Management Turnover as Change Agent

Friday, November 21, 2008

Walmart defies market - then replaces CEO?

The world’s largest retailer, Walmart WMT (NYSE) who has managed to defy the ever widening worldwide slump in retail, announced today that its CEO since 1998, Lee Scott, will be stepping down and replaced by Mike Duke, the vice chairmanLee Scott of Wal-Mart International on February 1, 2009. Duke will immediately get a seat on the board. The surprise announcement comes as consumers have continued to shop at Walmart in the midst of possibly the worst recession in over fifty years. Walmart’s strategy for maintaining loBigChartsw prices has kept strapped consumers happy and abundant at their stores.

Scott, whose exit at this moment in time appears a bit odd, may have found a way to leave Walmart at the top of his game. Often times in the past he has served as a lightning rod for union and healthcare activists as well many others who have found fault with his management of the company. Another possible explanation might be a conflict with the chairman, Rob Walton. There is no way of telling. One thing for sure, unlike so many other large companies, Walmart has managed to put in place a succession plan that appears to make sense. Duke’s ascension to top has been praised by a number of retailing analysts and appears to make sense for the firm overall. In a Reuters story in the International Herald Tribune,

Analysts said the succession plan comes at a good time for Wal-Mart, which has lifted profits at the expense of rivals by persistently focusing on low prices.”I think it’s good. I’m happy to see it,” said Joseph Feldman, a retail analyst with Telsey Advisory Group in New York, of Duke, 58.

“It’s a little strange that Scott didn’t want to get through the holiday season” before announcing the transition, he said. “I don’t think it’s a sign that they’re going to have a lousy season.

“Feldman said that at the company’s analyst meeting in October, there was almost a sense Scott was saying farewell, and “finally had the upper hand over Wall Street.”

In a story by Chriss Burritt for Bloomberg there was more praise for Duke’s appointment.

“Duke seems to be the right pick,” Richard Hastings, a consumer strategist at Global Hunter Securities LLC of Newport, Beach, California. Internal promotions make sense, “especially those from the transport and logistics
Mike Duke
side of the business, the center of the company’s extraordinary power and competitive advantage.”

As it appears right now, Walmart should serve as a good example for other large companies on how to execute succession planning. Stay tuned as the U.S. and world economy try to find a path out the financial and now economic quagmire. Walmart has so far found a clear path for moving forward.

For more:

Financial Times


USA Today

NY Examiner

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