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Managing the Transition

The apparel and retail industries are expert at outsourcing products, but they still haven't gotten the knack of importing top management.

NEW YORK — The apparel and retail industries have become expert at outsourcing their products, but they still haven’t quite gotten the knack of importing top management from other industries.

The most recent addition to the crossover casualty list was William Perez, who resigned as chief executive officer of Nike Inc. in January after just 13 months of trying to fill the sizable running shoes of chairman and founder Phil Knight.

Outplacement into the fashion business has been problematic for a long lineup of otherwise successful executives. Phil Marineau has struggled to get Levi Strauss & Co. back on track since 1999, after success at Pepsi-Cola North America and Quaker Oats. The jury is still out on Paul Pressler, Gap Inc.’s ceo, but the firm’s stronger balance sheet has been undercut by weak same-store sales in recent months — a far cry from his fast break to profitability at The Walt Disney Cos.

Observers are now focused on how Steve Sadove, formerly of General Foods and Bristol-Myers Squibb, will do in his stint as the ceo of the downsized Saks Inc., and whether Edward Lampert can transform Sears and Kmart in his multiple role as ceo, head merchant and largest stockholder of Sears Holdings Corp.

History suggests they all have their work cut out for them. Kenneth Wasik, director of the consumer products group for the Houlihan Lokey Howard & Zukin consulting firm, noted there is a high degree of executive transferability among the food, consumer electronics, lawn and garden and do-it-yourself businesses, to name just a few, but not into the highly visual, tactile world of fashion.

“Fashion is risky,” he said. “Getting a shirt on the fixture at Saks is a lot different than putting a can of cat food on the shelf at D’Agostino. And the skills that make a good fashion executive today, like international sourcing, are changing, and so is the balance of power, in the direction of the retailer.”

New ceo’s generally arrive at apparel and retail firms for one of two reasons: either the company is in trouble, or a long-time executive is stepping down. In the latter situation, Paul Charron, who will retire at the end of the year as chairman and ceo of Liz Claiborne Inc., succeeded founding partner Art Ortenberg 12 years ago and transformed Claiborne into a diversified group. Peter Boneparth at Jones Apparel Group Inc. has gotten high marks for moving from investment banking into apparel and filling the void left by the retirement of chairman Sidney Kimmel, even as the company begins to explore the possibility of a sale. Many observers have cited the recent move by Robert Skinner into the top job at Kellwood Co. as an interesting test of how well a new ceo can alter a corporate culture long dominated by the now retired Hal Upbin. And then there’s Robert Polet, who moved from frozen foods and ice cream at Unilever to succeed Domenico De Sole as president and ceo of Gucci Group.

At the WWD/DNR CEO Summit last November, Polet said he spent seven weeks soon after taking the reins touring Gucci facilities and those of its competitors worldwide. “It gave me needed insight to the rules of the game of the luxury industry,” he said, adding that he was able to soak up the culture. If you come in as a leader of an organization and you don’t like the culture, he said, “It’s a phenomenal challenge to try and change it.”

And time is hardly an ally of the newly arrived ceo. “The biggest challenge today, particularly when companies are in trouble, is that there is no time to find out what the problems are,” said Elaine Hughes, president of the E.A. Hughes executive search firm here. “You can’t find out 15 minutes after you arrive that the company is in distress and has neither the finances nor the other resources to get out of it. And that’s the scenario that some executives have faced, even at public companies.”

Importing top executive help has become even more difficult, she said, “because companies no longer adhere to the pure wholesale model. They have multiple channels of distribution, including their own stores, and several strong brands.”

Harry Bernard, executive vice president and chief marketing officer at Colton Bernard Inc., which provides both research and executive search services to apparel industry clients, suggested, “There are people who feel you can’t be successful in fashion unless you come from fashion, but it’s more a matter of having a global vision. You also need leadership, creativity and flexibility.”

Once inside a company, the new ceo has to choose between preserving the organization in its current form or bringing at least some of his or her previous brain trust along for the journey. Hal Reiter, chairman and ceo of the executive search firm Herbert Mines Associates, noted that Millard “Mickey” Drexler ended a string of failed ceo’s at J. Crew, but he didn’t do it alone.

“He brought expertise and stability, but he also brought in a lot of people who knew him from before,” Reiter said. “In a lot of instances, ceo’s wind up with a constellation of incumbents who, for one reason or another, they want to keep. And you have to remember that most of the succession out there is because the company is in trouble.”

Drexler also put a lot of his own money into the operation upon his arrival.

While most executive search experts agreed that it was difficult to pluck someone from retail and place them in a top wholesale job, some recent success stories suggest it isn’t impossible. Joseph Gromek, former ceo of Brooks Bros., has comported himself well at Warnaco Inc., and Roger Farah, formerly of Federated Department Stores Inc. and Foot Locker Inc., has helped to transform and build Polo Ralph Lauren Corp. as the number-two official there.

“Generally, though, retailers have had the pencil for so long that it’s hard for them to make the transition,” Reiter pointed out.

Kirk Palmer, head of the executive search firm that bears his name, notes that while ceo’s might need to take action immediately upon arrival, the results of their work are best judged after far more time has elapsed. Robert Nardelli, ceo of Home Depot and the former head of GE’s Power Systems unit, was considered a disappointment early in his tenure, but has now won over investors and consumers alike.

“No matter who comes in, they spend the first six to 12 months assessing their talent base,” Palmer said. “It takes a year or two before the new organization can really start to gel.”

Even if a turnaround can’t happen immediately, decision making must. “The instinct is to go a little slower than you might,” said Peter J. Solomon, the investment banker. “Barry Diller [ceo of IAC/InterActiveCorp.] is a great leader, and he once told me, ‘I’m not afraid of making decisions. I make decisions. If they’re wrong, I make other ones.’ It’s extremely important to have the confidence to make decisions and not equivocate.”

Thomas Ward, vice chairman and ceo of intimate apparel maker Maidenform Brands Inc., came to his current position in 2001 after 31 years at Westpoint Stevens Inc. and a brief consulting arrangement with Australia’s largest retailer, Coles Myer Ltd.

“I was attracted to Maidenform because it has just a great brand name,” he said. “There are a lot of common denominators among the businesses I’ve been involved with — forecasting, marketing, operating disciplines — and you can always learn the product category. And we have quite a number of people with a lot of experience in the category.”

Ward added, “We thrive on disagreement. We have a lot of good debate on the direction of the company, but once we’ve made a decision, we attack the marketplace in unison.”

Bob Wichser, the former ceo of JA Apparel Corp., said he has spent his first 11 months as president and ceo of Sean John “listening, asking questions, trying to understand the company’s culture, product and position in the marketplace. No one has all the answers, but if you ask enough questions you go deeper, understand more and in a sense do your own form of due diligence.

“Right, wrong or indifferent,” he said, “this company was built as a celebrity-driven business, but that will only take you so far.”