Leaders & Laggards – January 2017

“Ultimately, leaders are judged by what they leave behind.” – Muhtar Kent, CEO, Coca-Cola Company

Congrats, Muhtar, you’ve left behind a culture that appreciates the critical contribution that leadership makes to a company’s success. We salute you as this month’s Triangle Performance Leadership Leader.

Leadership Milquetoast

Steve Ells, Founder and CEO, Chipotle

Chipotle… Foodie’s version of Tex-Mex, or petulant adolescent?

A refresher for those living under or near a rock: A highly publicized E.coli outbreak sent Chipotle’s results in a tailspin around October 2015, followed by a norovirus problem in December of that same year. In total, six illness outbreaks. Since then, the stock has dropped nearly 50 percent.

Chipotle HAS done some good things to rebound: implementing cutting-edge food safety protocols, increasing third-party audits, and — supposedly — pushing hiring levels to ensure good customer service during these labor-intensive changes.

What they haven’t done, is simply step up and say “we screwed up, we’re sorry, and we’ll do better.” Chipotle’s founder and CEO Steve Ells has apologized, a couple of times (though only grudgingly for the norovirus fiasco), but what hasn’t occurred is accepting full accountability for making some serious mistakes. It’s not enough to say “I’m sorry.” Accountability means you also say “we made mistakes.” Real mistakes, and we’re trying to get better.

Mistakes happen; think Tylenol’s tampering, Toyota’s accelerators, Jet Blue’s cancelled flights.

The problem is how companies—executives—deal with mistakes, not the mistakes per se. And in this, Ells has screwed up royally. Since the E-coli debacle, here’s what he has blamed for Chipotle’s crappy financial performance:

1. Ells tried to saddle Monty Moran, Co-CEO for a time, for “not keeping it simple.”
2. The E-coli disaster caused customer service to slip. Wait, what??
3. Sick employees caused the outbreaks.
4. Higher wages.
5. The CDC caused it.
6. Sales promotions (necessary because of the snafu).
7. Media attention caused it.
8. Their tomato supplier.
9. British unfamiliarity with Mexican foods (seriously),
10. Their guacamole is too expensive (the most recent, and my personal favorite).

There are more, but you get the drift.

Here’s the real deal: Chipotle and Ells (sound like the show Rizzoli and Isles) have done many of the things necessary to fix their food safety problems. But they need to fix their customer problem, and that’s not just about food safety. If Ells could get that through his burrito beans, he’d be better off. Without accepting full, unqualified accountability, it’s a missed opportunity.

Until then, he—and Chipotle—are our Leadership Milquetoast.

Leadership Laggard

Terry Lundgren, CEO, Macy’s Inc.

Macy’s department store is laying off 10,000 employees in its continued effort to close 100+ stores.

Layoffs are almost always attributable to poor leadership. In fact, they are so ubiquitous that merely laying off employees — no matter how tragic — hardly rises to the occasion of being awarded our leadership laggard.

However, in this case Macy’s CEO Terry Lundgren managed to dodge his way into dubious honors.

It’s one thing to say that our business model needs tweaking. Or that our direction may need to shift based on demographics, spending patterns, buyer preferences, yada yada yada. It’s another thing altogether, Mr. Lundgren, to say ”I’m sorry, there’s nothing I could do about it.” And that’s exactly what he did.

Seems Mr. Lundgren would have us believe that all of retail suffered this most recent holiday season, and that Macy’s was simply one of many impacted by this terrible economic event.

Oops. It just ain’t so.

You see, retail sales are up by almost 4% in 2016 over 2015. And in fact, several retailers did quite well, posting respectable increases in sales during 2016 and the most recent holiday season.

Online sales continue to increase, this year by another 12%. Newsflash: this is not new. Brick-and-mortar stores have had plenty of notice that they must shift their model to address this changing buyer. Just because you failed to do so, doesn’t mean you get to blame your failure on the economy as a whole.

So, while layoffs are certainly nothing new, and retail has always been a cyclical, precarious environment, the fact remains that nationwide sales increased, many stores succeeded (think Amazon, Walmart, Target, etc.), and Macy’s continued decline is a tragedy of their own making.

Look, I’m no saint. I’ve had to lay off people, sometimes a lot of people, and that represents failure on my part and the part of my fellow leaders. Again, as I mentioned earlier, layoffs are generally the direct result of poor or misguided leadership. That’s bad enough, but a travesty occurs when that same leadership decides to dance a jig around exactly who or what is responsible for that decline in sales.

And to Terry Lundgren, regarding his “not my fault” stance, I say liar, liar pants on fire.

And bestow upon him this month’s Leadership Laggard.