> "To boost “visibility and accountability,” Lampert explained in a letter to investors, he divided the company into more than 30 business units, including product-based divisions (apparel, tools, appliances), support functions (human resources, IT), brands (Kenmore appliances, Craftsman tools, DieHard batteries), and units focused on e-commerce and real estate. Under the new scheme, each business unit had its own president, chief marketing officer, board of directors, and, most important, its own profit-and-loss statement.
Large technology companies and industrial conglomerates such as General Electric also take a decentralized approach. But retailers tend to favor an integrated model. That way, different divisions can be compelled to make sacrifices, such as discounting goods, to attract shoppers to stores."
> "Former Sears executives say their biggest objection to Lampert’s model is that it discourages cooperation. “Organizations need a holistic strategy,” says Erik Rosenstrauch, former head of Sears’s DieHard unit, who is now CEO of Fuel Partnerships, a retail marketing agency. As the business unit leaders pursued individual profits, rivalries broke out. Former executives say they began to bring laptops with screen protectors to meetings so their colleagues couldn’t see what they were doing.
Appliance maker Kenmore is a widely recognized brand sold exclusively at Sears. Under SOAR, the appliances unit had to pay fees to the Kenmore unit. Because the appliances unit could make more money selling devices manufactured by outside brands, such as LG Electronics, it began giving Kenmore’s rivals more prominent placement in stores. A similar problem arose when Craftsman, Sears’s beloved tool brand, considered selling a tool with a battery made by DieHard, also owned by Sears. Craftsman didn’t want to pay extra royalties to DieHard, so the idea was quashed."
> "The bloodiest battles took place in the marketing meetings, where different units sent their CMOs to fight for space in the weekly circular. These sessions would often degenerate into screaming matches. Marketing chiefs would argue to the point of exhaustion. The result, former executives say, was a “Frankenstein” circular with incoherent product combinations (think screwdrivers being advertised next to lingerie)."
> "Eventually Lampert’s advisory committee instituted a bidding system, forcing the units to pay for space in the circular. This eliminated some of the infighting but created a new problem: The wealthier business units, such as appliances, could purchase more space. Two former business unit heads recall how, for the 2011 Mother’s Day circular, the sporting-goods unit purchased space on the cover for a product called a Doodle Bug minibike, popular with young boys."
> "In the weeks leading up to Black Friday in 2011, Sears discovered that some of its rivals planned to open on Thanksgiving at midnight. Sears executives knew they should open early, too, but couldn’t get all the business unit heads on board, according to former executives. (A Sears spokesman says the decision “was not contingent on the business unit structure.”) Instead, the stores opened early the following morning. One former vice president drove to the mall that night and watched families pack into rival stores. By the time Sears opened, he says, cars were leaving the parking lot."
I have personally not worked for a major retailer, but I have worked for a vendor to several major retail chains in North America.
It is certainly not the industry norm to have this kind of management and internal competition serve as a substitute for merchandising know-how. I think these quotes from the article speak for themselves.
The only way those decisions make sense to me is if you're purposely trying to kill a business while maintaining plausible deniability to pick it apart and leave the minority shareholders with nothing.
Which will be the reality for Sears. Lampert will blame everyone else, while ignoring his personal failings as a manager of a large retail business. Because, hey, his hedge fund made bank. And tacitly, that's his goal. Conflict of interest is written all over this.
"The team didn't execute. Oh well." While his decisions directly lead to ballooning costs (A couple years back I read how many units ended up with redundant accounting/HR/etc, sapping their budget for store presence), stores that feel lower rent than a rural flea market (the last time I was in a Sears it was a mess; this was in a major metro area), and the cheapest merch, that made Goodwill seem upscale.
They could also be ideologically driven. This seems like an attempt to run a company like a Randian free market utopia.
Unsurprisingly, it loses out to a well-ran, centrally managed, autocratic command economy, that fosters competition between different teams, and also, by force, compels co-operation between different departments.
The level of enforced organizational dysfunction described there is genuinely astonishing.
Competition has its place in a business, and that place is almost always exclusively sales. Trying to impose it upon other parts of an organization rarely ends well.
I was at Sears a few times recently since my daughter was working there as her first job. Her job was to keep the clothing nice but the problem was the hangers didn't have any divets on them to keep the clothes from sliding off, so her main job was to put everything back on the hangers as they fell off. She couldn't keep up. Often all of the employees would have to stay late to put the clothes back on the hangers. Also another thing I noticed is that checking out took 20 minutes because the process was really slow. I wanted to buy things but after the first couple of times waiting in line I just gave up the idea of buying anything. It is pretty obvious the CEO has never visited any of the stores.
Libertarians will now make themselves scarce. They will soon resurface with a complete revisionist history of ifs and buts to wash their hands off this latest disaster of their ideas in practice.
Meanwhile others will continue to pay the price for their delusional anti-social ideology.
I thought this was somewhat common.