Blackfriar: Nothing succeeds like a smooth succession programme

0
Have your say

SUCCESSION planning pours millions into the pockets of headhunters and causes many a headache.

Take bakery chain Greggs, which is dogged with uncertainty despite the fact that outgoing chief executive Ken McMeikan is still in charge.

Its well-regarded CEO admitted in December he is leaving to head catering supplies firm Brakes.

Surprisingly, no replacement was waiting in the wings, as is usually the way with effective succession-planning.

Its shares have fallen eight per cent since then – although the tough high street and wet weather have also played their part.

“Given the lack of visibility on the successor to outgoing CEO Ken McMeikan, who we hold in high regard, we prefer to wait for an announcement on his successor before potentially returning to a positive stance and hence we reiterate our hold recommendation,” said Shore Capital analysts.

York-based housebuilder Persimmon appears to have a handy knack of avoiding all of this. It simply appoints from within. Persimmon has done this since the days of Duncan Davidson, its founder and life president. Jeff Fairburn, who started out with the building firm 23 years ago, is the latest Persimmon veteran to become CEO. He takes over from Mike Farley, who has been CEO for seven years and has 30 years’ service. Farley himself succeeded a Persimmon lifer John White.

“It’s been a great company to work for and I’ve been encouraged in the business and given opportunities to develop which no-one could have anticipated,” Mr Fairburn said. “It’s great to have worked through the business and understand it.”

The son of a car mechanic, Fairburn wanted a practical job and decided against university.

For two years he split his time between mixing concrete, unloading wagons and knocking holes in walls, while training for a higher national certificate as a quantity surveyor at York Technical College.

He joined Persimmon in 1989. He was given autonomy and promotions. By 2006, Fairburn was named chief executive of Persimmon’s north division. In January 2012 he added the role of group managing director.

His progress from building site to boardroom shows a company which, despite its size, can still recognise talent and reward it.

Of course, internal appointments won’t be suitable in every case, and a dose of objectivity can be refreshing.

But Persimmon is proof that the best place to start looking for successors is usually within your own walls.

Debenhams’ chief executive Michael Sharp has said that Christmas 2012 was the most competitive he has seen in his 37-year retail career.

In this incredibly tough market, shoppers want one thing above all others – value.

Whether that be value at Waitrose, where customers are prepared to pay for superior quality, or value at a bargain basement discounter, where customers can balance their family budgets, doesn’t matter.

In this environment the one thing customers will not stand for is having the wool pulled over their eyes. The days of misleading promotions – when supermarkets could hike a £5 bottle of wine up to £7 for a week or so and then advertise it as being a great bargain at £5 – are over thanks to new rules.

Supermarkets have to have an incredibly strong message on value. This is where Sainsbury’s has done so well. Its Brand Match promotion reassures customers that if Tesco or Asda have the same branded goods at a lower price they will get a money off voucher at the till.

This is reassuring for the Sainsbury’s customer. It deals with that niggling feeling that they should have gone to Asda or Tesco and got their basket of goods at a cheaper price. They can walk out of Sainsbury’s knowing they can still shop in their preferred store and they haven’t lost out.

Likewise Asda, further down the retail food chain, promises to be 10 per cent cheaper than its rivals or customers get a voucher for the difference, reassuring the typical ‘Asda Mum’ that she hasn’t been conned. The jury is currently out on Morrisons’ decision to use TV duo Ant and Dec to front an elaborate advertising campaign which is tied into their ITV shows.

The duo’s participation will only work if the value message is conveyed to customers.

Retail analyst Freddie George said: “Morrisons’ fresh focus has perhaps taken the offer too far away from its traditional value roots and we are not convinced there is a fresh/craft differentiated niche to be carved out.”

Shoppers couldn’t care less if Morrisons employs butchers, bakers and candlestick makers if they don’t help reduce the price.

If shoppers want fancy artisan goods they will go to Waitrose, Marks & Spencer or Sainsbury’s.

The one thing they want from Morrisons is decent produce at the lowest prices.

Morrisons risks ignoring this vital message at its peril.