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The NMG Problem: Finding The Successor To CEO Burt Tansky

<CS:BOLD>NEW YORK -- The death of retail legend Stanley Marcus last week was a sad reminder that the merchant prince is a rare breed.<BR><BR>Yet that's precisely the caliber of executive Neiman Marcus Stores must find soon to protect future...

NEW YORK — The death of retail legend Stanley Marcus last week was a sad reminder that the merchant prince is a rare breed.

Yet that’s precisely the caliber of executive Neiman Marcus Stores must find soon to protect future profitability, broaden its luxury appeal and rebuild a succession strategy. The chain has been hunting on and off for a chief executive for the last 15 months, ever since Hugh Mullins abruptly resigned.

When Mullins left, Burt Tansky got back in the saddle at Neiman’s, while continuing as ceo of the $3 billion parent Neiman Marcus Group, overseeing the Neiman Marcus Stores, NM Direct and Bergdorf Goodman divisions, and investigating new business opportunities. But at the time of Mullins’s appointment, Tansky said the two jobs were too big for one man to handle and that Neiman Marcus Stores needed its own ceo. The demands of his corporate role, he said, “have been growing and taking up more and more of my time.”

Herbert Mines Associates was hired to conduct a search for a successor to Mullins, but reportedly, the search is on hold.

There are good reasons why. Foremost, Tansky commands the respect of the industry and is credited with strengthening the firm’s focus. Even though he is 64, he shows no signs of being ready for retirement or loosening his hands-on approach. While the issue of succession is slowly bubbling to the surface, the corporation has more pressing concerns, notably its severe sales and earnings slippages and the depressed luxury sector. In its last fiscal year ended July 28, Neiman’s earnings dropped 19.8 percent and business fell apart even more in the fall.

The Neiman’s search, once revived, will be difficult, considering the limited field of those with the stature befitting such a plum position, and the dearth of talent in retailing generally. Further limiting the field are contractual restrictions, such as non-compete clauses, that many executives are bound by. “Usually, at the gmm level and above is where you see these contracts,” said Kirk Palmer, of Kirk Palmer Associates, executive search. “They continue to be written in ways that make it very difficult to make a move. A standard May Co. at the ceo level of a division would preclude someone from going to Neiman Marcus, which is a very distant competitor, for a period of time, normally two years after you leave the company.”

Also, Neiman’s is based in Dallas — not everybody’s first choice for relocating.

One possibility is that Neiman Marcus Stores bring in a chief merchant who could work with Tansky through a long transition period, initially command a salary in the $700,000 to $800,000 range and be given assurances of eventually taking the helm and making over $1 million. “It’s good money at the Neiman Marcus Group, but not necessarily home-run money,” said one source. According to proxy statements, Tansky’s salary is $1.15 million and his bonus, after Neiman’s experienced a difficult year, was $125,000. The year before, when business was much better, Tansky’s salary was $1 million and his bonus came to $1.116 million. Mullins’s salary as the stores’ ceo was $648,000 and his bonus was $750,000.

With the tough economy, Neiman’s main challenge is to stay the course while instituting greater inventory and administrative disciplines, i.e., payroll, and that’s just what veteran hands are best at. Secondary challenges are to attain a larger base of younger customers and reconsider some products and pricing, which can be rarefied.

Tansky won’t discuss succession, but reportedly, Neiman Marcus Stores wants a retail merchant at the top after Tansky retires or leaves that post, while maybe just continuing in his corporate capacity, so a selection from outside retailing, or a financial or operations executive, seems remote.

“Burt has the experience, the respect in the market and the respect of his people, and under his command, Neiman’s experienced outstanding growth. Given the circumstances of the business, its short-term tactical needs, as well as long-term strategic needs, Burt is the perfect person for the role,” said Arnold Aronson, managing director of retail strategies, Kurt Salmon Associates. “I don’t think anyone could have anticipated Hugh Mullins would have left.”

“It wasn’t surprising Neiman’s didn’t have another executive, other than Burt,” added Palmer. “Most companies are not that deep for the top job.”

“The best ceo candidate for the next couple of years is Burt Tansky,” said Robert Kerson, president of the global retail fashion practice of Korn/Ferry International. “Nobody knows the business better, but you’ve got to be thinking about succession.” Herbert Mines Associates declined to comment.

Tansky does have a strong and stable team with him, built around several seasoned general merchandise managers with long tenures at the store: Ann Stordahl, ready-to-wear; Neva Hall, accessories, shoes and cosmetics; Lisa Kazor, the newest gmm, over jewelry, home and children’s, although with the company a long time, and Robert Ackerman, men’s. But no one on the Dallas team is said to have an inside track to step up, leaving open the question: Who could Tansky and the Neiman’s board eventually tap?

Here’s the WWD list of logical contenders for the Neiman Marcus Group’s ceo of the future, undoubtedly among the most glamorous and prestigious posts in retailing:

Ron Frasch, chairman and ceo of Neiman’s sister division Bergdorf Goodman. He’s a natural choice for the job, knows the market, interfaces well with it and is a former Neiman’s gmm. But Tansky is said to be happy having Frasch where he is, and Frasch may not want to leave New York. If Neiman’s did decide to shift Frasch, Bergdorf’s president Peter Rizzo could step up as ceo of Bergdorf’s.

Jeanne Jackson, whose reputation hasn’t been sullied by her short-lived stint at walmart.com, where politics interfered with her progress. She made her mark by tastefully expanding Banana Republic in the Nineties and earlier was a merchant at Federated Department Stores and Saks Fifth Avenue, where Tansky also served as president.

Sharon Jester Turney, the former head of Neiman Marcus Direct and, before that, the Neiman Marcus catalog alone, is now directing Victoria’s Secret Catalog and trying to improve its performance. She’s said to be among Tansky’s favorite executives.

Howard Socol, currently ceo of Barneys New York, is considered smart, has experience running a big chain as a former head of Burdines, is a broad strategist and is well liked. But Mines put him in the job at Barneys in the first place, so couldn’t recruit him out of it. If Barneys gets back on track, Socol’s chances escalate.

Susan Kronick, Federated Department Stores, group president, who is described as a top-flight general business manager, strong strategist, extremely bright, with leadership and people skills, but embedded in the Federated hierarchy, and said to be tight with Terry Lundgren, president of Federated. She could succeed Lundgren as president one day, if he moves up to ceo. Lundgren would also be a good choice for Neiman’s, though he might consider it small potatoes compared to Federated.

Fred Wilson, ceo of LVMH Fashion Group Americas, formerly president of merchandising of DFS Group. He’s been coming up with new retail concepts, launching eluxury.com. One source describes him as a “killer merchant, very aggressive, with people skills.” Previously did work with Tansky and is also said to be on the radar screen of R. Brad Martin, chairman and ceo of Saks Inc., which has recently been beefing up its top ranks.

Who would be on Neiman’s wish list? Those with luxury backgrounds and experience running multi-unit chains. Unfortunately, they command multimillion-dollar salaries in major corporate roles. NM isn’t accustomed to paying that much, but in a couple of years, these executives could be more available and open to negotiations. The wish list would be:

Rose Marie Bravo, ceo of Burberry and former president of Saks Fifth Avenue. She would be a slam-dunk, since she knows everybody in the designer world and has a high taste level. But she’s not likely to leave Burberry soon. She’s committed to taking the brand public and commands a huge salary. Since Burberry supplies Neiman’s, it could pose a conflict of interest. It would be a more realistic scenario a few years from now.

Roger Farah, president and operating chief of Ralph Lauren, where he is the boss, behind Ralph himself. He also commands big bucks, but Farah has run large retail organizations, including Venator and Rich’s, and was once a gmm at Saks Fifth Avenue. He’s got the taste level, the know-how and the designer connections. Ralph Lauren is also a supplier to Neiman’s.

Andrea Jung has Neiman’s experience as a former executive vice president there, is highly regarded and retains an elegant image despite working the mass level at Avon Products, where she is chairman and ceo and makes a fortune.

Other executives who might be checked out are Joseph Gromek, former ceo of Brooks Bros., but his background is steeped in private label retailers managing single brands like Brooks Bros. and Ann Taylor. However, he spent 13 years at Saks, rising to senior vice president and gmm of men’s and women’s shoes. His wife works at Saks Fifth Avenue (executive vice president Gail Pisano), another factor excluding him from the search party.

One executive who has been around is Robert Mettler, Macy’s West president, former Sears merchandise president, a seasoned, professional with great market relationships. The downside is that he’s more associated with department stores than upscale stores.

Other names in the rumor mill, though considered long shots are: Denise Seegal, a former Liz Claiborne president, more likely to run another manufacturer or brand, reportedly among seven or eight candidates for the Leslie Fay ceo job, and considering posts at other labels; Michael Gould, Bloomingdale’s chairman and ceo and among the nation’s most popular retailers and on every search executive’s hit list for the big openings, but he has family ties to keep him in New York; and Heyward Wilansky, who is well liked, and credited with building a strong bridge business for some May Co. divisions, but who, since leaving as ceo of Bon-Ton a couple of years ago, appears to be yesterday’s news.

“You need a certain kind of talent to be able to manage the ego-intensive resources like Dolce & Gabbana, Prada and Burberry,” observed Isaac Lagnado, president of Tactical Retail Solutions. “There are very delicate egos involved. You need personalities on the merchant side to handle these sensitive resources, to get the exclusives, the introductions, the launches. It’s not just about money or providing space. You really need people to have an ongoing relationship with those design houses.

“Tansky really exemplifies the merchant who knows the designers for a long time, has groomed a lot of them along, like Michael Kors, Escada and Kate Spade,” Lagnado continued. “In addition to the merchandising, he is a good businessman. He does understand how to achieve sales per square foot and profit objectives. It’s delicate and not something an assistant buyer can do. In the luxury business, it is much harder to do than at standard department stores. You are dealing with merchandise with a very short shelf life. In effect, you’re really juggling dynamite — huge egos, short half-life merchandise, extremely expensive goods. It’s the antithesis of programmed buying.”