What The Reports Aren’t Reporting
Yesterday was probably my most difficult travel day in my 20 year history of international and domestic travel. I spent a fabulous week in Romania last week visiting with a really innovative organization and executive leadership team and experiencing their beautiful country and fabulous people. Yesterday, I was excited to fly from Bucharest to London with a scheduled 40 minute stop in Munich. What was supposed to be an easy four and a half hour flight turned into a 14 hour travel day due to mechanical issues with our airplane. We were asked to depart our plane in Munich while they worked through the mechanical issues and/or another plane arrived. So, given my extra free time, whilst not on Skype calls, I decided to catch up on some reading – specifically the news of two distressed retailers expected to upgrade their current status in their continuing saga of struggles.
The Real Story
I read up on one of these retailers in particular as I have working knowledge of them so I am very interested in their current marketplace position and their situation caters to my yenta sensibilities. I probably clicked on and read almost every article written and news report published over the course of the last five or six days regarding this retailer hoping to find an objective and educated reason why this “iconic” retailer is struggling. The truth is that a pretty large portion of my writing over the past year was inspired by this retailer because the workplace culture is profoundly broken and – frankly – toxic to an extreme level. The corporate executive level and senior level field leadership is so deeply entrenched in their own egos they absolutely know best and everyone else is, essentially, worthless. Shutting down any suggestions and feedback from anyone other than their posse of “yes men”.
I read/heard in almost every report that the foot traffic in the malls hurt the business – that is absolutely not accurate. Was foot traffic down, overall? Yes, though not at all to to a dire level, but where these leaders fell flat was in not creating a selling culture in the stores. There were lots of opportunities to eliminate tasks that were there simply because they’ve “always done it this way” but executives chose to add to the laundry list of daily tasking while still demanding and bullying [an issue at the highest level of field leadership] – in some cases – the customer facing employees to deliver on metric results in every area. I read that people were shopping online and this was another victim of the Amazon effect – NOT TRUE – there is a fairly large [25%-35%] segment of their business that cannot be shopped online.
Objectively, when you had a District or Regional Manager who was intent on and committed to driving results – there was a positive comp. When you had a store team that worked hard to create an aesthetically fabulous store [clean, well merchandised, filled-in, visual sign placement executed correctly] and processes in place to tackle these accountability’s, these teams delivered positive comps – especially in their unique business offering. Reports are very quickly assigning the blame to Amazon and shopping center traffic to their struggles when the blame most certainly and justly rests in the company leadership. After all, this is not the first company their “executive leader” has delivered into bankruptcy.
There is no reporting on the fact that the turnover at the 3rd tier of store “management” sat at 360%+ [in the US business]. There’s no reporting that every Regional, District, and Store Manager was set up to fail [and told they were, weekly] because they were ranked daily/weekly/monthly/quarterly on 17 [yes, 17] business levers – by far the most of any retailer I’ve ever experienced and up from six or seven metrics a few years before. The wages were so low and tragic for store managers and their teams that quality candidates were difficult to capture, leaving the organization with low skill, low wage workers who would show up primarily to collect a paycheck [many of whom I have encountered and spoken to were also collecting on government assistance programs such as WIC and/or Section 8 housing to make ends meet] but going above and beyond in any area was, for the most part, pathologically absent in their DNA. Excessive entitlement was a culture killer at the store level with many/most employees expecting and – futilely – demanding more pay for performing simply the most basic tasks listed in their job description and, in a few cases, deliberately under-performing.
Single coverage with three to four hours of operational tasks per day was a customer experience killer when there were customers in the store and at times many stores were downright busy and/or consistent with customer traffic. Even speaking about sales performance was #3 on the “Store Visit” after floorset walk and marketing checks when the “vice president(s)” would visit stores. Stores would receive an average of 10-20 “urgent” or “important” emails a day from home office, district, and regional management. Operations and “fire drills” took precedent over customer engagement and usually those emails were directed at an operational assignment that was a “miss” [a big phrase for them] or a “failure” and further tasking required to fix or follow up.
Reporting doesn’t tell about how sloppy Home Office operations were, consistently. As a matter of fact, in January 2017 a major error was identified for all stores that were permanently closing in Fiscal 2016. This error would have created a monumental and embarrassing accounting issues for Fiscal 2017 had the question/concern not had been surfaced to executive leadership. This error was identified by someone in the field who just thought it felt “off” and they were correct. Without so much as a thank you and certainly no credit given, stores that were closing for good lost a week to pack up and were rushed in their closing process to get all product accounted for and transferred out of their locations before Fiscal 2016 concluded in order to “close the books” correctly. There were constant communication/miscommunication issues that caused outrageous panic and chaos in this organization which also didn’t support engagement or experience delivery.
I remember being privy to a company wide conference call for this organization in July 2016 and the “executive leader” and his #2 were taking questions from international and domestic offices and overwhelmingly the questions centered around workplace culture and asking for support in improving the currently abysmal one. The CEO – when faced with these questions – turned the mic over to his #2 after mentioning he believed in “personal responsibility” to improve your own morale in the workplace. Her response, “I look at culture this way – when you go to a party and it was a dud – you don’t look at the party itself, you consider the party-goers, they’re the ones who ruined the party”. That was their reality. Take advantage of everything and everyone you possibly can, assign blame consistently, and give nothing in return and that philosophy was absolutely copied at every single level of the organization.
These are the reasons why this company is in distress. Not the customer. Not Amazon. Not shopping center traffic. The unspoken reality of the culture and the hubris of the executive and senior level leaders created a workplace that was negative, unhappy, and – on their best day – inspired mediocrity. They are the ones that destroyed this brand and placed this organization into distress. Though the announcement is coming six months earlier than I anticipated, I am not surprised by this banal trajectory of failure this company has created for themselves.
My Prophetic Words From August 1, 2016
As I was reading all of the news yesterday as I sat in the airport – I recollected an article this very organization and their executive leadership team inspired me to write in August 2016, “The Out Of Touch & Toxic Retail CEO“. I knew after one simple conference call where this was heading. Here is a portion of that article:
Once successful individuals and organizations often feel that they are entitled to continual success in the future. As a result, they risk becoming complacent, comfortable, and mediocre. Instead, they should continue searching for fresh approaches to improve products and services, and focus on staying lean and agile. [Source: Seduced By Success]
This is the dark side of success – this level of hubris frequently results in tragic outcomes as retail leaders believe themselves to be the only ones who know what is best. The result is that the emperor has no clothes. When leaders start to exist inside their own bubble of thought and action, listening to and hearing only what they want to [which is usually themselves], they cause damage to the business, to the people, to the culture, and to the customer experience.
CEO failures are more visible than they were 10 years ago – and they are usually available “on-demand”, in real time from a variety of perspectives via social media. Lackluster execution, poor communications skills, an abrasive, unreasonable and unrealistic management style and are some reasons for the demise of today’s CEOs:
- They Are Above The Truth: There are absolute truths in retail today. The customer experience needs to be tailored to the customer – they no longer have to adapt to our business. We must adapt and stay flexible to their needs/wants. When we excuse our inability to drive change and results to the bottom line – the truth of the matter is because we – lack the charisma, the credibility, or the strategy to do so. It’s not the customer’s fault. At the end of the day it is not the employees fault. It is the CEOs and the executive team’s responsibility to create a compelling vision and plan for the brand through both times of economic boom and bust.
- They Speak About Personal Accountability – But They Don’t Practice It: Just in the two examples with the CEO I shared earlier: There was no accountability. It was the customer’s decision to choose the other retailer as the “last man standing” inside that retail niche. From analysts perspectives there were other factors involved in the demise of that business that were owned by the CEO and the executive team:
- That business failed to turn a profit for several years;
- Management Missteps;
- Outsourcing the e-commerce business [instead of embracing this hugely important business to maintain relevance] – they rendered themselves obsolete by not embracing technology;
- Poor category management.
It is, in fact, the executives – starting with the CEO – who create and support company culture. This executive team – literally – placed that responsibility with the employees by stating “it’s not the party that was awful, it was the party-goers”. People are afraid for the future of the business. There have been layoffs and cut-backs. Placing the blame on the employees seemed extremely insensitive and demoralizing when they are hanging in there – hoping that their organization will find their footing in the evolving retail landscape and become healthy, fun, and important to their customer, once again.
- They Are Never Wrong: Just like Bill Gates said,”success is a lousy teacher”. Every good leader needs a strong sense of self-confidence, solid decision-making abilities and a team of trusted advisors. Despite those positives, problems arise when the CEO morphs into an all-knowing autocrat who believes they are the smartest person in the room. It’s our nature to seek information that reinforces pre-existing perceptions and supports our process. But not listening to or getting lost in their own ego they only know the facts and information they care to know and that is very dangerous – especially today. CEOs tend to be more susceptible to this flaw given their ability to create and control their own environment and the people that surround them. The issue is further exacerbated by support staff who finesse and dilute the data, trends and information the CEO needs to make the best decisions.
So now to sit back and wait. Wait to see if this is something the lenders or creditors can fix once they take possession of this company. Wait to see if the CEO lands a new job at another retail company with his closest associates that they will systematically destroy as they have done in the past and present. And finally, wait to see who is next to win, who are the new and innovative organizations who will capture our hearts and our dollars, and who is next to lose in the retail (r)evolution we are experiencing.