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Fort Worth Star-Telegram, Texas, Mitchell Schnurman Column: Good News or Bad News First?

Posted on: Wednesday, 8 February 2006, 09:00 CST

By Mitchell Schnurman, Fort Worth Star-Telegram, Texas

Feb. 8--The CEO who answers his own phone isn't picking up these days.

It's sad to see Marvin Girouard ducking media calls, but what's there to say?

The chairman and chief executive of Pier 1 Imports has tried mightily to revive the company in the past year -- changing merchandise, creating new ad campaigns, adjusting store designs, adding catalogs.

But sales kept falling, the stock lost two-thirds of its value, and investing giant Warren Buffett dumped more than half his shares.

Recently, Pier 1's stock price has started to climb, but it's the ultimate good news-bad news story for top management. The stock is rising on speculation that Girouard is on the way out and Pier 1 could be sold.

Pier 1 won't comment on the items that first appeared in Barron's (about being takeover fodder) and the New York Post (about a search firm vetting CEO candidates). And Girouard, who'd typically squash such talk with a quick, candid call, won't get on the phone.

Events seem to be spinning beyond the CEO's control, and the sequence is reminiscent of how Girouard got the top job in the first place.

He had been passed over as Pier 1's chief more than once, but he bided his time as the No. 2 executive and heir apparent for a decade. When Clark Johnson, then 67, decided to delay his exit in 1998, Girouard took his case directly to the board.

A succession plan had already been approved, and he wasn't willing to wait any longer.

The Star-Telegram soon broke a story about Johnson's pending departure, and the public attention brought the issue to a head.

Johnson left as scheduled, but he offered faint praise at Girouard's coming-out party.

"We ought to give Marvin a hand," Johnson said at the annual meeting in which Girouard was elected CEO. "Marvin's gestation period as president was about the longest on record."

Girouard must have envisioned a more graceful transition for his successor, but he may get less say in the matter than Johnson.

Girouard turned 66 last summer -- retirement age for many -- but he has been almost defiant about naming a successor. He said he didn't want to create rivalries within a management team that had been together for decades.

I always figured he didn't want anyone pushing his exit, either.

But Girouard may have lost the chance to orchestrate his succession. Even six months ago, Girouard seemed secure, but sales have been declining for two years, and new initiatives have fallen short.

What Girouard has called a strength -- a management team that together has 165 years of experience at Pier 1 -- looks like a weakness.

The top seven executives seem too uniform in age and background, and too insular. As I wrote in October, they're all guys, too, puzzling, considering that Pier 1's customers are primarily women.

An outside leader would be a shock to the system, but an infusion may be needed. It's hard to imagine the market embracing a promotion from within; the natural question would be, "Why didn't this executive fix Pier 1 before?"

In the New York Post story, an analyst said investors had become disillusioned, so Pier 1 needs "to do something radical."

"Most turnaround people come from the outside," says John Slocum, who teaches management at Southern Methodist University. "You're trying to find a spark, a new sense of direction. They bring a sense of urgency that insiders can't match, because insiders have made too many side deals through the years."

Slocum sent me a preview of a new research article on succession, written by Yan Zhang and Nandini Rajagopalan. The researchers studied executive changes at 184 companies.

The most successful cases involved grooming an heir apparent for several years. The researchers said that approach provided on-the-job training, less disruption and allowed stakeholders to get familiar with the next leader.

That produced the best financial results, and it's similar to the path we've seen at RadioShack, Burlington Northern Santa Fe, Exxon Mobil and many others.

But the article also found that outsiders had a bigger impact if they were headed to companies in the midst of great instability. It cited Eastman Kodak, which recruited a former Hewlett-Packard star.

"In these contexts, the potential benefit of outsiders' novel strategic approaches may outweigh the costs of organizational disruption," the researchers wrote.

What does Pier 1 really need today: more continuity or a novel strategy?

Facing intense competition from above (Pottery Barn, Crate and Barrel) and below (Target, Wal-Mart), the old tricks aren't working anymore.

Girouard says Pier 1 stores have never looked better, which could be true.

But what matters is how they look against the competition.

A year ago, the big question at Pier 1 may have been CEO succession.

Today, it's the company's succession.

ONLINE: Pier 1, www.pier1.com

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Copyright (c) 2006, Fort Worth Star-Telegram, Texas

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Source: Fort Worth Star-Telegram (Fort Worth, Texas)

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