What Went Wrong At Sears? Organizational Ossification!

A Short Saga of Sears and Organizational Ossification

There seems to be a lot of discussion about “What Went Wrong with Sears?” these days. Below are some somewhat different thoughts.  The Three C’s, Culture, Customer, Change, are the alphabet of failure for the once mightiest, the most admired retailer in America.

Change and Customers could have been fixed … if only Ed Telling and Ed Brennan, the last of legacy Sears management, could change the Culture. They couldn’t.

My father headed up advertising, Department 732A, at Sears for many years. I grew up in the Sears family and knew many of the ‘actors’. Granted, I was a kid then … and yet even today… they all struck me then and now as good men and women who truly believed they were serving their customers, the American consumer, better than anyone else could.

 

Organizational Ossification

Sears Roebuck & Company

 

What Went Wrong? The 3 C’s of Failure

How we got here. Read the series: Culture, Customer Change. Again, the last Sears leadership team of Ed Telling and Ed Brennan were the last-best hope for the Sears organization. They might have fixed the issues of Customers and Change, if only they could change the Organizational Culture.

Organizational Ossification defined the Sears culture in those days. The merchants and store operators thought thatbelieved in their minds and hearts, that what was Sears, would forever be Sears … and that what worked in the past, would certainly work in the present and probably into the future. Yes … there were many strategic and tactical mistakes that ensued over the years … but perhaps no retail fix of any kind was possible because of the onset of terminal Organizational Ossification.

Organizational Ossification is not an oft used descriptor of organizational cultures, but perhaps it should be. Take for example the problems at AT&T. The New York Times published a great article on February 14th, 2016. Randall Stephenson is telling his legacy workforce that there is an urgent necessity to “… retool themselves, and you should not expect to stop.”

Howard Schultz, in a January 22 Business Insider article said: “… the seismic wave is coming to retailers soon, and retailers should get in front of the curve.”

Today, Eddie Lampert is doing the necessary work to unwind what’s left of Sears’s former assets, in my opinion. He is not a “Venture Capitalist”, he is a “Vulture Capitalist”.  Most of us would define a Vulture as ‘a large bird of prey with the head and neck more or less bare of mall-michaelfmcelroy_nytfeathers, feeding chiefly on carrion and reputed to gather with others in anticipation of the death of a sick or injured animal or person.’ But Vultures perform a vital service in nature … they clean up the mess. And that’s what Sears is today … a mess. In my opinion, Eddie Lampert will not rebuild Sears. He will, in an orderly fashion, dismantle Sears. And that’s probably OK.

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So let’s review:

What Went Wrong? The 3 C’s of Failure

  1. Culture
  2. Customer
  3. Change

In a series of earlier installments, I visited each of these individually. I am sure there are those of you will disagree and offer comments. That’s fine with me. Click the link below to start reading the previous installments: https://rl098.wordpress.com/2014/02/05/chasing-the-customer-sears-down-the-up-escalator-3/

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 Continuing … A Short History of the Sears Saga

For the better part of a century, Sears was the central warehouse for the American consumer. Sears buyers became the buying ‘agent’ for Americans. Time after time surveys confirmed that Sears was the most trusted economic institution in the county. It grew to be one of the seven or eight largest corporations in the world. Two out of three Americans shopped at Sears every three months and over half of American households carried a Sears’s credit card. Sears at that time employed over a half-million employees.

Side note: At one time Sears was the world’s largest mail order house. The only difference between Sears and Amazon is that Sears sold through a large paper catalogue and Amazon is digital. Yes warehousing technology and delivery technology, etc. is better today, but the basic model was the same. And clearly Sears was bright enough to evolved from paper to digital. But the culture married them to the mall … and essentially, Sears has never been able to change.

It was in the early 70’s, however, that Sears began to fall apart. Within five years, the icon of American commerce would appear to be so badly injured and so lacking in direction that it verged on paralysis. Everything seemed out of control.

What went wrong? Here is my opinion. It may be right or it may be wrong. It is my opinion! Walmart, Apple, RIM, Microsoft, Kroger, Macy’s, Nordstrom and yes Sears are at apparent cultural inflection points. What about legacy media companies like the New York Times, The Sun Times, The Chicago Tribune or broadcast TV, or even cable TV? Customer culture and technology are changing fast.  Some will survive. But who will survive? Are those changes occurring faster than management and organizational culture can adapt? Who is figuring it out and who is not? Will the lessons of the past produce guidance for the future? Perhaps this series will start you thinking about some contemporary situations too. That, after all, is the whole point.

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What Went Wrong? The 3 C’s of Failure

  1. Culture
  2. Customer
  3. Change

The first level of examination is Culture. For the purpose of this paper, I am defining Culture more specifically as organizational culture. However, organizational culture closely relates to and is influenced by the broader social and historical forces that create the context of an individual’s behavior. Each iteration of the definition of ‘culture’ ultimately translates into the ways in which each person behaves within an organization.

My friend and teacher, Harvard’s Dr. Harry Levinson, said of organizational culture, “The human landscape is made up of geography and atmosphere, personal psychology and social cross-currents, changing patterns and lasting perspectives. The art of executive management … is just able to keep pace with the changes presented by the larger world. Its greatest source of strength lies not in computer modeling or the use of econometric forecasts, helpful through these tools clearly are, but in the best use of human resources. The leader is the one who can use the resources, but in order to use them well he or she must understand them.”

My short definition is that the role and responsibility of leadership and management in developing an organizational culture, after considering everything, is ─ the organization of talent.

In the late 60’s America was changing, the customer, overall culture and market was in flux and so was the culture of Sears. The once fluid, interlocking forces of the Field (stores) and Tower (headquarters) were now stuck between two fundamental principles of human organizational culture. Sears culture split into two powerful and competing liberal political traditions similar to the split that still exists and defines the broader cultural perspectives present in our American society today:

British political philosophers Hume, Adam Smith and Burke held that the basic function of government was simply to provide a framework within which the creative dynamism of all of the people would be free to operate. Good results would emerge spontaneously only if a limited government simply maintained the rules of the game. [The original Sears or ‘centrifugal’ model.]

Voltaire, Rousseau, and Descartes represented the European continental vision that believed that man could by reason and design lay out a blueprint of action. It followed that top-down control could and should be used to achieve and implement what pure reason, logic and applied intellect declared to be good. [Sear’s ‘new’ centralized command and control or ‘centripetal’ model.]

The ‘Centrifugal’ forces, the old regional decentralized business model, were now aligned against the new ‘Centripetal’, or the new centralized command and control strategy forces within Sears. Both sides were preparing and ─ willing to fight.

It would be up to Edward R Telling and Ed Brennan, as Sears senior leadership, to try to fix what many thought was un-fixable ─ the divergent cultures of Sears Roebuck and Company. Telling tried an acquisition strategy, but he did not buy retail, he bought financial services, Dean Whitter and real estate, Coldwell Banker. Brennan tried a centralized buying, merchandising and marketing strategy. Brennan even hired Michael Porter of Harvard and Competitive Strategy fame to develop a plan … which lasted a few short weeks before it had to be pulled.

By the end of Ed Brennan’s Chairmanship, it was obvious … the resuscitation and rescue plan … it didn’t work!

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