The Changes at Quiksilver; A Broader Industry Organizational Perspective

On Monday, The Editors at Boardistan, posted a still evolving story about cuts to Quiksilver’s team rider programs. Here’s a link to the post. As Boardistan points out, at that time there had been no official announcement from Quik, so we didn’t know the extent of the changes. 

They then make the insightful comment that “…Hollister doesn’t spend a dime on “core teams” and they don’t seem to be having any problem in the “So Cal inspired clothing for Dudes and Bettys” space.” Good point.
 
Since the Boardistan posting, Transworld Business and Shop-Eat-Surf have reported related stories, and we’ve also learned that Quik is also cutting certain brands and staff.
 
With the management changes that have happened and are happening at Quik, it’s hardly surprising that we’d see some things done differently. Tactically, it would make sense to me to cut team programs some. I can’t find the article (I have too many articles) but it was some years ago I suggested that your very best team riders have value and the guys you flow product to and maybe pay for wins or photo credits have value, but that it was time to take a look at the value of the members in the middle of a larger team. A lot of brands have done that.
 
Strategically, if it makes sense to cut your team budgets now, then it probably made sense a few months ago or even longer. Why didn’t it happen sooner at Quik? Or, for that matter, at other companies.
 
In recent years, we’ve watched management and organizational transitions at Spy, PacSun, Billabong, Burton, and Quiksilver. In at least some cases we’re still watching and I’m sure there are some other companies that should be included in the list.
 
Remember when Burton cut The Program? In the press release, or in an interview, Jake said something like, “I didn’t want to do this, these people are my friends, I fought it and tried to figure out another solution, but the annoying and persistent finance people on my board wouldn’t leave me alone.” From time to time, I am one of those annoying and persistent finance people, so I know exactly what he meant.
 
Organizations have momentum. People don’t like to change. Successful entrepreneurs have a high level of self-confidence and capability or they wouldn’t be successful entrepreneurs.   
 
A founding entrepreneur or long time CEO is successful partly because of the values she has imbued the organization with and the consensus around what the company is about. There is a sense of “how we do things” that gives comfort not just to the stakeholders (of which the employees are one part) but to the CEO as well. People have an understanding of their place in the company and their responsibilities that goes beyond their box on the org chart. At its best, this can be liberating and create efficiencies.
 
But it only works as long as the competitive business environment it was created to function in doesn’t change too quickly or dramatically.
 
In 2008, we experienced that quick and dramatic change. We are still experiencing it. And we experienced it suddenly after the best economy for the longest period anybody has seen for, well, forever.
 
Those of you who might have followed the travails of JC Penney (Excuse me, I mean JCP) know that attempts to fundamentally change a company’s market positioning and way of doing business aren’t unique to the action sports/youth culture market, nor are they easy.
 
You’ve probably also noticed that it’s typical for the pressure to build and then for the change to begin with a defining event.  The period immediately following that event often seems a bit chaotic.
 
If you’ve reflected on my descriptions of organizations above, maybe that’s not such a surprise to you. My experience in turnarounds is that really fundamental change is resisted as long as it can be (hence the need for the turnaround. Typically, it is some outside stakeholder that forces the change. It can be the banker, the accountant, investors, or a tax authority (hint: it’s a really, really, bad idea to use payroll taxes as a short term source of working capital).
 
Prior to the defining event that leads to the organizational change there’s almost always, as I’ve described it before, “more of the same” going on. “If we do the same thing, but work harder, we can solve this problem,” is the way the thinking goes. I have also called it “denial and perseverance in a period of change,” and I think that’s a damned good phrase. That will often extend to claiming that required changes are being made, but they are tactical rather than strategic and don’t truly address the new business environment.
 
But what would you expect when you’ve got an organization created to function under a set of assumptions and positive business conditions that have lasted for decades that suddenly, in a few months, change so dramatically that in some sense those business conditions cease to exist? The existing organization, the existing management, the existing relationships, may simply not be capable of coping with the new environment and making the required changes. That’s not what they were optimized for.
 
When you’re dealing with a difficult business situation, it starts to wear on you after a while. Where it used to be fun to get up and go to work (most days- there is no perfect job), now it’s a struggle. If it’s tough enough, you spend most of your time talking with suppliers, bankers, and investors and worrying about cash flow. It takes an incredible amount of time and energy, but doesn’t do anything to help you address the new business environment. The management team, and the entire organization, starts to get a little beat up. Attitudes can turn negative.
 
Interestingly, that’s the moment when you can get the most accomplished in the shortest amount of time. The CEO’s I respect the most are the ones who figure out what has to happen but decide they don’t want to be the ones to make those changes and aren’t the right ones to do it.
 
So you end up with a new CEO. That CEO has incredible situational authority, at least for a while, exactly because the change has been resisted long enough that things are tough. He doesn’t have the personal relationships or vested interest in the organization that the previous CEO had. Look, when you walk into a company and they say, “Welcome Jeff. We can’t make payroll next week. What should we do?” it’s incredible liberating because there’s nothing you can’t try.
 
Inevitably, the changes are a bit chaotic because they’ve been put off too long, change fundamental things about the company, and usually happen fast. Insecurity among employees can also be coupled with a sense of relief, because they all knew something had to happen.
 
When we hear about these dramatic and maybe unexpected changes from Quik or any other company going through this process, let’s by all means feel bad that people are losing their jobs. Let’s also remember that the goal here is to keep Quiksilver a successful, profitable company that supports the surf industry and provide jobs and careers to the people still working there.
 
For the reasons I’ve described above, the change process in companies facing a dramatically new business environment can often by chaotic and look pretty awful at first. Typically, however, it’s happening for a good reason and needs to happen. To that extent, I look at it as positive.

 

 

3 replies
  1. Micky
    Micky says:

    Generally, people don’t like change but just want things to “get better”. Change, is the only way to make things better or different to the way they currently are. It can be painful at the time but necessary and for the long term benefit of the company.
    We share similar views on team riders Jeff and there has been very few team riders who have managed to really sell product over the years. Travis Rice on a board really does sell the board, Jamie Lynn Jacket was one of the best selling snowboard jackets of all time! The obvious, most recent example of a rider “selling” product is the Sean White line. I am sure there are a few more but not that many!
    If you imagine that most successful companies have around about a 10% net profit so if a company gives a team member $10,000 per year, then that rider would need to generate an additional $100,000 in sales, just to pay his own salary. I sincerely doubt that 99% of paid team riders come even close to that number.
    While change can be painful, it is a necessary evil in order for any company to continue to evolve and to hopefully prosper.
    Nice article.
    Cheers
    m.

    • jeff
      jeff says:

      Hi Micky,
      I’m guessing that a financial analysis similar to what you just did in your comment was pretty much the reason for the Quiksilver team changes.

      Thanks,
      J.

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