Bob's Gutsy Leadership Blog

Sears: Ignoring What the Turnaround Icons Teach Us!

It was 2013 when the current CEO took over the leadership of the classic retailer Sears.  His task was to stop the share price decline; virtually a straight line from $120/share in 2007 to $45 when he took over in 2013.   Unfortunately, he has been unable to halt that decline and it is now fairly clear that Sears is on its way to bankruptcy.  It just announced it will be closing 100 more stores in 2018, and its stock price is currently in the $2.25 range.   Stepping back, you don’t find many examples of major companies who are in a severe negative spiral and then a new leader is able to turn the situation around.  This is an interesting topic, because we can learn valuable lessons from the very small number of successes that there are.  Here are the three that are the most significant over recent decades:

1.) Chrysler – In the early 1980’s Lee Iacocca became CEO of Chrysler, which was in a death spiral.  He quickly simplified the organization and introduced a wildly popular new model; the minivan.  By 1984, Chrysler’s business was thriving.  They had even paid off a big government loan.

2.) IBM – In 1993 IBM was heading toward bankruptcy.  Louis Gerstner was hired to save it and he went to work changing the corporate strategy from “selling IBM computers” to “helping our customers solve their IT related business challenges.”  He reorganized the company around IT services and by the mid 1990’s the company was growing and highly profitable again.

3.) Ford – In 2006, Ford was a mess; its cars were boring and the organization was fat and bureaucratic.  The board hired Boeing exec Alan Mulally as CEO and he quickly dismantled the consensus management practices, and delegated decision making to the individual product managers responsible for specific models (e.g., F150 pick-up, Explorer, etc.).  This led to some exciting products news which quickly put Ford back on track and profitable.

Stepping back from these examples, there are four characteristics that clearly emerge as the way to turn around a sick organization, or to further strengthen successful ones:

1.) Fresh talent – You need to reach for an experienced, objective, aggressive new leader who is not vested in the practices of the past and has successfully led major change efforts.  This person can come from either the inside or the outside, as long as they have the skills just mentioned.

2.) Develop the Plan for Success – This starts with extensive interviews inside and outside the organization, as well as detailed reviews of the marketplace, competition, technologies, and trends.  Then a plan for significant improvement is developed and launched.

3.) Simplify the Organization – Managers hire too many people, and with time, you end up with a bloated bureaucracy that complicates and slows down decision-making.  This has to be cleaned up quickly.

4.) Key Measures – A scorecard needs to be designed that enables the organization to see progress toward the achievement of the plan.  This also helps in signaling when course corrections in the plan need to be made.

Mulally, Gerstner, and Iacocca are the epitome of these characteristics; learn from them!

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