Don't Be Surprised
How quickly things can change
Here’s a recent true story from the headlines.
CarMax stock falls 24% as CEO steps down, used car retailer releases weak outlook
As reported by Michael Wayland and CNBC
DETROIT – Shares of CarMax Inc. fell 24% trading Thursday after the used car retailer announced a weak preliminary outlook for its current fiscal quarter and said CEO Bill Nash would be unexpectedly stepping down.
The preliminary outlook for its third fiscal quarter includes an 8% to 12% decrease in comparable store used unit sales and net earnings per diluted share of between 18 cents and 36 cents, including 9 cents in non-recurring expenses related primarily to the leadership shakeup and other workforce reductions.
Regarding its CEO, the company said board member David McCreight, a retail clothing executive who has served as CEO of Lulu’s Fashion Lounge Holdings and president of Urban Outfitters Inc., will replace Nash on an interim basis until a permanent replacement has been found.
As I read this, I’m left with a number of questions, as I always am following the surprise announcement of a CEO departure. How was the decision made? Was it just poor financial results or was there more to the story? Who knew about this in advance? Was the CEO blindsided by the news, or did he see this coming? What efforts were made to deal with the situation and why weren’t they successful? Did the board really support the improvement plan or were they just throwing out a final lifeline? Why would the board choose a temporary replacement rather than having a successor ready to step in?
We like to think that business is all buttoned up, that the i’s and t’s are dotted. If the CEO is struggling, the board is there to advise so that instances like this one don’t happen. Strategies to respond to competition are thoughtfully crafted and dutifully executed. The senior team is totally focused. Data are available to monitor the situation and allow additional corrective actions to be taken. A succession plan is in place and ready to be activated in case of emergency.
And then this.
I’m sure there are many sides to the story. I would have loved to be a fly on the wall for the closed-door conversations that took place in formal meetings and private get-togethers. I’d like to know the points that turned the conversation, that made it reasonable to accept a sharp decline in share price as a necessary cost of righting the ship. I’d like to hear the discussion of what the CEO failed to do that his replacement could easily accomplish.
Of course, it’s possible that there was much more to the story than poor business performance, and the board was left with no choice but to pull the plug. These things happen. We’ll never know.
It’s also possible that the change was long overdue and that the future demanded action be taken. Sometimes, events transpire more gradually than they appear to, only seeming surprising to those who didn’t know the inside story.
Each unanticipated CEO departure is an ink blot, the interpretation of which says as much about the observer as the blot itself. Is it a tragedy? A victory? A relief? The conversation on the Street may coalesce around one of these but it doesn’t make it the truth. Certainly not for the parties involved. It’s more complex than that. There are business factors, to be sure, but there are also human factors that stem from relationships, emotions, politics and expectations. These all mix together to lead to an outcome that is unpredictable and sometimes inconceivable. Small variations in the ingredients can lead to very different results.
One thing that is certain is that lives are changed. Decisions have consequences. The reverberations will be felt for some time. My hope is that we pause after events like this to ask ourselves what we did well that we had to do, but also how we could improve. What was missing in the signals we were receiving? In the honesty of the communications that were taking place? In the planning for a possible emergency? In the CEO’s willingness to ask the board for advice? In the failure of the leadership team to come up with a winning game plan? In catching the problem early enough that it could be dealt with before it ever came to this?
If we aren’t asking these questions, we are squandering an opportunity to learn that we have paid dearly to access. If we aren’t asking these questions, we have a bigger problem; an unwillingness to face the light and take the heat that comes with deep self-examination. If we aren’t asking these questions, we may never understand what really happened, setting ourselves up for a possible repeat performance. If we aren’t asking these questions, we may not discover the breakthrough that will change things for the better, forever. It’s easy to close the door and move on. But if we aren’t asking these questions, we aren’t doing our job.
We like to believe that things are all buttoned up, but it’s surprising how quickly things can change. Make it a point to not be surprised.