“If we don’t learn from history we’ll repeat the same mistakes.”
That’s an annoying phrase but in the case of Marks & Spencer it seems very appropriate.
You can’t have failed to notice that M&S has appointed a new chief executive and terms have finally been agreed with him. Marc Bolland will start on 1 May and will be paid a base salary of £975,000. Not excessive you might think except that there are six other components to his remuneration package which could mean that he receives £14.8m in his first year. This is quite a staggering amount for someone who until he joined Morrisons, had never worked in retail and who at Morrisons hasn’t had any experience of non-food retailing, which makes up the bulk of M&S revenues.
So, how did the board of M&S get to a situation where they have had the same CEO and then Executive Chairman for six years but haven’t got around to grooming one of their 75,000 employees to take over? If they had, they might find that they didn’t need to pay £15m to Stuart Rose’s successor. What does it also say about Sir Stuart Rose that he hasn’t been developing his executive team for the top job?
In any Chief Executive role, whether M&S or running your own small business, leadership skills are usually the most important characteristic of success. Every CEO should have as one of their objectives that they develop their successor and infact in good companies there will be two or even three potential successors who are then motivated to perform strongly with the hope of getting the top job. In smaller owner-managed businesses of course, the good Chief Executive develops the management team so as to make the company less reliant on him/herself which in turn makes the business more saleable at some point in the future.
In a business like M&S which has a board of directors of the great and good, how could the succession issue never have been addressed in all that time? Especially as M&S had been here before; Stuart Rose himself had been parachuted in during 2004 replacing internally-sourced CEO Roger Holmes, who clearly wasn’t the man for the job but had got the role anyway. Poor Mr Holmes was probably the least bad person for the CEO role at that time and might have muddled through had it not been for the hostile bid from Philip Green, at which point everyone recognised that he wasn’t the right person for the job after all. Stuart Rose came to the rescue having been snubbed for the CEO role previously as the M&S board obviously thought they had it covered when they didn’t.
What does this say about how large company boards operate? Well, its not an encouraging sign especially after the debacles of poor board performance at other companies over the last year or two such as Northern Rock and RBS. What does it mean for owner-managed businesses in Enterprise Britain? Probably too much to go into detail in this column but it raises questions you should ask about how effective your board is and whether your board members add value and have accountability (yes even the non-execs!) and whether you are building a strong management team and developing your high-flyers. Because if these things aren’t happening then sooner or later, like M&S shareholders, you may end up paying a hefty price to compensate for those failings.