Question: Should Harry Denton be removed as CEO from Delarks?
As Suzy Wetlaufer described in her article, After the Layoffs, What Next? Delarks department store endured a significant transformational change. In just one year, the Midwestern department store chain transformed itself from a boring, outdated chain into a modern, fun, and trendy 28-store chain marketed to affluent baby boomer females. The new CEO, Harry Denton, was the catalyst for this change. When Denton was brought in, Delarks was on the verge of bankruptcy. Denton led the change process which saw Delarks revenues reach $400 million along with a 20% increase in the chain’s stock price within his first year. Due to the financial success of the turnaround, Delarks’ board of directors granted Denton a two year contract extension with increased salary and stock options.
To accomplish this turnaround, Denton incorporated several strategies including refurbishing all 28 stores within the Delarks’ chain. The previous outdated furnishings and layout were redesigned with a more modern and affluent look. To offset the large cost for the remodeling, Denton slashed overhead costs. Employee compensations were cut since Denton believed it was out of line with industry standards. In addition, to increase sales per square foot, Denton initiated “link selling” across the sales floor and adjusted salespeople’s pay from salary-based compensation to commission-based compensation. To implement and execute link selling successfully, Denton needed a highly trained salesforce that were astute to the new, urban, modern, and trendy merchandise that Delarks was now carrying. This led to the layoff of many longstanding salespeople, many of whom were low producers and did not have the abilities to execute link selling; to persuade shoppers that entered the store looking for one item to leave the store having purchased multiple items. While not all of the downsizing initiatives were disputed, some...