Just what will Kate Swann do next?
I am somewhat surprised to find out just what a success story there is hiding behind the cluttered shelves, understaffed check outs, and long queues, in my local WH Smiths store. To be honest, it has come as quite a shock to find out just what a well run business it is, as whenever I go in there it makes me feel like the business has somewhat lost its way. In spite of my passion for well run businesses, I had never consciously considered how Smiths was doing; I just had this impression that all was not well. So, when I saw a headline saying that the CEO of the last ten years was leaving, I read the FT article fully expecting yet another long list of failures, mistakes and unfortunate events: oh dear, how wrong I was.
Kate Swann is stepping down, as CEO of WH Smith, after nearly a decade of considerable success. She leaves with the share price twice what it was when she joined: in recent years I haven’t come across that very much, it is more often than not 50%, or less, what the bright new broom inherited. She got out of low margin CD’s and DVD’s nine years ago, when this category represented a quarter of the business, and Smiths was also one of the first companies to get rid of final salary pensions.
In anticipation of the diaspora from the High Street, she reduced the number of high street stores and refocused on travel concessions in airports and railway stations. She decided to focus on the blindingly obvious, that they were in the books and stationery retail business, and so concentrated on it even more. I really don’t mean that to sound like a criticism, it isn’t, it is quite an achievement, as it is sometimes harder to do than it might seem; the call of the wild can be seductive to new CEO’s and she resisted it. All this, and being tough on costs, resulted in increased profits, even though like-for-like sales have fallen over the last five years. In 2006, she also spun-off the newspaper distribution business and Smiths have since given £450M back to shareholders.
As I write this I recognise that the bigger Smiths stores I have been to are both clearly positioned and well stocked, if a little stuffed full of product; my local store is perhaps one of the old breed corner shops, no longer representative of the rest of the chain these days, as High Streets slowly die and we shop more out of town, or on the move.
I’m a little embarrassed at not recognising what was happening in Smiths, as I go on all the time with my clients about: having a well thought out strategy built on proven success; focussing and defending a core (ideally leading) market position; picking your best business and putting all your energies into that rather than spreading it around; acting early; that shareholders are probably better able to invest their spare cash than management; and perhaps most importantly, the importance of an able and well motivated leader. In Smiths’ case I think I didn’t notice because in many ways not much seems to have changed; Smiths has always been the obvious place to go to for books, magazines and stationery, hasn’t it? In fact, almost everything has changed behind the scenes and the brand has been subtly reinvented without a great deal of fuss and with great effect; a bit of a master class in how to do it really.
Clearly Swann is a class act, an able and accomplished business leader, but is she also a poster child for intelligently designed long term incentive plans too? Is this also a good example of where a generous long term incentive plan, attached to a very able manager, has achieved its desired results?
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