Vince Molinaro - Accountable Leaders

The leadership angle to this story is also interesting, for at the center of it all is CEO Edward Lampert, a successful hedge-fund manager with extensive experience in the retail world. He took over management of the retail chain in 2013. He launched a series of moves designed to both modernize the company’s operations and compete online while cutting overhead.

In addition to his vigorous restructuring plans, Lampert put nearly $1 billion of his own money on the line for the struggling company in loans or letters of credit. However, even that wasn’t enough to spare him from widespread criticism. The media regularly chastised him about his leadership style and the way he led the company.

He rarely made personal appearances at the company’s headquarters, preferring instead to do most of his work from a vast Florida estate. He would hold daily video conferences with Sears’ executives toiling in the company’s Illinois head office. He only traveled to the head office once a year for the annual shareholders meeting. The video conferences reportedly would get quite heated and emotional. Lampert defended his tone and approach to leadership as a way to “drive decision making and accountability at a more appropriate level.” Most would agree that this was a strange way to lead a company in the throes of gut-wrenching change. In 2016, Lampert was named the most hated CEO in America based on his employee rating on Glassdoor. 6

It would soon become clear that Sears was in a death spiral. In late 2018, Sears filed for bankruptcy protection in the United States. 7Then in early 2019, Lampert’s hedge fund bought the company for $5.2 billion, avoiding liquidation and allowing the company to keep some stores open and save an estimated 45,000 jobs. Lampert said he planned to step down as CEO, which he did. 8About a year later, he also stepped down as chairman.

In April of 2019, the company lodged a lawsuit against Lampert and a string of its high-profile past board members for allegedly stealing billions of dollars from the once-storied retailer. 9Unsecured creditors of Sears argued that Lampert was the cause of the company’s downfall, not its savior. They asserted that Lampert, along with some of the company’s most significant shareholders, unduly benefited from deals that occurred under Lampert’s watch. The lawsuit alleged that Lampert caused more than $2 billion of assets to be transferred to himself and other shareholders, putting those assets beyond the reach of Sears’ creditors.

Then in May 2019, Lampert asked a federal bankruptcy judge to release him from his obligation to compensate former Sears workers with an estimated $43 million in severance costs. 10Lampert argued that the company had not lived up to its obligation to sell him most of its assets. As a result, he believed he was not obligated to pay the severance costs.

In the end, Sears is a story of a once-great company unable to keep up with the ravages of gut-wrenching change in its industry—referred to by many as the “retail apocalypse.” Sears joined hundreds of other companies facing similar struggles. Like Sears, many would be unable to adapt to the forces that have shifted the industry’s landscape.

Many industry analysts assert that the claims of a retail apocalypse are overblown. While some companies have struggled and have gone bankrupt, many others are thriving in an industry that continues to grow. These analysts blame the demise of individual companies on poor leadership, not some external apocalypse. For many leaders, the world can appear to change right before their eyes. However, that isn’t really the case. Signs of change and even opportunity do arise, but leaders don’t always see them. Alternatively, by the time they do, it is too late. This points to the need for leaders to be both externally and future-focused to understand the world in which they lead. However, in practice, I find the opposite to be true. Many leaders are too internally focused, stuck in old thinking patterns or are simply too arrogant, believing their past success will drive future success.

Consider the example that comes from Blockbuster and Netflix. In his book That Will Never Work , Netflix co-founder Marc Randolph recounts the story of a meeting with Blockbuster senior brass. 11Netflix was struggling and in debt. After months of trying to get Blockbuster’s attention, they finally secured the ever-important meeting. Blockbuster could have bought Netflix for $50 million, but they chose not to. Blockbuster’s CEO, John Antioco, didn’t believe it was an idea worthy of consideration. You know how the story ended. Netflix went on to become widely successful. Blockbuster went bust.

As an accountable leader, leading in a time of significant change and even disruption requires you to understand what is happening in the world. How are CEOs currently thinking about the world in which they are leading? Let’s look at the findings from KPMG’s survey of nearly 1,300 global CEOs about their perspectives on leading their companies in today’s world. 12

Seventy-two percent of CEOs said that they believe the next three years will be more critical for their industry than the previous 50 years.

Sixty-nine percent of CEOs are concerned about the number of mission- critical business priorities they need to tackle with no prior experience.

Sixty-five percent worry about new entrants disrupting industry business models, and about half of the CEOs are concerned that their companies are not disrupting their own business models quickly enough.

As you look at some of these high-level findings, you might say they paint a grim picture. However, CEOs also expressed a high degree of optimism about their ability to succeed. As we will see later in this book, that attitude is vital for leaders during times of change and disruption. However, leaders will need more than a good dose of optimism because leading change is hard work.

For example, McKinsey found in their research that only 26 percent of senior executives surveyed believe their organizations’ efforts to transform are successful. 13Change and churn have always been a reality in the world of business. No surprise there—however, the pace of change is unrelenting today and is also affecting corporate longevity.

Research conducted by Innosight found that in 1965, corporations stayed on the S&P 500 Index for 33 years. 14By 1990, that number had drastically declined to 20 years, and it is forecast to shrink to 14 years by 2026. If that churn rate continues, they estimate that half of today’s S&P 500 companies will cease to exist in the next decade.

It’s not just companies experiencing churn. CEOs increasingly find themselves in the hot seat, and their shelf life is getting shorter and shorter. Heidrick and Struggles, a leading global search and leadership firm, found that the number of CEOs who exited from their organizations nearly tripled from 2001 to 2016. 15

No matter where you look, the story is the same—the world in which leaders are leading is getting more challenging than ever. Leaders need to deeply appreciate the context in which they lead because it matters—I believe now more than ever.

Harvard Business School professors Anthony J. Mayo and Nitin Nohria wrote a fascinating book called In Their Time: The Greatest Business Leaders of the Twentieth Century. 16In it, they chronicled the stories of some of the most successful business leaders of the twentieth century and found a close relationship between context and leadership. Based on their analysis of hundreds of leaders, they arrived at several key conclusions:

1 When it comes to leadership, context matters. In the end, long-term success comes down to awareness and sensitivity to context and business environment.