Best Buy’s CEO Succession Circus Continues
With alleged personal indiscretions, covert investigations and a founder’s potential meddling amid a crumbling business model, the search for Best Buy’s next CEO could make for a pretty good soap opera.
First, former CEO Brian Dunn resigned on April 12 under still mysterious conditions. The board is investigating whether he used Best Buy resources to carry on an inappropriate relationship with a younger female employee. But Best Buy was particularly criticized for not acknowledging the investigation into Mr. Dunn’s behavior until it received calls about it.
Some investors were then surprised to hear that it would take six to nine months to find a successor. Many expected a quicker hire.
"People question whether [management and the board] feel the urgency of the situation," Bradley Thomas, an analyst at Keybanc Capital Markets, told The Wall Street Journal. Recruiters also said not being able to immediately name a permanent CEO suggested either a lack of a succession plan or a lean existing executive bench.
That also leaves G. "Mike" Mikan, a former healthcare executive who is serving as interim CEO, to lead Best Buy’s efforts to reinvent the "big box" amid market share losses from the likes of Amazon, Apple and Walmart.
The plotline thickened earlier last week when reports surfaced that founder and chairman Richard Schulze was increasing his role with the company. The 71-year old, who handpicked the two CEOs who followed him and opted for insiders, could complicate the hunt for a new CEO, according to a Wall Street Journal report.
Last Friday, the board named a four-member committee to find the next CEO. The panel did not including Mr. Schulze. Promising an "open and transparent search process," Best Buy’s statement reiterated plans to post the CEO job opening on its website and disclose the name of the firm leading the search. Mr. Mikan was the only acknowledged internal candidate.
Best Buy also promised to release the results of its investigation of Mr. Dunn, which is being led by a former U.S. attorney and ex-enforcement director for the SEC. Mr. Dunn has yet to respond to the allegations.
Despite the distractions, Best Buy is expected to find a strong group of candidates eager to tackle the challenge. Pointing to how JC Penney was able to land Apple store’s former chief, Ron Johnson, David Nosal, CEO of executive search firm Nosal Partners, told the Minneapolis Star Tribune, "Best Buy is one of the most significant brands in retailing. Any candidate will have a significant opportunity to shape the brand for the future."
- Best Buy Board Appoints CEO Search Committee – Best Buy
- Best Buy’s Founder Not Part of CEO Search – The Wall Street Journal
- Founder Hovers at Best Buy – The Wall Street Journal
- Best Buy selects CEO search squad for Brian Dunn’s replacement – Los Angeles Times
- Best Buy opening up its CEO search – Minneapolis Star Tribune
- Best Buy to take 6-9 months to name new CEO – Reuters
Discussion Questions
Discussion Question: How would you evaluate the handling of Brian Dunn’s departure by the Best Buy board as well as its search for a new CEO?
The ironic part of this whole thing was that no one was surprised to hear that Mr. Dunn was being let go. The board really didn’t have to release information about the alleged indiscretions at all.
The board’s flailing a little, but ultimately has demonstrated a lot of patience (too much, maybe).
As for the founder getting involved — why is that surprising? It’s his “baby” after all. I can imagine he’s upset over the demolition of his brand. But not putting him on the search committee? Just bad taste really. It could have been handled more delicately.
How important is it to those leading the CEO search to find someone who can make a positive difference? As far as I know there is no performance review associated with CEO searches. Stock prices are hard to control, but the CEO is accountable for revenue growth and profit … usually. In this economy a little cost cutting can satisfy some of those who are looking for greater profitability, regardless of its impact on long term corporate growth.
We’re aghast when a new CEO comes aboard who we know will cause havoc and little, if any, upside advantage for the corporation. Often we on the outside have heard of this person and his (mostly male) reputation. Yet, the board chugs along.
Others on this panel will set me straight for sure, but I’ve often thought it’s about celebrity and charisma. Wow the board and wow, you’ve got the job.
Whether the new CEO succeeds or fails (success is better of course) the position looks good on his resume. When a CEO with negative impact on Home Depot is embraced by the Chrysler board (and he has no auto industry experience)… I have to believe it’s about charm and personality.
The Best Buy matter was handled in the worst possible manner. Nepotism appears to have ruled operations and board activities as well as BB’s selection processes and its ability to stay ahead of a fast-revising curve. If grades are appropriate, then a D-minus would be recorded.
But Best Buy is still a mighty dynamo that needs new electricity. And hope is everlasting. It needs a new leader who can provide leadership that will create new visions, values and ethics for BB. There will need to be some heartaches to get back into the swift current of change in their retailing world. May the right person to lead Best Buy into tomorrow be among the target sites of the searcher.
I am not sure that the board was wrong in not announcing the specifics concerning the investigation into Mr. Dunn’s resignation. It would depend, in my mind, on the significance of the evidence that the board has/had at the time of his resignation. If the evidence were circumstantial, it would be proper to contain any announcements until more substantial evidence were brought to light. At that point a more formal and complete announcement of the nature of the investigation would be appropriate.
In light of Best Buy’s performance in the marketplace and the importance of the CEO’s role in turning the business around, the board appears to me to be a little too casual in its approach to recruiting, vetting and hiring a replacement.
Look … large companies all seem to handle these kind of issues in the same way — basically badly. Just look at the investigations to date in the Walmart de Mexico scandal or any succession story where the founder still has a large say in what happens to the company he or she built.
The fact is, industry needs to make more effective use of crisis communication managers. It isn’t like corporate titans are the only ones in society that have illicit dalliances, but like politicians, they seem almost uniquely incapable of covering them up.
Big business generates big money and big power and power and money doth corrupt the soul. It isn’t just companies that think they are, “too big to fail,” it’s often corporate egos as well.
It’s past time for the Best Buy board to conduct an independent search without undue influence by its founding CEO. You can make a case that Best Buy needed a fresh pair of eyes before it hired Mr. Dunn in the first place. His failure probably had less to do with his ethical issues than the lack of a transformative vision.
I wouldn’t be so quick to forecast the demise of Best Buy, however. They are still the dominant big box player in their market segment (maybe the only player, outside of Apple) — and their PC business will get a lift this fall with the introduction of Windows 8, if history is any predictor. But the new CEO had better move the company forward to thrive five and ten years from now, even in the face of lightning changes in the consumer electronics business.
A mess like we have here needs some cleaning up first. This is what the banks and debt holders will insist on to the board of directors. There is a great deal of difference between the ax man and the magician, so we will see a few new leaders in the next few years, or a sell out if there isn’t enough money to weather the impending storms. But this is just my guess!
Richard hinted at the key issue; and that is “the new CEO had better move the company forward.” The problem in these hires is that they tend to happen in a vacuum. We look at track record, etc., but not at how they think. Does Best Buy need a big picture/explorative/transformation-capable CEO or a detail focused/problem solving/stick-to-the-kniting CEO?
The knee-jerk reaction is that both are needed — but you are not going to find all of that in one leader. And that’s where we have to face the fact that this is about LEADERSHIP — not merely about a leader. If indeed the senior leadership bench is weak then they have a lot bigger problem than finding a CEO. No CEO alone will move Best Buy forward.
A leadership team that has diversity in thinking and perspective and that can align all of Best Buy’s energy toward its highest possibilities, allowing different people to move to the front depending on what’s needed … will triumph. How likely is that to happen? That’s the key question.
Dirty laundry aired in public is never good — for the brand or investors. In time, the smell goes away. Very unfortunate for all concerned — Dunn was an inspirational leader and to be dragged through the mud is awful, but so are indiscretions if true. The new CEO will look forward and leave all this behind.
Dumb and Dumber. BB is clearly clueless regarding the implications to having their ship run without a captain. Putting the old captain back into place, just because he determined this was the best path, demonstrates poor decision making on the part of the board (who has to approve this), as well as a continuation of the misguided direction this company is taking. Find a great CEO at a relevant company and hire him away. Pay him well, and he will do wonders for the organization. Anything less than this will only accelerate BB’s demise. Do it right, do it now, do it right now.
Another major retailer going through another internal crisis. The sad part is that this is nothing new and we, as the general public, have become used to it.
My issue with the handling of this matter is the founder being left off the search committee. After all, it was his baby. There will be more bad news before we hear good news.
It is interesting that this discussion appears on the same day as the first discussion on the continued decline of the brick and mortar business model. It is clear that Best Buy has suffered significantly from the “showroom syndrome” and that they need to make long-term changes. RadioShack looks like a great elixir. By combining Best Buy’s purchasing and distribution with RadioShack’s local presence for walk-in service, it seems like a viable model that would save both organizations.
As far as the circumstances of Mr. Dunn’s departure, I guess the simplest answer is that we do not have enough information to really evaluate. If he used his position of authority to establish a personal relationship, I don’t think the company had any options. Beyond that, the varying shades of grey mean there is no “right” decision for past events. The decision simply has to be “What is the best choice for moving forward?”
There are two thoughts regarding the search for a successor. If the departure was as unexpected as it appears, there is plenty of time to make the choice. In an emergency, the first thing to ask yourself is “How much time do we have?” If a janitor quits, everyone will know the next day. The company will run fine without a CEO while the Board conducts a thorough search for the proper successor. I think the bigger concern must be how Best Buy is going to address the other discussion today and can they find a successor who will guide them through the transition to a new business model.
This is another circus being conducted by a group who doesn’t know what they are, where they want to go, or how they are going to get there. For years they have thought they had a winning formula (selection + decent pricing) only to find that they were basically Sears with a better location. Now their selection is average and they have no earthly idea who they are. I would strongly suggest that they concentrate all their efforts on developing their own line of high quality merchandise with their brand and ween themselves away from “National Brands.” If they actually hired someone with great customer service experience and built superior products and delivered them at great pricing they might stand a chance. Right now the smartest guy in the room is Brian Dunn — he got out!
If I’m a shareholder, I’m more interested in who they find than how long it takes. It takes as long as it takes to find the right person. Brian Dunn wasn’t running the entire company by himself. There is a solid management team that will continue to run things until then. Then pity the person that takes over a company that is in an extremely difficult competitive position.