Good CEOs are Hard to Find – 6/3/09
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?
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.
Mike Osorio, your Dare to be Contagious! ™ strategist
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