Saturday, December 06, 2014

The Great Indoors - victim of a libertarian hedge fund manager

In 2007, I gave retail sales on commission a try. I worked 8 hours a day, walking the floor, selling big screen TVs and high-end audio at a place called The Great Indoors. It was a fascinating, if not very profitable experience. I tried it because I wanted to see if I could really sell.

Turns out that I can sell, but the problem was, I had virtually no support to sell. For one, I noticed that hardly anyone came by my department and couldn't figure out why. I talked with another member of my team there and learned that I also had to market on social networks to get people to come to the store. Oh, so I'm doing marketing, too?

There's more. Whenever I did close a sale, I had to check their inventory database to make sure I had something to sell, that was a given. But I was also told that even if I had it in stock according to the database, I had to run upstairs and see for myself if we really did have it in stock. Wait a minute, so I'm doing inventory, too?

More than once, by the time I got back down to finish the paperwork, my customer was gone. In 2007, that was what it was like working at The Great Indoors.

Fast forward to present day and now I find out why I had to struggle so hard back then. It was because a self-styled "entrepreneur", Edward Lampert, hedge fund manager extraordinaire, had managed to cut costs and get people laid off at the parent company, Sears. Mr. Lampert had managed to engineer the merger of Kmart and Sears in 2005 and Sears had acquired The Great Indoors the same year that the merger between Kmart and Sears closed.

Instead of growing the companies, Lampert has been liquidating their assets, very efficiently. This is probably what we can expect from a man who's had little retail experience, and who takes a very different view than Warren Buffet. Where Buffet lays low and lets the company run after acquiring control, Lampert has been very aggressive, inserting his own ideas of how the companies should run. So how does he think Kmart and Sears should run?

Like an Ayn Rand fantasy, that's how. Lampert's strategy has been to force managers to compete with each other, spying on employees and managers, and finding ways to get everyone to act "selfishly" to improve performance. Under Lampert's reign of management terror, Sears stock dropped by half. The best minds in management quickly fled when they saw what was coming. Some had to fight for their severance packages according to contract, in court.

Much of that was happening while I was trying to sell top-end products for a tiny subsidiary of Sears, The Great Indoors. This management induced suffering explains why inventory and sales couldn't get their act together. It also explains why there was no marketing support for my department. The word in management offices and on the shop floor was "competition at any cost", not cooperation. Unfortunately, I didn't hear it and didn't notice it. I find it very fortunate and comforting that I now work for a company that rewards cooperation and sharing, but this time, I'm sticking with IT.

So even though many people working at Sears and Kmart lost income, endured bickering and suffering between departments, and ordinary shareholders lost money in their 401ks, Lampert is a billionaire, completely insulated from his mistakes. Oh, sure, he's lost money big time, but he will never be homeless or have to worry about retirement. He gets to keep his house and take nice vacations, and still makes big bucks even when he's not working. His kids will still go to college.

Lampert and his Ayn Rand experiment with Kmart and Sears proves that at the very top, there can be a very obvious and serious disconnect between performance and consequences. The difference is this: For most employees, when they lose money, that comes at the price of a months rent, with no savings and no 401k.

For Lampert, with almost $3 billion net worth, losing a job means that he's still going to be living comfortably. He will have the money needed to buy another opportunity to succeed. He can easily gain C-class employment on friendly terms. Why? Because CEO salary is largely a matter between friends.

So what happened to The Great Indoors? Liquidated. I guess I should have done more research before applying for that job.
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