News of Best Buy CEO Brian Dunn’s resignation has resulted in some raised eyebrows, to say the least. There were no disagreements, Best Buy said — the company and Dunn came to a mutual agreement that it was time for new leadership.
Director G. Mike Mikan will serve as interim CEO while the company searches for a new chief. Richard Schulze, who founded Best Buy, remains as chairman.
Best Buy did not respond to our request for further details.
It’s not surprising that a CEO would leave a foundering company, but the timing in this case is jarring, given Best Buy’s recent reorganization announcement.
Not quite two weeks ago, it said it would close 50 of its larger stores and test new store formats — so called “connected stores” in San Antonio and Minneapolis. The new stores will emphasize tech support and wireless products, and feature checkout lanes designed to speed shoppers through the buying process.
The reorganization trimmed 400 employees, including some corporate executives, from the workforce — a downsizing that, whether he realized it at the time or not, apparently also included Dunn.
It followed a weak quarterly earnings report with a Q3 profit drop of 29 percent.
In a nutshell, Best Buy’s core problem is that it has been outmaneuvered by online retailers that have been able to target the same customer base with lower prices, more inventory, and even 24-hour shipping.
Best Buy has been in trouble for a while and has not made enough strategic moves to improve its position, Kenneth C. Wisnefski, founder and CEO ofWebimax, flatly said. “That is a reflection of the CEO and could shed light on the resignation.”
Still, while it is no secret that the chain has been struggling, it is a little surprising that its CEO Brian Dunn would resign just after Best Buy announced its restructuring plans, Francis Petit, associate dean for executive MBA programs at Fordham University, told the E-Commerce Times.
In truth, there is no telling why he left at this point, Petit said. “Perhaps it was always intended for Mr. Dunn to leave. Perhaps he was involved in the restructuring plans or was just a ‘sitting duck’ throughout the process. Perhaps the company just wanted new leadership.”
But it’s likely Dunn was forced out, said Petit, especially given that he has spent 28 years at the company working his way up through management’s ranks.
“The board, in my estimation, probably felt it was best to present a restructuring plan immediately to the market as opposed to selecting a new CEO and developing the restructuring plans at that point,” he said.
However, given Dunn’s tremendous store of knowledge about the company — and his affinity for it — it “would make sense, in the long term, if he remained as CEO,” added Petit.
Struggles Call for Leadership Change
On the contrary, Best Buy had to jettison Dunn, if only to signal to the market that it was serious about righting its ship, said Lisa Chandler, visiting assistant professor of management in the Quinnipiac University School of Business.
“The company has been struggling financially for some time,” she told the E-Commerce Times, “and the announcement of a traditional turnaround strategy, including closing stores and leaning operations, was not greeted with enthusiasm by the market.”
Now a new CEO can make a fresh start, which should include making structural and cultural changes in the organization, Chandler continued.
Mikan more than likely won’t be able to move the company in that direction, she said. “It is often difficult if not impossible for a sitting CEO to make the dramatic changes necessary to respond to disruptive shifts in the environment. A return of investor confidence depends on the capabilities of the new CEO and executive team.”