New Walmart CEO Faces Desk Full of Challenges
Doug McMillon, the new CEO of Walmart, barely had time to find the water cooler this week before confronting a huge pile of challenges that awaited on the desk he inherited from retired chief Michael Duke. The transition illustrates a challenge common to most companies: markets and external forces never stand still and the volatile and chaotic times will demand more from boards and company leaders.
February 9 2014 by ChiefExecutive.net
Promoted from chief of international operations, McMillon took the helm of the world’s largest retailer as the company is, arguably, beset like never before by a variety of short- and long-term challenges. Some stem from its unique status in retailing, some from its corporate culture, and some from the sluggish economy. But they were all right there on McMillon’s first-day plate.
McMillon came in fighting. Walmart told the National Labor Relations Board that it is officially disputing the government’s complaint about the company’s treatment of employees who defied their employer in labor strikes on recent Black Fridays. Walmart contends that it was within its rights when it disciplined those workers.
Meanwhile, McMillon also must contend with a variety of top- and bottom-line afflictions at its Walmart and Sam’s Club stores. The company warned, for example, that cuts to the nation’s food-stamp program late last year will hurt its bottom line and that bad weather this winter has hurt its financial performance.
To some degree Walmart, like many successful companies, must always guard against the opium of its own success. For example, in 1980 the then towering retail giant Sears, in its marketing plans never mentioned Walmart as a competitor; yet by the end of that decade, Walmart had surpassed both Sears and Kmart to become the country’s largest retailer.
Analysts say that Walmart also is in need of a “brick-and-mortar” makeover by moving its stores closer to major population centers, shrinking the square footage of its superstores and shuttering about 100 underperforming U.S. locations, CNBC.com reported.
“High sustained transportation costs and broader consumable distribution appear to be reshaping consumer shopper behavior,” Credit Suisse analyst Michael Exstein said. “Walmart and Target have been slow to react thus far, but we think the broader trend will call for the rollout of smaller ‘big boxes.’”
Walmart does give McMillon plenty to work with, of course. The most important abiding advantage, besides its scale, is the fierce loyalty of the most important constituency: Walmart customers. The brand continues to dominate the discount category and inspire great loyalty, mediapost.com reported, despite the “love-hate relationship many people have with it,” according to Robert Passikoff, president of Brand Keys, which indexes loyalty to American brands.
McMillon also can be expected to try to leverage a new edge for Walmart over biggest rival Target, which is smarting from its massive Christmas-season customer-data breach and which, according to Brand Keys, was suffering some brand erosion anyway. Also in McMillon’s favor: Walmart’s enemies and weak points are of long standing and well understood.
Yet, McMillon also left some problems abroad when he came to the top job from being head of the company’s international division, whose newly appointed CEO is David Cheesewright. In Brazil, for instance, Wal-Mart faces higher-than-projected costs, a continuing threat from online retailers and a lackluster retail environment. Now it will be up to Cheesewrite, formerly the CEO of Walmart’s Europe, Middle East, Africa and Canadian divisions, to grow the Arkansas-based company’s global arm, which accounts for 30 percent of total revenue.
The transition at the world’s largest retailer also underscore’s the importance of something the company has not done at least visibly–align the board more closely. When one peers more deeply at examples of successful transition, one sees management and boards sharing more responsibility. If McMillon is shrewd he will draw upon the advice and input from his board much as Alan Mulally did at Ford, and what McNerney did at Boeing. It’s one thing to claim partnership between a CEO and a board, it’s quite another to navigate skillfully the knowledge and influence of the board to help a new CEO succeed while others flounder.