Friday, February 19, 2016

The Decline of Sears

I've been saying for years now that Sears is doomed to fail.  I just don't see light at the end of the tunnel.  The company's revenues have been dropping for years.  Multiple restructurings have attempted to pare costs, but none of these moves have recharged sales.  Adam Hartung has a good article for Forbes about the reasons for the decline under CEO Ed Lampert.   Two of the reasons cited by Hartung are: "micromanagement in lieu of strategy" and "seeking confirmation rather than disagreement."   For more on the latter point, here's an excerpt from Hartung's article:

Seeking confirmation rather than disagreement. Mr. Lampert had no time for staff who did not see things his way. Mr. Lampert wanted his management team to agree with him – to confirm his Beliefs, Interpretations, Assumptions and Strategies — to believe his BIAS. By seeking managers who would confirm his views, and execute rather than disagree, Mr. Lampert had no one offering alternative data, interpretations, strategies or tactics. And, as Mr. Lampert’s plans kept faltering it led to a revolving door of managers. Leaders came and went in a year or two, blamed for failures that originated at the Chairman’s doorstep. By forcing agreement, rather than disagreement and dialogue, Sears lacked options or alternatives, and the company had no chance of turning around.

I would one other key point to Hartung's insightful analysis.  The Sears decline began long before Lampert took over.  Yes, he has mismanaged the retailer and accelerated its fall toward bankruptcy. However, in many ways, the crisis at Sears stretches back decades.  Harvard Business School Professor Jay Lorsch has said that gradual crises are often much more dangerous than sudden crises. When a sudden jolt occurs, firms often mobilize resources and attack the problem with a sense of urgency.  However, when a decline occurs over many years, beginning with small decreases in performance, managers often find ways to rationalize the diminishing results.  Denial sets in during these crises that unfold over lengthy periods of time.  Sears seems the perfect example of what Lorsch calls gradual crises.  


Mike said...

There is a broken link in your article, beginning at
Adam Hartung has a good article for Forbes about the reasons for the decline under CEO Ed Lampert.

That Kmart, Sears, Macy's, JC Penny, maybe Kohl, maybe even Walmart are faltering isn't rocket science. What should have Sears seen as triggers and what should have Sears done in response?

IMHO, Sears is a series of problems, not all of them related and not all of them something Sears could have addressed. The latest is - of course - on-line sales are causing in store failures.

In prior decades, Sears suffered from being not-hip-enough. Product quality is pretty bad at Sears and employee training is awful. But you may have deep insight that comes from spreadsheets.

Was the problem that they were carrying store locations that were no longer shopper destinations? Was the problem too many employees at the wrong stores? What exactly was their problem.

Lee M said...

Thank you for a graciously phrased exploration of the long, slow ebbing of the Sears business.

Peter Drucker did a review of the economic performance of a large group of American businesses for a time frame from the end of WW II to some date 30 or 40 years later. (I have yet to look up the specific Drucker book in the library. I mean to.)

I seem to recall Mr. Drucker explored the question "Do business have a limited lifetime?" and I do not recall how he resolved that conjecture.

I wonder how that whole group of businesses, including Sears, would measure if the end date was moved towards 2016?

In the 1950's my Dad (a proprietor of a machine shop in Los Angeles, started after WWII) told stories about the predatory acquisitive hardball business practices of Sears in the 1930's as the firm engulfed or muscled aside small speciality manufacturers.

I think a key to understanding Sears' decline is revealed by speaking of Sears in the past tense: It's market was the post WWII home owner, it's market was the '20's farm family.

Here is a puzzle for business management. Sears had a growth strategy that has shaped the entire American consumer product landscape. Now that the benefits from it's decades of expansion and growth are diminishing, why does becoming smaller boil down to loss of working capital and then bankruptcy?

Michael Roberto said...

I have fixed the broken link on this post.