Some things are happening in big business this year that is way different than the normal modus operundi. Target chose Brian Cornell as its CEO, to replace Gregg Steinhafel. And, Sprint chose Marcello Claure to replace Dan Hesse.
Of course, Target has a few black eyes to treat. Not the least of which was the massive data theft (40 million credit- and debit-card accounts, plus some 70 million personal records were “lost” around Thanksgiving) that was not promptly reported to its customers or employees. Or, the terrible financial performance of the chain.
So they chose someone who came from PepsiCo (and Safeway, Sam’s Club and Michaels Stores- that last place that has thousands of my money because they make the frames that surround my art). Instead of hiring from within as they have forever, they chose the best they could find without. (Cornell may know food and consumer basics, but those are only small parts of Target’s business.) Target is not alone- because most consumer businesses only hire from within.
But, it’s a signal as well. Both inside the firm and out. It designates that the firm knows it needs a fresh perspective, one not wedded to the past, one that will move fast. But the data ( Ayse Karaevli and Edward Zajac, MIT Sloan Management Review) seem to indicate that insiders and outsiders perform about the same over the first three years. Unless the company is determined to grow quickly, is failing to achieve its objectives, or a wholesale management change is effected (multiple changes at the executive level).
(By the way, this is why we are normally brought in as CXO. Because we focus on the bottom line, looking to train the folks in the enterprise to achieve the desired results without wholesale management changes.)
The first two reasons why outsiders will do better clearly apply to Target. The security breach (failing to meet objectives), profits down over 18 months (in a row), and the need to take charge in the industry. But, a wholesale change in the executive team is not in the offing- yet.
Cornell will have to make decisions- quickly. For example, should Target abandon its Canadian foray? After all, they’ve lost $ 1.6 billion in less than 2 years there. And, Target’s internet presence barely makes a dent in its sales; with less than 2% of sales, it clearly doesn’t ‘click’.
Sprint also wants to show it means business, too. Having determined it was never going to take over T-Mobile, and losing money hand over fist for the past few years, its new owner (Masayoshi Son, who used to own ComDex) and the executive board terminated the CEO, Dan Hesse. They replaced him with someone who became a billionaire selling phones (Marcello Claure), but is not from the telecom industry per se. But, to be honest, what Sprint needs to do now is sell phone service to lots of folks.
Cornell and Claure better get cracking. They both may be starting today (this post is scheduled for 12 August)- but time’s awasting. Target needs a turnaround and Son won’t be funding more losses (they already lost $46.5 billion in the past few years).
If they do succeed, maybe it will start a trend. Many businesses will choose CEOs that have a new perspective for their firms- and really grow their businesses.
