged by the Government with reviving our High Street?].

To be fair, anyone can get a bit carried away in a radio interview.

In a piece for the Guardian, the Queen of the High Street explains under the headline how I would have saved BHS

If I had been at British Home Stores I would have looked at today’s market place and created a brand that is relevant for today’s shopper.

I would have gone totally after the value market, but made it functional and cool.

I would have started with where it was good – the lighting. Then I would have extended that to become a modern British lifestyle retailer at a great price.

Nice move, Mary

So that’s what Philip Green missed. Fixing the lighting. Mary avoided mentioning him by name. Probably best.  He has been known to sort out opposition in a not particularly functional or cool sort of way.

To be continued


Ben and Jerry’s brand of activism survives its Unilever takeover

May 24, 2012

The folksy Ben & Jerry ice cream outfit seemed an unlikely fit for the global Unilever Corporation. But their activism and social values of the smaller business seem to have survived the takeover

When a global Corporation acquire a smaller brand, there is likely to be a clash of cultures. Recently, Coke’s acquisition of Innocent, the pioneering manufacturer of healthy Smoothies drinks comes to mind. Another instance is that of Sony acquiring the tiny Hawkeye operation ahead of its own interests in Hawkeye’s technology being developed in sports such as tennis and cricket (with the greater market for football looming).

The Anglo Dutch giant Unilever likes to acquire brands with enough global potency to retain identity within the Unilever family. One BBC article recently asked whether its brand and corporate actions were becoming more like that of Ben & Gerry’s.

When Unilever bought Ben & Jerry’s ice cream in 2000, there was talk of Unilever becoming more like Ben & Jerry’s and not the other way round. The quirky American ice-cream maker certainly does not appear to have abandoned the principles of its founders.

Ben & Jerry’s publicly supported the Occupy Wall Street movement and, according to co-founder Jerry Greenfield, nobody got fired.
“I am pleased that Ben & Jerry’s is able to continue its innovative mission,” he says. “We get a lot of support – sometimes I’m a little surprised at how supportive Unilever is.”

“I think Ben & Jerry’s was a tipping point for Unilever – they learned a lot from the culture and learned that it made business sense,” says Paula Widdowson, former head of social responsibility at Northern Foods who is now a consultant on the subject.

The Corporate plan

When Unilever unveiled its plans for putting sustainability at the heart of its global operations [in 2010], CEO Paul Polman publically committed to to reducing the environmental impact of its products by 50% while doubling sales, in the coming decade to 2020. He noted that the new model was “the only way to do business long term”.

The Ben & Jerry website

The Ben & Jerry website retains a powerful sense of the historic quirkiness of the company. Its activism and commitment to social values shines through. [I was reminded a little of the core identity of Mattel, when I looked at the site: Ed].

Ben & Jerry’s is founded on and dedicated to a sustainable corporate concept of linked prosperity. Our mission consists of 3 interrelated parts [social, product and economic].

Underlying the mission is a determination to seek new and creative ways of addressing all three parts, while holding a deep respect for individuals inside and outside the company and for the communities of which they are a part.

At the time of the takover the news was described in these terms

Unilever is to buy Ben & Jerry’s ice cream company in a deal worth £203m ($326m).

Started in an old petrol station in Vermont in 1978, the [Ben & Jerry] company grew into a quirky business with a strong social dimension.
But lately differences have arisen between Ben Cohen and Jerry Greenfield about the direction the company should take, although the old schoolfriends deny they have fallen out.

“While we and others certainly would have pursued our mission as an independent enterprise, we hope that, as part of Unilever, Ben & Jerry’s will continue to expand its role in society,” they said in a statement.

Leadership lessons

Ben & Gerry cases have become a favoured topic for business school study. A range of case studies can be found (together with a range of not-always-model analyses).

This post has been written to introduce the potential dilemmas facing the Tom & Gerry brand within its wider responsibilities as part of a global operation.

Follow-up

Ben and Jerry has thrived as an autonomous part of the mighty Unilever global Corporation. Its employee-driven foundation backs community initiatives with millions of dollars.


Tesco’s ‘near perfect succession plan’ coincides with period of business turbulence

January 15, 2012

Philip Clarke

When Philip Clarke replaced CEO Sir Terry Leahy in 2011, Tesco’s succession plan was described as ‘near perfect’. Within a year, serious profit warnings suggest it will be unlikely to deliver its strategic aims

The Guardian has followed the story closely, and analysed the succession plan in depth:

Leahy’s retirement has triggered a changing of the guard, including the departure of Andrew Higginson, its former finance and strategy director, who will step down as head of its retailing services arm in September [2012].

The Big Price Flop

The Big Price Flop, as some analysts now refer to it, also suggests the British arm is missing the influence of Tim Mason, the group’s deputy chief executive and Clubcard guru; he currently has his hands full with its heavily loss-making US chain Fresh & Easy.

The Terry, Tim and Andy show

One former executive argues the top team is depleted and weaker than when “Terry, Tim and Andy” ran the show, but adds: “Terry was always going to be a hard act to follow. He was a retail genius.”

When [Philip] Clarke, who first worked for Tesco in 1974 as a part-time shelf stacker while he was still at school in Liverpool, was appointed to succeed Leahy, their similar backgrounds and immersion in the business suggested they were cast from the same mould. Only time will tell if Clarke can have as much success.

So what went wrong?

If you consider the reported evidence, Tesco has had a tough time in the near recessionary conditions of 2010-11. Its failure to meet its financial targets was shared with most of its rivals. A few bucked the trend, notably Sainsbury, Morrisons, and the discounters Aldi and Netto.

Arguably, Clarke was too willing to accept the positive picture of a company requiring no major change of strategy. Forced to respond to market conditions, he and the respected top team appeared to have focused on an extensive price cutting plan of £500 million.

Black Thursday

As poor results at Christmas [2011] were unveiled, securities analyst Dave McCarthy talked of a Tesco ‘black Thursday’ as £5bn was wiped off the company’s stock market value and when the results showed that the UK chain, which generates more than 60% of group profits, was funding international losses.

“We suspect that when investors look back, they will view this day as the day the market recognised the fundamental changes that are taking and have taken place. A profit warning is the last sign of a company in trouble — and they usually come in threes.

Tesco admitted for the first time that it has long-standing problems around range, quality and service. It has slashed wage bills to try to preserve profits and that, like pushing prices up, is a short-term fix at the expense of future profits.”

Hero to zero again

Another Guardian story replays the hero to zero theme, comparing the rise and fall in reputation of Leahy’s leadership at Tesco with that of Philip Rose at Marks and Spencer.

More on Tesco’s succession plan

Tesco’s succession planning was covered in an earlier LWD post


Reclaiming the town centre: The Mary Portas report and her magnets for change

December 14, 2011

Mary Porter presents her government-commissioned report to deal with the decline of inner city retailing. Has the Queen of Shops made a serious contribution to addressing the problems? And is there another story of her undeclared business interests?

Mary Porter has become a celebrity in the UK, thanks to her TV role as a trouble-shooter, specialising in fixing retailing businesses. As a late adaptor of such things myself, I had learned of her through my Business students and colleagues. She seems to have become something of a role-model, and worth scrutiny for her approaches dealing with leadership dilemmas

A confident message

On the day her report came out [Dec 13th 2011] she did the rounds of the media. I heard her on Radio 5 live. Her performance was impressive and confident. Her message clear. The traditional high street at risk from the giant retailers and the convenience of out-of-centre shopping.

An academic called in to comment would probably have gnawed away at the inexorable forces of change that have produced a dreary convergence of the shopping experience around the world (‘Mallification’ to coin a term for it).

Mary’s people magnets

Mary was upbeat and remarkably convincing. (“Sounds very charismatic”, I mused). She avoided almost all the usual business clichés of footfall, consumer value, visions, (not sure about visions, on reflection). Instead she offered ‘her’ map which has something to do with metaphoric ‘magnets’, which pulled people into spaces and places.

The old market-stalls were people magnets, and Mary wants more market stalls to help revive the high street by such forces of attraction.

The Indie trumps the BBC

I expected to find a rapid critique of the report from the BBC but found the most impressive summary in the Independent. It even managed to find a possible vested interests story which I will return to later

An Independent view

The recommendations of the report (with acknowledgement to the Independent) are as follows

1. New ‘National Market Day’ where budding shopkeepers can start a business.

Pro Those who can’t afford property costs will be able to give retail a try without the overheads.
Con Shoppers prefer the low cost but reliability of supermarkets and out-of-town shops. It will be difficult for a ‘Market Day’ to change this.

2. Local authorities to give business rates help to start-up retailers.

Pro Business rates is the great prohibition to start-up retailers, as rates are usually more than 40 per cent of the rental charge.
Con Cash-strapped councils will find it hard to reduce their rates bills, while established local independent retailers will claim an unfair advantage for new kids on the block.

3. Create disincentives for landlords to leave shops empty.

Pro Empty shops are the biggest blight to the high street.
Con Landlords are already struggling to find tenants for vacant shops and are already hit by the large cost of business rates for these empty shops

4. Introduce Secretary of State “exceptional sign off” for all new out-of-town developments.

Pro Could curtail, or lead to more suitable and controlled, developments on the edge of towns which complement high streets.
Con The horse has already bolted. The big four grocers plan to develop 19 million square feet of new space between 2010 and 2014.

5. Put in place a “Town Team” – an operational management team to deliver a vision for a high street. [Oops, there’s that vision thing at last: Ed LWD]

Pro Will allow stakeholders to collaborate and take responsibility for their high street.
Con Stakeholders are likely to have diverging views, and non-retailer and non-landlord participants may not have real clout.

How promising is the Portas plan?

Promising enough to trigger a national debate. Aligned enough to the Prime Minister’s enthusiasm for the Big Society to have his continuing support.

And the undeclared interests story?

The Independent also draws attention to unrevealed interests of Mary Porter:

The TV presenter Mary Portas … laid out her vision to rescue the UK’s ailing high streets but refused to answer questions about her PR company’s links to the big property developer Westfield and other retailers.

Shame. Just as I thought we could have an all-round feel-good story and a new charismatic hero[ine].

Acknowledgements
To the Independent for the précis of the Portas plan; the image of the Prime Minister and Mary Portas and their undeclared interest story. Also to my colleagues and students for introducing me to the Portas phenomenon.


Mothercare: Rumours of takeovers continue

December 12, 2011

Susan Moger & Tudor Rickards

Mothercare is a high profile brand in the UK which is struggling to become a successful global operation. It is also facing rumoured takeover bids

Recent rumours suggest that Mothercare is ‘ripe for a takeover’. These have been supported by speculative share purchases. Venture capitalist Cinven is currently [Dec 12th 2011] favourite to move for Mothercare.

Background

To the general British public, Mothercare has developed iconic status since its origins in the 1960s. In some ways it has the ‘much loved’ status of Woolworths. LWD subscribers will be familiar with the demise of “Woolies” adding to the gloom of last Christmas for its employees. In hard times, sentiment is a commodity that does not guarantee survival.

The Company was founded by Selim Zilkha and James Goldsmith in 1961. In 1982 it merged with Habitat to form Habitat Mothercare and in 1986 Habitat Mothercare merged with British Home Stores to form Storehouse. Mothercare also acquired the Early Learning Centre (ELC) in 2007.

Profits have been increasingly coming internationally, this year just about balancing losses in the UK. The financials suggest that a takeover by a venture capital organisation would result in more rapid and drastic actions to address UK losses.

The declining fortunes of Mothercare are indicated by a sequence of CEOs. Ben Gordon was the fifth in rapid succession four years ago. At first,his appointment was accompanied by a strong rise in share price which eventually reversed (until the recent takeover rumours)

Crisis actions

The firm has followed the well-known steps for businesses facing financial problems. In particular, there have been changes in leadership, and steps to reduce costs.

Any signs of rethinking its strategy?

Cost cutting has included announcements of reducing the number of stores in the UK as leases expire. Signs of rethinking strategy are less evident.

Alan Parker, executive chairman of Mothercare was quoted in The Telegraph [17th Nov 2011] as saying

“We have to rejuvenate the whole brand and offering. The competition in the UK is more intense than overseas. We need to review the format and location of our outlets in Britain.”

More than an economic downturn?

Matt Piner, at the retail consultancy Conlumino, said: “Mothercare has blamed its falling UK sales and profits on the economic environment, but in reality all this has done is expose the wider issues the retailer faces.

However, with consumers now increasingly confident using the internet and sites such as Mumsnet to educate themselves, the once habitual visit to Mothercare is becoming a thing of the past. Instead, consumers research what they need online and head to the cheapest retailers to buy it – which nowadays normally means one of the supermarkets.”

In addition, retailers such as Boots and Superdrug have made great efforts at providing advice as well as products for young families and with greater high-street footfalls.

Is the story straightforward?

Oner evaluation was less convinced about the non-UK business prospects.

Mothercare’s overseas growth has been hugely impressive. But despite the rapid growth in the international business over the past six years, the UK remains the driver (or not) of profits. For all the talk of reducing exposure to the UK market and restructuring the property portfolio, retail space in the UK actually grew last year.

Of course [Former Chairman] Peacock – and his chief executive Ben Gordon – would rather talk about Eastern Europe than the UK. International sales rose 15pc-plus, while the UK has seen sales fall 4.3pc, despite weak comparatives.

The retailer has made much of its international franchisee business in recent years, [flying out analysts and journalists] as far as India to see the business. But whatever the spin, Mothercare’s fortunes are still tied to the UK market. Last year the group sold £587m worth of baby stuff and toys to UK shoppers and £206.4m to its international franchisees. Mothercare – rather bizarrely in my view – prefers to highlight “network sales”, which include the international franchisees mark-up (of which Mothercare takes just a small “mid-single digit” cut).


“I need a new tennis racquet …I’m prepared to pay up to £30 for it”

April 3, 2011

“I need a new tennis racquet” I announced to the proprietor of Jim Halls Sports, Bramhall.

“They’ve changed shape since you bought your last one” Jim said rather unkindly

“Nothing fancy…”

“Nothing fancy. Don’t want to pay money for the branding.” I added.

“You’ll have to. Everything’s branded these days” Jim said “Do you want a Murray-branded one or a Nadal one?”

“Just one I can keep in the back of the car winter and summer. Twice a week, used for social doubles. And with strings that don’t break. I’ve never broken a string with my trusty Dunlop Prince 1975 matchplay.”

Jim started going on again, trying to get me to chose from his assorted collection of 2011 models. “Do you see yourself playing more like Andy Murray or Rafa Nadal?” What kind of question was that? No one plays like Andy Murray or Rafa Nadal. Not even my nephew Connor, who has a Rafa racquet, Rafa headbands, Rafa shirts, Rafa baggy long-shorts, Rafa tennis shoes, and Rafa socks (perhaps I’m not right about the socks).

“Just an ordinary tennis racquet” I pleaded “One to replace my old one. I know there’s been inflation since 1975. I was thinking I could go up to even £30.”

Jim looked downcast. “I think you’d better take a seat for a minute” he said. “I’ve got something to tell you.”

Follow the action

What happened next? Will I abandon my trusty 1975 weapon for some new-fangled over-branded over-priced racquet? Watch this space.


The People’s supermarket: A communitarian innovation?

February 9, 2011

Tudor Rickards

The People’s Supermarket, as televised on Channel 4, appears to be a social innovation offering a communitarian local alternative to the international retail giants. But there is more to this project than meets the eye

The People’s supermarket exists as a physical entity in London, with two entrepreneurial founders and a group of local members. It also exists as a Channel 4 television series. It can be said to exist as a visionary dream with social and communitarian values.

Over a million people watched the TV launch of the People’s Supermarket. This is sort of publicity most entrepreneurs can only dream about for a new venture. As I watched [February 2011] I had trouble getting my head around what I was seeing. Is this whole thing a creature of the media? A little more research and I discover even more publicity for the project in a recent [23rd January 2011] Guardian/Observer article.

The People’s Supermarket is giving it a go. Set up by Arthur Potts Dawson, who was behind London’s environmentally sound, award-winning Acornhouse restaurant, the mission statement is “for the people, by the people” which in practice means a not-for-profit co-op. Pay a £25 membership fee and sign up for a four-hour shift once a month and you become a part owner, have a say in how it’s run and receive a 10% discount on your shopping. The store itself, in London’s Lamb’s Conduit street, opened on 1 June [2010]

So what’s going on?

The initial fund-raising event involved sixty people lobbing up top-dollar prices for a special dinner cooked by a celebrity chef. That bit I understand. It’s a classic fund-raiser much loved by politicians. The creative edge was food ‘obtained’ from discarded stuff acquired by volunteers and discarded by the major supermarkets (but that’s another old media story, isn’t it?). The diners got their few minutes of TV exposure. Health worries were reassuringly addressed (they had begun to worry me, anyway).

By the end of the episode, the critical elements of the business model had become clearer. The success of the enterprise depends, pretty much as the Guardian indicated, on whether the community membership and volunteers will go on supporting the idea, and whether the products will generate footfall and satisfactory financials.

A bit of a mash up?

While the TV mockumentary would like to preserve the story line, information in today’s multi-media environment means that we can experience a bit of a mash-up. The Retail Gazette reported:

Kate Bull, the former Marks & Spencer commercial executive and co-founder of The People’s Supermarket alongside chef Arthur Potts Dawson, told Retail Gazette: “Average spend per person has grown from £3 to £5 in recent months. “On a Saturday – our busiest day – this has grown to just under £10.” The evidence suggests that the store is drawing a small percentage of locals away from the top grocers at weekends.


What happens next?

I just have a feeling there will be a few crisis points in the mini-series. Viewers will share the roller-coaster as Arthur, Kate and chums experience the pains and pleasures, the highs and lows of becoming involved in creating social reality. It is likely that the future of the venture will remain unresolved.

Maybe inferences will be drawn regarding David Cameron’s vision of The Big society. Or perhaps comparisons will be made with communitarian dreams such as that of the famous Mondragon community venture in the Basque region of Spain, or Ricardo Semler’s Brazilian vision.

Stop Press

By March 2011 the project had become a political football. The publicity had included a visit from Prime Minister David Cameron. But Labour-controlled Camden borough council had moved to claim unpaid rates of £33,000.


The Grigor McClelland Conference

This post was prepared as part of the celebrations planned for The Grigor McClelland Conference to be held at Manchester Business School, Friday April 8th 2011.


How Discounters Succeed in Tough Times: The Poundlands Case

September 1, 2010

Discount retail stores thrive in tough times.  Poundlands seems to be a good example. The firm is planning to create 2000 jobs and open 50 new stores to augment its 250 existing ones, many being installed in former Woolworths premises.

According to the BBC

Discount retailer Poundland posted annual operating profits [August 17th 2010] up 81% to £21.5m, on turnover up 28.7% to £509.8m. Jim McCarthy, chief executive, called the results “impressive” and promised further profits growth and expansion. He said: “With the economic uncertainty continuing, we are seeing many more first time shoppers joining our… customer base and with this trend set to continue, I remain confident of our prospects for the current financial year.”  Poundland employs more than 7,500 staff, and created about 2,000 full- and part-time jobs during the financial year ending in March 2010.

The firm, based at Willenhall, West Midlands, opened 56 outlets during the last financial year, many of which are based at former Woolworths stores.   The chain, owned by the private equity company Warburg Pincus, is gradually increasing the average size of its stores, and also stocking more branded items and food.

An interesting point is the way in which a smaller more dynamic firm is able to react in potentially difficult times. Woolworths, which might have been able to follow a similar strategy failed to survive the credit crisis, and became an opportunity seized by Poundland.


Tesco: Continuity in Leadership, but what about Strategy?

June 11, 2010


When the internal candidate Philip Clarke replaced Sir Terry Leahy [left] as head of Tesco, The first reports were almost exclusively focused on the departing leader rather than on the arriving one

The lament was understandable.

Profits, dividends and earnings per share doubled and then doubled again during Sir Terry Leahy’s 14‑year tenure. It works out at a compound annual growth rate of 10%. Very few large companies improve these measures at double-digit pace for a decade and a half without blowing up at some point.

Part of the secret, you suspect, is that long [leadership] reigns have always been part of Tesco’s culture. As every football follower knows, changing managers frequently is a losing strategy. Leahy is only the fifth chief executive of Tesco since the company was formed in 1929. He has seen four chief executives at both Sainsbury’s and at Asda [UK arm of Walmart] during his time at the top.

Praise from his predecessor

Within hours of the announcement, [June 8th 2010] Lord McLauren, Leahey’s predecessor, was on BBC’s Five Live lunchtime radio programme. He gave a glowing account of Leahy’s efforts and the merits of another internal appointment ‘from the Tesco family’. On being pressed, he added he had drawn up a private short-list of three internal candidates, and that Philip Clarke was ‘up there at the top’. He refused (naturally) to name the other two executives.

The endorsement ended abruptly when the interviewer suggested that Sir Terry may have eclipsed Lord McLauren’s leadership contributions.

“Didn’t eclipse me at all” he growled “he built on the successful company I established … and Phil will build on what Terry has accomplished” [quoted from memory].

Other BBC eulogies followed
:

Under Sir Terry, Tesco led the way in offering banking services and introducing the Clubcard, the store card that has been copied right across the High Street. He has also overseen the store’s expansion [overseas]. The company now employs almost half a million staff worldwide, with stores in China, the Czech Republic, Hungary, Japan, Malaysia, Poland, the Republic of Ireland, Slovakia, South Korea, Thailand, Turkey and the US.

Enter Philip Clarke

Philip Clarke said he was “honoured and delighted” to succeed Sir Terry. Mr Clarke has worked for Tesco for many years and joined the board in 1998. He had held responsibility for the supermarket’s Asian and European operations, as well as for IT.

The Guardian was quick to provide an informed account of Philip Clarke and the challenges he was facing:

Clarke, who has been on the Tesco board since 1998, was judged one of the frontrunners to replace Leahy. The son of a Tesco store manager in the Wirral he has reached the top rung 36 years after he did his first shelf-stacking shift for the supermarket as a schoolboy.
Analysts said that the biggest challenge in Clarke’s inbox come next year [2011] would be deciding what route to take with its loss-making US arm Fresh & Easy which is run by Tim Mason, who was also promoted to deputy chief executive. Fresh & Easy made a loss of £165m on sales of £354m last year and outgoing boss Sir Terry Leahy hinted at its annual results in April that its scope might be “hundreds” rather than the “thousands” of stores first envisaged when it was launched in 2007.

“Pile ‘em high ….?”

Tesco’s diversification both geographically and in product offerings has become a model for Business School study. Will the one-time local retailer get back to its original ambitions in America with the less than successful Fresh and Easy chain? Will it become more involved in the challenges of the financial sector? Will continuity in selection of a leader be followed by continuity of strategy? Whatever happens, the firm has come a long way from its original “pile ‘em high” philosophy.


Stuart Rose and the Beethoven Effect

July 9, 2009

Beethoven

Beethoven

When Napoleon took on wider powers, Beethoven rejected his onetime idol. Is Stuart Rose getting the Beethoven treatment at Marks and Spencer?

Stuart Rose has won the acclaim of ordinary shareholders and institutional investors alike as CEO of Marks and Spencers. But his move to take on the powers of Chairman and Chief Executive has not been so widely approved. Is this a modern-day Beethoven effect?

Music lovers are brought up on the tale of Beethoven’s admiration of Napoleon and how it turned to wrath when Napoleon declared himself Emperor of France.

A work originally entitled “Bonaparte Symphony” … was renamed when Bonaparte crowned himself emperor, a move which angered Beethoven. As legend has it, the composer ripped through the title page and later renamed the symphony the Eroica, refusing to dedicate one of his pieces to the man he now considered a “tyrant”.

When Business Leaders fall …

The fall of a Business Leader can also be accompanied by a rapid flip ‘from hero to zero’ , as many case examples in LWD have illustrated. Recently a spate of examples accompanied the fall of failed financial executives such as Fred Goodwin.

The hero-to-zero effect in some ways is a throwback to the days of The Great Leader, a period during which charismatic personality was believed to be the driving force behind transformational change.

The Governance Issue

There has been uneasiness about the joint role since last year’s AGM. However, despite continued turbulent times in the retail sector, Sir Stuart’s track-record as entrepreneurial leader remains relatively intact.

At this week’s AGM he retained considerable support, although the Governance issue will not go away.

Sir Stuart has been under pressure from institutional investors for more than a year over the board’s controversial decision to allow him to hold the roles of chairman and chief executive, which is against best corporate governance.
[One] said if Sir Stuart were to stand down early as chairman, he should consider leaving the board altogether. Sir Stuart’s urbane response was to say he was “a servant of the board. If they wish me to stay I will be here until the latest July 2011.”
The Universities Superannuation Scheme called for Sir David Michels, deputy chairman and senior independent director to be made chairman at least on an interim basis. “If Sir David would become the chairman, and I would become the chief executive, it’s moving . . . back to the past,” Sir Stuart replied. And while Sir Stuart could charm the audience, he could not escape the words of Councillor Ian Greenwood, urging support for a motion for him to hand back [the Chairmanship] “Whatever happens we are not going away.”

The Wider Issues

Students of leadership will recognise the wider issues implied in the ongoing story of Sir Stuart Rose’s leadership. At one level there is the technical matter of corporate governanace. At another level these is the process through which a powerful leader appears to seize greater powers ‘in the interests of the company or country’.

In other words, the Beethoven effect.

Acknowledgement

Close examination of the Beethoven image reveals it to be an ironic comment on the great man’s coiffure, to be found on a blogpost by Charlie White