Monday, September 25, 2017

Sainsbury’s new CEO latest victim of a ‘hospital pass’?

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Much has been written about the so-called ‘hospital pass’ that Sir Terry Leahy gave to Philip Clarke when he took over from him as Tesco CEO in 2011 – a tenure that recently ended prematurely. And now that Justin King has stepped down as Sainsbury’s CEO to be replaced by Mike Coupe, it is yet to be seen whether history is about to repeat itself.

In the football or rugby world a ‘hospital pass’ is one that subjects the receiver of the pass to unavoidable harmful contact. The player’s chances of getting the pass are small, while the chances of them being injured by the opposition in the process are high. And for Clarke, the odds were strongly stacked against him from the start.

He was passed a dangerous ball. Tesco had significantly over-invested internationally, while under-investing in the UK core business. In spite of much effort and good execution on his part, Clarke ended up failing and will be replaced in October amidst the worst trading performance recorded at Tesco in many years.

Now Sainsbury’s also has a new CEO, Mike Coupe. He could well be a great choice. When business strategy is more about sustaining success (Sainbury’s now) than turnaround (Tesco under Clarke), it’s ideal to recruit from within as you are getting someone who knows the business well. In spite of market challenges, there is no need for Coupe to fundamentally change the direction of business. It is more a case of evolution than the revolution required at Tesco.

Despite this, Coupe faces an almost impossible challenge. The situation could quickly prove to have been a hospital pass all along – and here are five reasons why:

  1. The Market forces now vs. Market forces then Coupe has been handed a very challenging set of ‘current market’ cards, more challenging than the cards his predecessor had. There is huge structural change going on in the industry with the dynamics of online, the discounters, and with consumer demand being very low. Working out a strategy that continues to fuel impressive and consistent growth will not be easy.

  2. Sustaining success vs. Turnaround Turning around a business is not easy, but if you have the right insight, good experience and the confidence – as Justin did – it is achievable. It is much, much harder however to continue to impress once a business has been turned around. It is even harder to continue to impress after nine years of consistent growth. Revolution, when it works, is also distinctly more inspiring and headline grabbing, than the kind of evolution that is likely to occur in Sainsbury’s next phase.

  3. The personality comparison King’s personality was a big one and an appealing one. He was outgoing, an excellent communicator, an extrovert with an affable personality and a natural leader. His tenure climaxed during the London2012 era when everything in the UK was great. His style inspired the confidence and trust of key stakeholders. And of course, Coupe will always be compared to King. Even though Coupe is a decent and highly respected person, he’s more down-to-earth, straightforward, calm, intelligent, more serious and more low-key. The question is, when the going gets really tough, will the key stakeholders continue to have faith in Coupe’s style? And will he be able to rally the troops with a more low-key approach?

  4. It’s hard to follow a hero King’s tenure was a fairy tale, where King played the hero role. He’s been admired, even revered for what he’s achieved over a long period. It’s not just about the success that he delivered, or natural outgoing leadership style, it’s about the pedestal that he’s been put on. Even though Coupe has played a pivotal role in the recovery of Sainsbury’s during King’s tenure, as CEO it is King who’s received the acclaim. And it goes without saying that it’s tough to follow a hero. There is a vacuum that is hard to fill and whoever came next would ‘not

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