Lessons on Internal Team Building from Eddie Lampert and Sears

In a world where new busi­ness mod­els are being re-imagined and indus­tries are apply­ing their approaches to dif­fer­ent cor­po­rate struc­tures, it’s worth exam­in­ing the suc­cesses and fail­ures of these meth­ods. If you work in cus­tomer ser­vice management—and par­tic­u­larly if you have a team of sales peo­ple in charge of cus­tomer rela­tion­ships—it’s a good prac­tice to fol­low trends in cus­tomer ser­vice management.

As impor­tant as it is to fol­low what works in cus­tomer ser­vice man­age­ment strat­egy, it’s equally impor­tant to fol­low what doesn’t work. An arti­cle in Bloomberg that pro­filed Eddie Lampert’s approach to man­ag­ing Sears high­lights this very point; namely, a suc­cess­ful man­age­ment struc­ture in one indus­try does not always apply to other indus­tries. Though Sears is a retail behe­moth, the lessons the com­pany is (painfully) endur­ing under Lampert’s lead­er­ship are espe­cially applic­a­ble to cus­tomer ser­vice man­age­ment and sales-heavy orga­ni­za­tions – or essen­tially any com­pany that is housed under one brand, has a goal of serv­ing cus­tomers through prod­ucts, and shares the same pool of resources. Let’s exam­ine Sears and Lampert’s approach.

Lampert’s strat­egy: Autonomous busi­nesses within the business

Eddie Lam­pert made his name and for­tune in the hedge fund world. A bil­lion­aire by the age of 41, Lam­pert became a major­ity owner in Kmart and used Kmart to buy Sears in 2005. His move from a Gold­man Sachs super­star to man­ag­ing estab­lished (though flail­ing) depart­ment store brands puz­zled many, but what’s become even more puz­zling is his insis­tence that Sears be man­aged like a hedge fund port­fo­lio. He chose not to run the com­pany accord­ing to the tra­di­tional retail model: depart­ment heads run prod­uct lines, but they all work under the same mer­chan­dis­ing and mar­ket­ing team, with the over­all com­pany goals as the over­ar­ch­ing yard­stick. Instead, Lam­pert broke the com­pany up into 30 sep­a­rate divi­sions, mak­ing them autonomous busi­nesses within the com­pany (sound famil­iar, you in sales?). All of the sep­a­rate divi­sions must prove their value in order to gain their share of mar­ket­ing spend and com­pany resources, and they even have their own indi­vid­ual pres­i­dents, board of direc­tors, chief mar­ket­ing offi­cers, and profit and loss statements.

Lam­pert insists that this struc­ture gives him insight into the indi­vid­ual busi­nesses that he’s cre­ated within the com­pany, and, as he’s con­tin­ued to argue, forces the depart­ment heads to fight and work harder in order to get their share of the pie. Instead, what has hap­pened is that depart­ment heads are fight­ing against other divi­sions, force­fully pro­tect­ing their own resources, and aggres­sively hoard­ing what they can—often at the expense of other brands within the com­pany, and even the over­all com­pany brand. After eight years of man­ag­ing the com­pany this way, Sears has seen its stock fall 64 per­cent, and its hold­ings have gone from $49.1 bil­lion to $39.9 bil­lion. Many fore­cast that the com­pany will con­tinue on this path of decline under its cur­rent structure.

Cus­tomer ser­vice man­age­ment strat­egy: The com­pet­i­tive ver­sus the col­lab­o­ra­tive approach

It’s easy to read about sto­ries such as Sears and think – “well, of course that’s not going to work.” Or, “that’s not how we man­age our com­pany, so we have noth­ing to worry about.” Before you get too con­fi­dent in your cor­po­rate struc­ture, and specif­i­cally, your cus­tomer ser­vice man­age­ment strat­egy, think more about your indi­vid­ual depart­ments, depart­ment heads, and teams. If you run sales, specif­i­cally, are you build­ing a sales team that truly col­lab­o­rates with other teams? Are they focused so much on their own met­rics and suc­cesses that they forego the company’s main goals and image? Do teams help each other, and are they will­ing to sac­ri­fice resources so that other divi­sions can pros­per? In short, does your com­pany oper­ate more like a page out of “The Hunger Games,” or an episode of “Sur­vivor,” or are you col­lab­o­rat­ing like a win­ning sports team?

Strik­ing a bal­ance in cus­tomer ser­vice management

While it’s true that com­pe­ti­tion spurs teams to outdo the oth­ers and can inspire added moti­va­tion, it can also breed unwanted behav­ior and lower morale – as is the case at Sears. Clearly there needs to be a bal­ance. In the case of Sears, stan­dard meet­ings to dis­cuss mar­ket­ing dol­lars for the var­i­ous brands erupt into loud shout­ing matches, and com­pany turnover has increased since the cor­po­rate re-structuring.

What’s notable about the Sears exam­ple is that the com­pany is in the busi­ness of sales and ulti­mately serv­ing cus­tomers, but nowhere in Lampert’s strat­egy do you find “serv­ing the cus­tomer” or “uphold­ing Sears’ image as a 120-year old ven­er­ated retailer.” Instead, he seeks to ignite self­ish behav­ior among the divi­sions and looks for higher sales by essen­tially forc­ing the depart­ments to thwart the efforts of other divi­sions within the company.

How about build­ing a cus­tomer ser­vice team that’s more like an ecosystem?

If your com­pany is in the busi­ness of serv­ing cus­tomers and sell­ing a prod­uct, are you oper­at­ing in silos, or is your struc­ture envi­sioned as a holis­tic ecosys­tem, where the parts depend on the other parts to grow and thrive?

The Sears story is a good reminder to take stock of your company’s val­ues, goals, and cus­tomer ser­vice man­age­ment strat­egy. If you’re there to sell and serve cus­tomers, make sure that every divi­sion, depart­ment head, and team mem­ber under­stands that the over­all brand and goal of increased cus­tomer sat­is­fac­tion must trump any indi­vid­ual depart­ment gains.

Unless, of course, you’re run­ning a hedge fund.