Lands' End CEO Pushed Out: Culture Eats Strategy For Lunch

The Wall Street Journal reported last week that Federica Marchionni was forced out as CEO of Lands’ End Inc. after only 19 months on the job.   The news did not surprise me given the faltering performance at the firm and the controversy surrounding her leadership.   Six months ago, I wrote a blog post about her effort to turn around Lands' End.   In that post, I referred to some comments by Columbia Professor Rita McGrath, who questioned whether the Lands' End scenario would unfold much like the situation at J.C. Penney when Ron Johnson tried unsuccessfully to engineer a turnaround.  I was particularly taken aback at the time by Marchionni's choice to work out of an office in New York, while only spending one week per month at the firm's headquarters in Wisconsin. At that time, the Wall Street Journal reported, "As part of her contract, the Lands’ End board agreed to let Ms. Marchionni work primarily from an office in New York’s garment district—an arrangement that rubbed some in Dodgeville the wrong way, according to former employees. Her employment agreement says she must be in Wisconsin for holiday parties and other social events that the Lands’ End CEO “historically has attended.” 

To me, the scenario at Lands' End reminded me of the old saying:  Culture eats strategy for lunch.  You can have a bold vision, but you will not succeed as a leader if you can't build buy-in and commitment from people throughout the organization.   How could working from an office halfway across the country have sounded like a sensible way to build support for her turnaround?   There's a bigger issue here though.  Like the J.C. Penney scenario with Ron Johnson, Marchionni did not spend sufficient time understanding the culture, building a coalition of supporters, and making people feel a sense of involvement and ownership with regard to the turnaround plan.   The best turnarounds involve people throughout the organization believing that it's their plan, not simply the CEO's plan.  Sometimes, the CEO has to set the organization on a new course.  Still, the CEO can consult with employees to determine the best way to make that shift, to execute those plans, and to achieve key goals and objectives.   You can tell them what to do differently, but still ask for their input as to how to implement that strategic shift.   

Lands' End: Another J.C. Penney Scenario?

Columbia Business School Professor Rita McGrath asks an interesting question on her blog this week. She ponders whether the situation unfolding at Lands' End may be eerily similar to the fiasco that took place at J.C. Penney when Ron Johnson was hired as CEO. She's commenting about a Wall Street Journal feature story about the culture clash taking place at Lands' End as new CEO Federica Marchionni attempts to revitalize the apparel retailer. The former Ferrari and Dolce & Gabbana executive has taken over as CEO of the Wisconsin-based retailer, and she's trying to make the brand more fashionable. She tells the Wall Street Journal that her goal "is to evolve Lands’ End into a meaningful, global lifestyle brand.”  The key question:  Can she reignite growth at the firm without alienating traditional customers as well as her long-tenured employees?  

Why has a culture clash emerged? For starters, Marchionni has decided not to work primarily from the corporate headquarters. The Wall Street Journal reports:

As part of her contract, the Lands’ End board agreed to let Ms. Marchionni work primarily from an office in New York’s garment district—an arrangement that rubbed some in Dodgeville the wrong way, according to former employees. Her employment agreement says she must be in Wisconsin for holiday parties and other social events that the Lands’ End CEO “historically has attended.”  Joining her in Manhattan is a small group of fashion veterans including Joseph Boitano, a former Saks executive who serves as the company’s chief merchandising and design officer.

Marchionni has also been critical of some of her own company's clothes, describing certain traditional Lands' End items as "ugly" in one presentation.   There are other changes that have made some waves:  

The CEO ordered up a slate of new ads to run in the September issue of Vogue and other fashion titles. She commissioned celebrity photographer Bruce Weber to shoot a major holiday campaign. The full-page newspaper and magazine inserts showed patrician-looking models in coastal settings. Spiked red heels now featured alongside comfy slip-on moccasins.

Professor McGrath acknowledges that Lands' End faces substantial challenges and needs to change.  She wonders, however, whether Marchionni can lead in a way that brings her people along.  Can she create an inclusive vision for the key employees?   Or, will culture eat her bold new strategy for lunch?  I don't know the answer to these questions, but I cannot imagine how leading a company from 1,000 miles away makes much sense.  It creates problems at two levels.  First, symbolically, it sends a message to employees that you don't want to engage with them, be available to them, etc.  Second, substantively, it isolates you from the rank-and-file, making it more difficult for critical information (including bad news) to reach you in a timely manner.  

It's Time for Sears to Sell Lands' End

Sears has been on a slow slide to extinction for some years, even decades.  Now we hear that Sears is considering the sale of its Lands' End business unit.  Well, it's about time.   Whenever we look at a corporate strategy, we have to ask the following question about each business unit:  Is it truly better off as part of this corporation, as opposed to being on its own or part of some other organizational arrangement?   In this case, you have to ask:  Does Lands' End benefit from being part of Sears?  Is it perhaps disadvantaged because it is part of a struggling retailer?  This article in Business Week makes a good case for why Sears should divest Lands' End.  Several good arguments can be made.  First, Lands' End could benefit from being a smaller, focused company with all attention focused on growing its online business (it already has a strong catalog business and a decent presence online).   Second, it would not be battling for capital within a larger corporation that has liquidity issues and clear capital constraints.   Third, the company may be able to attract more talent as a focused entity, as opposed to being part of a struggling giant such as Sears.  Does a young talented fashion merchandiser want to work for Sears?  Might they work for a Lands' End brand that is owned by a private equity firm instead?    Finally, Lands' End may actually be harmed because, as the article suggests, "Being close to Diehard batteries or Kenmore dryers doesn’t do much for an apparel line looking to burnish its fashion cred."