Edit ModuleShow Tags

Job opening: Captain of a sinking ship


Published:

A recent Wall Street Journal article highlighted the challenge J. C. Penney, Target and American Eagle are having in recruiting new CEOs. They are all large, well-paying, prestigious jobs. Why is this a problem?

All three are experiencing significant declines. J. C. Penney recently fired its CEO, who had previously built the Apple stores into a powerhouse. Target’s CEO resigned with profits down $1 billion year over year and a security breach that affected millions of customers. American Eagle’s CEO left after two years with sales declining.

All of these companies are in for a tough future. The certainty of their business model is in question. In other words, they all need to dramatically shift their strategy.

Of course, there will likely be cost-cutting moves, product changes and management shake-ups. The business model changes will probably be “in the margin” and my guess is unsuccessful over the long run. Perhaps they’ll pare down the business to the point where long-term profitability is more certain.

Having served on numerous boards (but none as large as these companies), I’m quite certain that a prospective new CEO who proposes something radical such as shutting down many stores or running the business like a cash cow, sending the profits to the shareholders until there are none, would likely get thrown out of the interview.

So you have a sinking ship with no apparent way to plug the leak. How would you like that job?

There are a few examples of large public companies that consciously took a hard body blow and took a strategic hard right to fight another round. Netflix recently pulled this off and, famously, Gerstner did it at IBM, though they are now struggling for growth. But most of this occurs, although infrequently, in the private sector. It takes patient money and a management team with vision and tolerance to make the tough decisions for long-term survival while assuming short-term pain.

At this point, I’d like to tell you exactly what popular and painless action that J.C. Penney, Target and American Eagle should take – but there isn’t any. It is not about executing better. They must plan for significant change, and it’s more likely that they’ll disintegrate until they’re in tremendous pain and someone has a good idea and a supportive board to get through it.

When you’re driving toward a known hurricane, you have numerous options when you’re 10 miles out. A 15-degree turn might keep you safe. However, if you wait until it is bearing down upon you only divine intervention or luck will help. Prayer is recommended, but luck is not a strategy.

Edit Module
Todd Ordal

Todd Ordal is President of Applied Strategy LLC. Todd helps CEOs achieve better financial results, become more effective leaders and sleep easier at night. He speaks, writes, consults and advises on issues of strategy and leadership. Todd is a former CEO and has led teams as large as 7,000. Follow Todd on Twitter here. You can also find Todd at http://www.appliedstrategy.info,  303-527-0417 or todd@appliedstrategy.info

Get more of our current issue | Subscribe to the magazine | Get our Free e-newsletter

Edit ModuleShow Tags

Archive »Related Articles

Why you need to swim like a shark

I recently met with prospective clients. We had a great conversation and ended an hour and a half meeting with handshakes and a smile. After the meeting, I felt really great about our conversation and the caliber of the couple I had just met with.

How to say "Livin' the dream" -- and mean it

Ever notice how pretty much every time someone says those three little words, “Livin’ the dream,” it is in a dull, lifeless, tone and with more than a hint of sarcasm?

Millennials -- How will you be able to retire?

Here’s the good news: if you start saving now, you will more than likely have more money in retirement than the generation right in front of you, Generation X, who are busy playing catch up. Here are some goals to strive for to help you achieve a better financial future than you may have anticipated. Even implementing a few of these items will go a long way towards securing a strong retirement.
Edit ModuleShow Tags

Thanks for contributing to our community-- please keep your comments in good taste and appropriate for our business professional readers.

Add your comment: