Leaders & Laggards September 2016

Leadership Leader

Arnold Palmer, a Leader’s Leader.

arnold-palmerI was an Arnie fan. A soldier in Arnie’s Army and damned proud of it. When I grew up, you affiliated with a particular golfer; Jack Nicklaus if you were textbook methodical (Mack, in my H.S. golf team), Gary Player if you leaned toward the flamboyant; Lee Trevino if you were a hustler; and Arnold Palmer if you swung hard, took risks and left everything on the course when you played. You led. Hard.

I was in the Arnie camp. “You swing out of your shoes,” they often told me. I didn’t care. Hell, even today I have trouble laying up for par 5’s. The rewards, when I actually connected, were worth it. And besides… Arnie did it. I only started golfing because of Arnold Palmer. The King.

golf-clubsMy first set of clubs was an old, worn set of Tru-Matics by Arnold Palmer. 1-9 iron (yes, a 1-iron). Three woods (real persimmon—remember, I’m old), and a beat up full-size cart bag that I had to lug around. I started playing golf when I was 12, didn’t ride in a cart until I was 16, so that big, honkin’ bag was a chore.

Humble and plain-spoken, I met him once in 1994 as a guest of a friend at Latrobe, Arnie’s course in Pennsylvania. He was playing in the group ahead of us, but took all the time in the world to speak, shake hands, and cut a joke or two. He seemed a giant, even then.

Yes, Arnie was a helluva golfer. The best ever, as far as I’m concerned. He won the U.S. Amateur, 92 events on multiple tours, and seven major tournaments, including four at the Master’s, two at the British Open (Brits like to call it The Open), and once at the U.S. Open. He won a tournament every year for 17 consecutive years. No question, the man owned the links. But I consider Arnie the best, and a real Leader, because he was so much bigger than just a golfer.

arnold-palmer-centerThe man (and his wife, Winnie) lent their name and provided funding, leadership and support to the Arnold Palmer Medical Center, the largest facility dedicated to children and women in the United States. The Center is comprised of the Winnie Palmer Hospital for Women & Babies and the Arnold Palmer Hospital for Children.

arnold-palmer2He provided financial and public support to so many more organizations. The list is long. He put his money, name and time where it needed to be, and simply did what he could. Because it was the right thing. And he did so with humility, dignity, respect and extraordinary generosity.

When recently asked in an interview to advise current golf stars, he said, “Generosity and work. Always be generous and appreciate what you have.” When asked in that same interview to name his proudest moments, he didn’t speak of the tournaments won, or the medals received by Presidents Bush and Obama. He said simply “I think of the charities and the results that I’ve seen, that’s very gratifying.”

He was an icon, a legend, and a Leader. A real one. He was, and will remain, The King.

This month’s Leadership Leader. Arnie, you will be missed.

arnold-palmer3

September 10, 1929 – September 25, 2016

Leadership Milquetoast

What exactly is Eddie Lampert, Chairman and CEO of Sears Holding Corp, trying to do to Sears and Kmart? Did he learn nothing at Yale about Montgomery Wards? He must have missed that case study.

kmart“Insanity: doing the same thing over and over again and expecting different results.” Albert Einstein
In brief, Lampert brought (or bought) Kmart out of bankruptcy in 2003 through his hedge fund, ESL Investments.

Within two years, he bought Sears and combined the two companies to createsearsSears Holding Corporation (SHC) and became the company’s first Chairman.

As Chairman and CEO of SHC’s majority stockholder, ESL Investments, Lampert oversaw the closure of thousands of stores and year-after-year stock repurchases to dry up billions of dollars (like $7.5B) in cash… all without making significant capital investments in surviving Sears and Kmart stores (which nobody likes going to anymore). Winner: Lampert as the majority stockholder.

lambertWhat’s wrong with that, since Lambert, a former Goldman-Sachs whiz kid – which means he knows exactly how to wring every investment dollar out of a company – believes that retail isn’t about selling, it’s about being profitable.

The Sears and Kmart team has seen falling sales revenue every year since 2006, and its stock has lost nearly 90% of its value in the same period (~60% in the past 12 months alone). But that doesn’t mean it wasn’t profitable, right?

Right, because since Lampert took over as CEO in 2013, he’s spun off Land’s End and set up a real estate investment trust to take over SHC’s real properties, offsetting operating losses with proceeds from the spinoffs. Did I mention he’s the Chairman of the REIT, too?

ESL is making money, Seritage (the REIT) is making money (remember, REIT’s pay no corporate taxes), and the shareholders are getting dividends. Looks like Lampert wins all the way around, unless you consider him a failure at leading the 160,000+ demoralized employees anxious about their futures. And unless this precarious house of cards implodes, which seems increasingly likely.

Now Sears is talking about spinning off the Kenmore, Craftsman and Diehard lines… though since we can get all of that stuff on the internet, I’m not sure of the point. His recent purchase of $700M of Sears debt and $300M loan ensures he’ll get paid back before the bankruptcy judge gives the stockholders squat.

Hey Eddie – your company needs a leader, not a liquidator. It’s difficult to see a path forward with $5.5B in debt and operating losses nearing $2B annually. I wasn’t a math major in school, but I do own a calculator.

Weak leadership (or an intentional Gordon Gekko impersonation) may have doomed another company that survived two world wars and the Great Depression. Maybe a better question is: “How long will the Board sit idly by and watch Lampert drain the last bit of money and hope out of the company?”

sears-holdingsWe’re going to give Fast Eddie — and the Board of SHC — a chance to reverse course as this month’s Leadership Milquetoast, but when the billionaire investment banker pushes the company to bankruptcy, you can count on an ‘I told you so’ with that month’s Laggard award.

Leadership Laggard

john-stumpf_155x198Culture starts at the top. So does accountability.

Wells Fargo Chairman and CEO John Stumpf’s protestations that the two million (2,099,713 to be specific) fraudulent bank and credit card accounts created over the last five years were the work of individual rogue employees – some 5,300 of them – are laughable.

And if Stumpf thinks anyone believed his “If I Could Turn Back Time” apology in front of Congress, he’s delusional. It’s exactly the kind of “apology that isn’t” that normally wins a Milquetoast award, but that’s not good enough this month.

After all, the dots aren’t hard to connect: years of lawsuits and investigations point to systematic fraud against Wells Fargo customers, encouraged (and expected) by management at the local and regional levels. Only a fool or the very naïve would believe that senior leadership wasn’t aware.

Stumpf says, “There was no incentive to do bad things.” I’m calling bullshit…

wf-logoThe numbers are staggering. TWO MILLION fraudulent accounts. That means nearly four hundred accounts apiece for the 5,300 rogue employees. Either their management was incompetently unaware of their activities or they were complicit. I believe it closely approaches criminal behavior.

If an employee knowingly breaks the rules, you have a behavior problem. If thousands of employees are knowingly breaking the rules, you have a leadership problem. Imagine that in your company, your division fires three employees for wrong doing every single day for five straight years. Seem excessive? Maybe gets someone’s attention?

At Wells Fargo, the head of community banking should have noticed. Stumpf used to be the Community Banking EVP, so he’s familiar with how that works. That’s why he praised the outgoing EVP for her selfless dedication (she’s the “standard-bearer of our culture”) and sent her into retirement with a $125 million bonus. Added to the other senior leadership bonuses, that ought to just about cover the $185 million settlement with the government.

The “standard-bearer of our culture?” A failed leadership culture, to be sure.

The CEO, COO, CFO and Community Banking EVP have a combined 100 years at Wells Fargo. Maybe it’s time for a little chlorine in that gene pool.

A CEO blaming the employees for his bank’s unethical behavior is an insult to his customers and the institution. And it’s a leadership failure that earned John Stumpf Triangle’s Leadership Laggard for Sep 2016.

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