Country Road CEO departs after just 10 weeks – here are the lessons for SMEs

The departure of Country Road chief executive John Cheston after just 10 weeks in the top job has shocked the retail community, but recruitment experts say the incident serves as a lesson to company boards to complete due diligence or face the consequences.

The announcement comes after a disappointing result for the clothing retailer, with the company reporting a 20% drop in profit for the 2010 financial year. Cheston issued a profit downgrade just three weeks into his role.

In a statement, Country Road chairman Simon Sussman said Cheston would be leaving due to “irreconcilable differences” regarding the company’s future plans. Former chief Ian Moir will take over operations until a replacement can be found.

Chief operating officer for ICT recruitment firm Clarius, Kim Quick, says company boards need to learn from this incident and complete due diligence before hiring someone in such a sensitive role – especially given Country Road was considered an example for successful retailers as recent as a year ago.

“We do some executive recruitment, and we have a reasonably understanding of this type of hiring, and what makes this scenario so unusual is that very early on, there was a significant crack in the relationship. This indicates both parties are very philosophically divided.”

“For an organisation going through a significant change, the most simple thing you need to do is just ensure the board and new hire are on the same page. Even if the methods are different, both need to have the same goals, and you need to have a clear strategy planned out.”

In the statement, Sussman said the differences regarding the company’s future were “fundamental in nature”, and could not be resolved.

“The situation is regrettable but the board is unanimously of the view that this is the best course of action to maintain the momentum and future growth of the business.”

Sussman says businesses need to take three things away from the Country Road incident: make sure due diligence is completed, have the board involved in the hiring process and make sure the wrong candidate is removed early to minimise damage.

“Firstly, the due diligence needs to be completed. Even to a micro level, the company needs to know what this person’s values are, how they plan to approach certain problems and if they have a set of objectives they want to bring the company.”

“Secondly, I often see boards that aren’t as active in the recruitment process as they should be. Of course, I’m not suggesting this has happened here, but sometimes boards come in during the later stages and don’t have as much intimacy in the process as they should.”

Finally, Quick says Country Road may have actually negated a problem by acting quickly. She says if boards notice a conflict of interest, it may be better to nip the problem in the bud instead of drawing it out over months and potentially impacting performance.

“I’ve certainly seen in many organisations where there is a new hire, the person comes in with a clear set of objectives and it causes a bit of rumbling and back-peddling. It can often cause trouble.”

“But if there is a problem that can’t be resolved, it’s far better to act quickly when there are legitimate concerns. I’ve seen businesses that draw it out and think that it’ll be okay, but it’s much better to sort it out early and stop a problem from getting worse.”

Martin Nally, founder and managing director of HRanywhere, says the chief executive recruitment process needs to come back to fundamentals. He recommends businesses use specific situational questions when interviewing to get a feel for how the candidate operates.

“You need to be asking questions like, “tell me about a time when you reacted to this”, or “how did you react when this happened?” You need to know what these people did, not what was done by the company. Get a feel for how they operate.”

“That due diligence is so important, and it can be shaped in any number of ways. It’s certainly not the be all and end all, but it’s an indicator for how that person will behave.”

Country Road shares remained unchanged at about $3.72 after the announcement was made.