What could Britain's new Prime Minister, Gordon Brown, learn from the way that Stuart Rose has led the recovery of another great British institution, retail giant Marks & Spencer?
You are about to become the leader of one of the best known organisations in the country – at a particularly challenging time.
Recent performance is poor, with customers defecting to competitors. Investors are uneasy and showing signs of losing confidence. There is a lack of clarity about what the brand really stands for, even though it has a high profile and evokes strong opinions. And all the time, key competitors are showing signs of becoming much more focused and effective.
Sounds familiar? This was the scenario which Stuart Rose stepped into, when he became CEO of UK retail giant, Marks & Spencer, in May 2004. To add further colour to the situation, one of Rose's first challenges was to fight off a hostile takeover from entrepreneur Philip Green, his long time sparring partner and rival.
To make matters worse, Marks & Spencer's Board was not particularly aligned, nor did its leadership team have the right mix of skills, knowledge and experience to enable the company to regain its long-held position as a market leader.
There could be fewer leadership roles in the private sector which attracted more attention. Marks & Spencer is a unique brand – almost a national institution. This goes some way to explain the emotions – both negative and positive - around its performance.
It is striking to remember that its lowest level, M&S profits were still £480m. Yet the share price plummeted. The media was full of articles ridiculing its shops, its products and its people, with much blame being heaped on remote, out of touch leadership
But at the same time, swathes of customers were asking themselves what they would do without M&S as their staple source of everyday products and supplies.
The parallels with the challenges that Gordon Brown is facing as Britain's new Prime Minister are striking. Rose became CEO three years ago and it took two years for recovery to take root. Results published on 22nd May 2007 show just how robust that recovery has been, in both business terms and in terms of confidence in the organisation.
Similarly, Gordon Brown has about two years before he needs to call and election. So could he usefully learn from the way in which Stuart Rose has led the recovery of M&S?
The Rose Way
Stuart Rose's leadership has been distinguished by a number of key features:
He was very deliberate in managing key stakeholder groups to buy time to create confidence in his ability to lead out of its difficulties. This was especially important in dealing with the takeover bid and creating reassurance for investors that an independent M&S under his leadership would create better returns.
He inspired confidence that he could create value. In rejecting the offer from Philip Green of £4 per share, he persuaded shareholders that the M&S share price would rise far beyond that point. Today, it is trading in excess of £6.
He was clear and decisive about the leadership team he needed. This included taking some tough decisions about the make-up of that team, making it smaller and more clearly accountable, but also paying attention to signals about leadership culture.
The plush headquarters at Barker Street, with all its hierarchical culture were swept away. At the same time as slimming down the top team, he simplified the management structure to make decision making faster, more accountable and transparent. Rose himself was regularly seen on the shop floor close to employees and customers - and he expected his team to do likewise
He immediately engaged with employees at all levels. A major side effect of the loss of confidence in M&S was low employee morale. This had a direct effect on the way in which they interacted with customers – stories of poor service from apathetic employees abounded.
Rose focused on re-building employee pride and commitment. But he was also ruthless in removing some long term employee perks which had grown to become rights. He introduced more professional, performance based contracts for staff which were designed to reinforce and reward behaviours which support organisational performance.
He took a personal interest in the product ranges and critical buying function of the organisation. M&S long believed that buying was a generic skill –that a buyer of cabbages could equally well buy ladies' fashions. But with buyers being rotated around different areas of the business, the result was that some key areas – notably clothing - lacked any coherence from season to season.
Rose fundamentally challenged this thinking and insisted that buyers became experts in their particular field.
At the same time, he embarked on a major revamp of stores, supply chain management and advertising. The results were striking. But above all, the success of these changes are founded on confidence and belief in Stuart Rose as a leader.
What lessons can Gordon Brown draw from this?
Leadership, credibility and integrity are the essential foundation. At critical stages of the M&S recovery, key stakeholder groups - from investors to shop-floor staff - based their decisions on their confidence in the personal leadership capabilities of Rose. His promises were realistic and he delivered – to the point that the City was begging him to use the word 'recovery' before he actually did so.
Strategic integration. Rose took action in every key area of the business. But each programme of work was integrated and everyone could see how it contributed to one coherent vision and strategy.
Be deliberate about the mix of skills and knowledge in the senior team. A key strength of the CEO is to understand what is needed to meet the total leadership challenge, including what skill sets and working approaches will best complement him or herself
Professional knowledge of operational excellence. A CEO needs to be able to scale their experience and expertise. Understanding how to lead implementation and what is needed for operational excellence is key. This should not be confused with micro management
Engage all levels of the organisation. Front line employees often have the best grasp of what is needed, what is working and what needs to be fixed. Thus the CEO needs to be connected at all levels of an organisation to ensure that everyone is part of the solution.
Rose simplified the organisational structure, cutting out layers of decision-making and focusing resources and the freedom to act towards the point of use. When the strategic integration is sound, this is freedom within a framework – and it always works!
Labour's support rating in the polls is trailing at about 30 per cent - can Brown inspire confidence that he can create value, as demonstrated through at least one headline measure – taking Labour's 'share price' back above 40 per cent?
