April 4, 2019

Lidl culls its bigwigs, but can't stop growing

You're fired! (photo: ojogabonitoo/iStock by Getty)
It used to be fun being one of the boss men, but not if you work at Schwarz Group these days. Klaus Gehrig, the mighty figure of power running the German retail giant founded by secretive entrepreneur Dieter Schwarz, seems to revel in home-made creative disruption. In increasingly frequent purges the 70-year-old corporate veteran regularly gives his top brass the chop, regardless of their sales achievements. No one is sacrosanct and no one is spared, if they question the general partner's structural changes.

In an unmistakable power shift from operations to the consultative committee headed by Gerd Chrzanowski (47) at HQ in Neckarsulm, top managers are often obliged to vacate their offices so abruptly that no immediate replacement can be found. Only three weeks ago, Patrick Kaudewitz, CEO of hypermarket subsidiary Kaufland, had to make his goodbyes; now it is the turn of Jesper Højer, CEO of discounter Lidl, to say his sad farewells.

Ignazio Paternò, a former head of Lidl Italia and currently deputy director of purchasing at Lidl Foundation in Neckarsulm, will assume Højer's role on an interim basis. The new supervisory body Schwarz Treuhand (SUT) is expected to make this arrangement permanent as early as this spring. But, at the current rate of survival, Paternò will last only two or three years.

We all love to moralise and journalists more than most people. It would be immensely satisfying to write how the arbitrary ruthlessness of Klaus Gehrig is ruining the company for good and all. But this would create a false causality. In fact, with sincere apologies to both idealists and the tender-hearted, the very opposite would seem to be the case...

Schwarz Group CEO Klaus Gehrig (photo: Schwarz Gruppe)
Giant slayer: Looking somewhat avuncular, Klaus Gehrig could perhaps be mistaken at first glance for a harmless family man tending his cucumbers and pumpkins down at the local allotment in rural Swabia. That would, however, be a fatal mistake, if you happen to be a manager at Schwarz Group...
In fact, Lidl, which could post €80bn in sales this year, is booming. Despite the fact that Gehrig has got through four chief executives since 2014, the discounter has grown at an average annual rate of €4bn since 2012. Revenues have more than doubled over the last decade with store numbers rising from 9,000 to 10,500.

Lidl is also an international success story and now achieves more than two-thirds of its annual sales abroad. While Lidl Germany works on an estimated margin of 2.5 to 3 per cent (earnings before tax as a percentage of net revenues), numerous foreign operations make more than 5 per cent.

You're fired!

Meanwhile we have the strange case where the boss can't sack enough top people at a company that continues to go from strength to strength. What can we conclude from this counterintuitive phenomenon?

Klaus Gehrig at Schwarz Group (caricature: Oliver Sebel)
Klaus Gehrig: "The system is all, the individual is not so important"
The ritual letting of blood by the High Priest of Schwarz Group has certainly put a lot of senior discount talent on the market over the years, which under a different management culture would presumably still be working loyally for the retailer today. Former Lidl CEOs Karl-Heinz Holland, whom LetterOne might use to revamp Lidl España competitor Dia, and Sven Seidel, now board member for Multichannel Retail at Otto Group, are just two prominent examples.

What management consultants and retail experts might one day refer to as the 'Gehrig phenomenon' raises a number of interesting questions. Is he an inspired figure commanding one of the world's largest and most dynamic retailers or really Darth Vader in disguise? Will the actions of this giant slayer have negative results in the long-term not foreseen today? Could Schwarz Group have been even more successful without all these St. Bartholomew Day massacres in the C-suite?

Are Gehrig's regular culls only possible thanks to the solid efficiency of the Lidl concept and the strength-in-depth of its middle management? And should Dieter Schwarz hoist Gehrig by his own petard and sack him in the name of structural change despite the high sales growth achieved under his aegis?

Schwarz Group organigramme (LZ Retailytics)
A study in power: Schwarz Group's new organigramme
Gehrig has now ousted all Lidl and Kaufland managers with any operational experience from the supreme supervisory body Schwarz Treuhand, confirming Churchill's dictum that power always flows into fewer and fewer hands. The man himself uses only clinical words to explain his feeding frenzy at the top of the food chain: "The system is all, the individual is not so important." Friends, Romans, countrymen, have we not heard this somewhere before?

Perhaps one day it will all make for an interesting case study on the illustrious pages of the Harvard Business Review. By which time Schwarz Group will already have imploded like a dark star or surpassed Walmart...


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Read in German: "Viel Wirbel bei Schwarz" by Jan Mende on pages 1 & 3 as well as "Lidl wächst und wechselt die Chefs" by Hans Jürgen Schulz and Jan Mende in Lebensmittel Zeitung, no. 14, 05.04.19; "Erfahrung hilft nicht mehr" by Bernd Biehl on page 2 as well as "Schwarz-Gruppe stellt sich neu auf" by Jan Mende & Bernd Biehl on page 4 of Lebensmittel Zeitung, no. 12, 22.03.19; "Gehrig bestätigt Übernahmepläne für Real" by Silke Biester on page 6 of Lebensmittel Zeitung, no. 9, 01.03.19. Also available on LZnet: "Schwarz-Gruppe in Unruhe" (paywall).


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Comments for this article are closed.

  1. Tim
    Created 4 April, 2019 17:39 | Permanent link

    Comic take on management churn

    Darth Vader or is this Mr Stevens Head of Catering?
    https://www.youtube.com/watch?v=Sv5iEK-IEzw

  2. David Blakeman
    Created 8 April, 2019 12:05 | Permanent link

    Lidl culls its bigwigs, but can't stop growing

    I found this an interesting article. "Why?", I asked myself. I came to the conclusion that it was a feeling of empathy with the man concerned. "And where does this come from?", I asked myself again. I realized that Herr Gehrig is probably a man scarred by the experience of building a successful company, only to have it stolen by the accountants and those who believe they can do a better job than you.

    If my reading of the situation is correct, his reaction is rather extreme, but understandable. Mine was less impressive: lesson learned, sucked it up, and started again.

    Success comes in a myriad of forms, and those who create it, often from nothing, should not be expected to follow the usual trajectory.

  3. Tasneem
    Created 9 April, 2019 02:23 | Permanent link

    Lidl's expansion

    They are also expanding aggressively in UK and Spain. However we need to see the impact of the impending Brexit. https://www.swotandpestle.com/lidl/

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