HOW THE BOSSES AT BAKER STREET BOTCHED IT UP

WHAT causes a great company to fail? What caused Marks & Spencer, regularly voted the most admired company in Britain, the subject of three Harvard Case Studies and regarded as a benchmark of retailing excellence around the world, to unravel at the speed of light? That is the question I have wrestled with in compiling my book over the past two years.

Ever since profits collapsed at Marks & Spencer in 1998, bringing down the share price and the reputation of the company, a litany of reasons have been put forward. The company was too arrogant, too complacent, too dull, too unfashionable, too out of touch. All these things may be true but they were symptoms of the more important point that M&S was badly managed by the people then at the top.

The executive directors of Marks & Spencer, most of them "lifers", knew how to manage things when they were going well, but none had ever known anything other than success.

Only two of the 16 main board executives in 1998 had any experience of commercial life outside the womb-like atmosphere of the Baker Street head office. Rather like the crew of the Titanic, which was presumed to be unsinkable, nobody knew what to do when trouble struck. Trouble was something that happened to other companies.

Managements start to fail when they get complacent, when they are diverted, or both. At M&S, directors were lulled into a sense of ease as they watched profits double between 1992 and 1996. They also became distracted from running the company by the race to succeed chairman and chief executive Sir Richard Greenbury. That ended in one of the most spectacular boardroom bust-ups in modern British corporate history and proved a catalyst for the firm's undoing.

The first major mistake came in 1994 when Greenbury made the ambitious Keith Oates, the eventual loser in the power struggle, his deputy chairman as well as managing director in charge of finance and international.

He also created three other managing directors in Andrew Stone (now Lord Stone), Peter Salsbury and Guy McCracken, intending that whoever proved themselves the most able, should succeed him. In doing so, he put in place a structure where infighting and jockeying for position were inevitable.

The company came to resemble medieval court and, like many medieval courts, it broke into factions where intrigue and plotting were rife.

How different the future might have been if the nonexecutive directors - then Sir Martin Jacomb, Denis Lanigan of JWT, Sir Ralph Robins, chairman of Rolls-Royce, and the former Cabinet minister Janet Young - had stepped in and said: "This is madness."

With their combined experience - they were all in their 60s - they could have insisted on a simpler, less divisive structure. They might also have prevented Greenbury making Oates deputy chairman, a move he claimed signalled to the outside world he was heir apparent, when there was never any intention he

should succeed to the top job.

Oates first asked to be made chief executive in 1994. Instead of telling him he had no chance, his colleagues allowed him to hope that the job might one day be his.

By 1996 his ambition was plain and in April 1997, when an article appeared in the Observer tipping Oates as the next chief executive, there was every reason for somebody to tell M&S's deputy chairman he would never get the job and that he was welcome to seek higher office elsewhere.

Instead, a g fashioned ensued.

By then, invited two c on to the boa Brian Baldo giant Diageo Perry, form Unilever, to executive tea Both later Greenbury the truth to felt such a ta instead of de undertook a

Copyright 2001
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