When John Fletcher writes his memoirs or prepares his CV for coming board appointments and speaking engagements, he could proudly point to his role in “improving shareholder value” at Coles. That will be an impressive, but incomplete, story.
In 2001, when Fletcher was appointed to head the company, Coles was Australia’s number-one retailer, with daylight second and Woolworths third. During Fletcher’s reign, both Woolworths and daylight have passed Coles.
Why has this once great retailer slipped so badly?
There are many good stories about Fletcher’s skills as a leader, but it is now clear that he has been unable to drive change through a company that needed renovation.
When he got the Coles gig, Fletcher famously announced that he hadn’t been in a supermarket for 20 years. He had no retail experience, having spent most of his career at Brambles, which clearly meant he urgently needed to surround himself with the right expertise.
Fletcher’s failure to build the right team and access to the right advice is central to the company’s problems. A great general needs great colonels. Many of those at senior levels at Coles (Myer) were unwilling or unable to drive the necessary cultural change. Aside from the hiccoughs with supermarket heads Steven Cain and Peter Scott, there issues with the leaders of many of the Coles business units.
Last year, Fletcher (or the board) engaged McKinsey — a management consultant with groupspeak, jargon and reputed arrogance toward client executives which has a history of cutting costs to create shareholder value rather than improving the long-term health of their clients.
We have heard several reports of McKinsey consultants marching into departments and mandating percentage, cost reduction, arbitrary outcomes with scant examination of how well the department was operating. There was a laughable story of a Coles manager, who earned in excess of $125k, being allowed to take a redundancy package because his role had changed by more than 30%, and then immediately being re-hired as a consultant with a 30% increase in his income on a long-term contract with the probability of going permanent. This guy was a young star and exactly what the company should not lose. But the mandatory McKinsey-driven system produced this Pythonesque outcome.
If this is a renovator analogy, McKinsey prepared the house for sale, rather than making it better to live in.
If Coles is to be salvaged, it needs a strong leader who is a retailer, who understands the Australian retail market, and who is an up-front operator. It has been a long time since the head of Coles has been able to tick all of those boxes.
Disclosure: My wife still hangs on to her 768 Coles shares, terrified of selling them before the raiders maximised the price.