What's prudent is not necessarily smart

Chain Drug Review, March 2, 2009 by David Pinto

Shoppers Drug Mart announced two hires earlier this year that are worth noting. Former Target merchant Mary Kelly signed on to oversee Shoppers' front-end business, while Mark Valesano, who formerly ran the pharmacy and H&BA business at the Wegmans grocery chain, has been asked to run Shoppers' pharmacy business.

These are two talented merchants. Each comes to Shoppers with a range of experience gained at two of the best retail companies in the United States. Valesano enjoyed a reputation within the supplier community for his intelligence, loyalty, personality and sense of humor. Kelly, a more elusive personality for a supplier community that found her somewhat enigmatic and difficult to know, nonetheless exerted a huge influence on Target's H&BA business.

This much is certain: Each will play a significant role going forward in influencing Shoppers' business and enhancing the Canadian drug chain's already formidable reputation.

But the real story here is not about Kelly and Valesano. It is about Shoppers Drug Mart. Dealing with the defection of Joe Magnacca, the retailer's key merchant, who recently moved to New York City and Duane Reade, and the retirement of Shoppers' pharmacy chief, Virginia Cirocco, Shoppers did what too few retailers are capable of doing: instituted a search for the most capable people available.

What makes all this particularly applicable just now is the state of the economy. Simply put, business is terrible. It is adversely affecting retailers across the range of store formats, price points and merchandise offerings. It is impacting suppliers without regard to the products they sell or the advertising, merchandising and promotional incentives they offer to induce retailers and consumers to buy them.

What the economy has produced is a state of uncertainty approaching chaos. Amid this uncertainty, the retailer and supplier response has been predictable and predictably similar: Companies are cutting costs.

If this reaction is understandable it is notable as well for its lack of creativity. Though painful, cutting costs is easy. It is more challenging, in a time of economic crisis, to spend money, especially when that money is spent on people. Yet that's the path Shoppers Drug Mart has taken, at a time when lesser retailers might have concluded that it might be wiser to save money by keeping these two critical jobs open just a bit longer. After all, conventional wisdom has it that the front-end and pharmacy businesses won't disappear overnight. Surely a few months' delay in filling these vacancies won't do irreparable damage.

That's probably true. Shoppers' business would not have suffered unduly if the retailer had put off any personnel decisions until, say, June or July. But what's prudent is not necessarily smart.

Retailing has traditionally been an inbred business. In the past, retailers have tended to hire other retailers. Taking this myopia a step further, most retailers have in the past filled vacancies almost exclusively from within, ignoring impressive candidates from elsewhere in the retailing community. With rare exceptions, supplier executives need not have even bothered to apply.

But retailing is changing. The best retailers have begun attracting talent from outside their companies--occasionally from outside the retailing community. A year ago Wal-Mart recruited John Agwunobi, a physician and public sector employee, to oversee the retailer's considerable health care business, a decision that has worked well for both parties. Walgreens, once the most inbred of drug chains, has recently dazzled the chain drug industry by bringing in Kim Feil, a former supplier marketing executive, as chief marketing officer and Brian Pugh, most recently a senior executive at Tesco's Fresh & Easy unit, as vice president of format development.

Indeed, so numerous are the outsiders in key positions at Walgreens' senior levels--Kathy Steirly, Dave Van Howe and Jon Rudden come readily to mind--that the assignment that new CEO Greg Wasson has undertaken, that of changing the culture, won't be nearly as daunting as it might have been a decade ago.

This is not to say that hiring from outside is always the answer. CVS Caremark and Rite Aid have both been burned by outside hires. But their successes in this area far outweigh their failures. The shining CVS example is, of course, Dave Rickard, whom CVS recruited from R JR Nabisco in 1999. He has emerged as perhaps the most capable chief financial executive working in the chain drug industry today.

The point here is merely that, with personnel cuts and consolidation, some very good people have become available. Despite the economy, this might be a good time to locate them--and maybe even offer one of them a job.

By David Pinto, Editor