Country Road’s howler

It’s a feeling that many entrepreneurs know well.

Your new hire is just a few months into the job, and already you can see they are not working out. Perhaps their skills aren’t up to scratch, perhaps their experience is not as deep as had been suggested in the CV. Maybe they just don’t fit your culture.

These things happen, particularly when you are hiring younger people in more junior rolls.

But what if that new staff member wasn’t working in the call centre or accounts?

What if they were the CEO?

That’s the problem that confronted the board of iconic retailer Country Road in the last few weeks when it became clear that the company’s new CEO, John Cheston, wasn’t “working out”.

Yesterday, Cheston departed from Country Road (it’s not clear if he walked or was pushed), with chairman Simon Susman citing “irreconcilable differences with the board over the future direction of the company” for the dumping.

“The differences regarding the future path of the business were fundamental in nature and were not capable of resolution. 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 said.

How embarrassing. Here is a board that conducted a four-month global search for a new CEO, found a seemingly experienced candidate (Cheston was previously the head of Singapore’s biggest listed retail and a long-time executive at UK icon Marks & Spencer) and then obviously failed to do the necessary due diligence on their man.

While we don’t know what the “irreconcilable differences” were, it does appear Cheston had quite a different view of Country Road’s performance and outlook to the company’s previous management.

One of his first acts as chief executive – after less than three full weeks in the chair – was to warn that the chain was being smashed by discounting in the retail sector, and issue a profit warning. In the end, profit in 2009-10 was down 21.3% to $12.3 million.

Whatever the case, the fact that no one on the board (or at the executive search agency, for that matter) picked up on the fact that Cheston had a different style or approach than what the board wanted is laughable.

A detailed, thorough and exhaustive due diligence process should have uncovered potential problems well before Cheston’s appointment was signed off on.

Investors, who include veteran rag trader Solomon Lew, will no doubt be keen to ask some pretty tough questions of the board in the coming weeks.

But the board should be asking tough questions of itself too.