The Real Reason Behind the Change in CEO at Lego

The Lego Group is bringing on its second CEO in eight months, citing a sooner-than-expected opportunity to appoint its ideal candidate.

Lego says its current CEO, 61-year-old British businessman Bali Padda, understood from the beginning that he would only do the job for a few years at most because of his age. But the sudden change-up has raised some speculation. The Danish toymaker is replacing Padda—the first non-Dane to lead Lego in in its 85-year history—with a Danish executive who is 10 years Padda’s junior. Padda has been with Lego since 2002 and is credited with transforming the company’s supply chain. Lego maintains that it still holds Padda in high esteem, and that the move is simply because the right person became available at an earlier time.

Niels Christiansen

Lego Executive Chairman Jørgen Vig Knudstorp—who served as chief executive for 12 years until December 2016—told the Financial Times that Padda’s short tenure was not due to his performance, but rather because of his age and the realization that he could only do the job for a few more years. After a transition period, Padda will become a special advisor to the Lego Brand Group, which is exploring opportunities to diversify the brand away from toys.

“It isn’t a [humiliation]. He definitely [has] not disappointed us. Bali knew that I would immediately look for a successor,” Knudstorp said. “Both Bali and I thought it would take a long time as it’s not a trivial matter. It was just very fortunate that, relatively early, we found the right person.”

“Christiansen has a solid rooting in Danish values, where you have authority because you are a competent, credible and authentic leader, not because you are a boss who sits at the end of a table and smokes big cigars.”

Until June, Christiansen was CEO of Danish industrial manufacturer Danfoss, which he led for nine years. Knudstorp told British newspaper The Times that “when Niels stepped down at Danfoss, I faced one of the country’s absolute best persons to lead a global company. I suddenly saw a chance to shorten the process.”

Knudstorp said that while it was not essential to have a Dane lead Lego, it was important for the CEO to understand the country. “[Christiansen] has a solid rooting in Danish values, where you have authority because you are a competent, credible and authentic leader, not because you are the boss who sits at the end of the table and smokes big cigars.”

David Robertson, a Lego scholar, author and senior lecturer at the MIT Sloan School of Management, questions the circumstances of the abrupt leadership change. “We’re told this is a normal transformation, but having someone as CEO for eight months isn’t a normal or expected thing to do,” Robertson says.

Alternately, the reason for the transition could be as simple as timing, Robertson says. “Maybe another company called [Christiansen] and said, ‘We’d really like you to be CEO,’ and he called Lego and said, ‘Look, it’s now or never.’ So they had the guy they wanted sooner than they thought,” he says. “That’s a very likely scenario, and I think we’ll find out sooner or later which one it was.”

Christiansen, who takes the helm Oct. 1, comes in at a time of slowed growth after more than a decade of revenue increases in which Lego nearly overtook Mattel as the world’s largest toy maker.

At the same time, Lego is in the midst of some unprecedented opportunities to boost its sales of bricks this year, including two feature-length theatrical movies—“The Lego Batman Movie” and “The Lego Ninjago Movie.” Lego also is enhancing its retail experience through its Legoland Discovery Centres, mini theme parks that are popping up throughout the United States and parts of Europe.

Looking ahead to the next decade, Lego will have to determine whether to invest in adding digital and virtual-play experiences, versus expanding its theme park and movie efforts. “I think Lego has some big strategic decisions to make,” Robertson says. “Those are two very different directions, and so far it’s the second one.”

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Autumn Cafiero Giusti
Autumn Cafiero Giusti is a veteran business writer and editor specializing in global payments, e-commerce and personal finance. She is based in New Orleans.

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