Fletcher, John E. 1952–
John E. Fletcher
Managing director and chief executive officer, Coles Myer
Born: 1952, in Melbourne, Victoria, Australia.
Family: Married Nola (maiden name unknown); children: three.
Career: Brambles Industries, 1974–1982, accounting, operating, and senior management positions; 1982–1984, general manager of Transport Division; 1984–1986, commercial director; 1986–1988, managing director of CHEP Australia; 1988–1993, managing director of Brambles Australia; 1993–2001, CEO; Coles Myer, 2001–, managing director and CEO.
Address: Coles Myer, 800 Toorak Road, Tooronga, Victoria 3146, Australia; http://www.corporate.colesmyer.com.
■ Over the course of his career, John E. Fletcher pulled two of Australia's ailing businesses out of slumps at considerable profit to shareholders. While the better part of his career was spent with Brambles Industries, an international business-to-business industrial-services company, he later took the helm of Coles Myer, Australia's largest retailer. Some analysts and corporate executives saw his switch from service to retailing as holding the potential for failure; Fletcher did not share their opinions. He confidently commented to a reporter, "Brambles wasn't a small company. It had 40,000 employees, it was multibranded, and it operated in 26 countries. That gives you some experience in managing diversity and complexity" (November 14, 2002).
TURNED BRAMBLES INTO AN INTERNATIONAL POWERHOUSE
The Australian-based Brambles, a building-materials and transport company, was established in 1875. By the time Fletcher stepped down from his position as CEO, it provided business-to-business industrial services in more than 30 countries worldwide. Although planning his retirement for March 2001, he stayed with the company to negotiate a long-anticipated merger with the British engineering giant GKN, a deal that was finalized later that year for £7 billion.
Brambles went through a period of rapid international growth in the 1980s, and Fletcher was a major driving force behind that growth and the company's development into one of Australia's truly multinational corporations. The turnaround rewarded shareholders generously. In an address to the company's annual general meeting on November 10, 2000, the day he announced his retirement, Fletcher noted that Brambles had shifted from earning 64 percent of its profits in Australia in 1994 to earning 66 percent offshore in 2001. During that six-year period, he led the company in realizing a 15.4 percent annual growth rate, which he credited to the company's dedicated staff worldwide. Fletcher was also quick to admit to failures. In his address at the annual general meeting in November 2000, he noted: "We didn't get everything right. We made some mistakes, but that generally comes with progress."
When Fletcher announced his planned retirement for March 2001, he delineated the five-year strategic plan he had already developed for the company and left shareholders with a vision. "We will have built a stronger Brambles, a better Brambles: the world's first truly global industrial-service company with global brands," he said at the November 2000 annual meeting. The chairman Don Argus said that Fletcher was leaving the company in a strong position and with a clear strategy. He also said Fletcher's service was outstanding and that having successfully run an international company for eight years was a tribute to his skill, determination, and resilience.
Although Fletcher had planned to retire, members of the board of Coles Myer had different ideas for him. Following the merger of G. J. Coles supermarkets and the Myer Emporium department-store chain in 1985, Coles Myer became Australia's biggest owner and operator of retail stores. By 2004 the company employed 165,000 people and owned and operated more than a dozen retail brand chains, including Bi-Lo super-markets, Coles supermarkets, Coles Express Shell Service Stations, Kmart, Liquorland, Myer Grace Brothers, Target, and Officeworks. However, as the 21st century began, Coles Myer was suffering under falling sales, poor stock decisions, and tumbling stock prices and was looking for a way to stop the decline.
After a four-month-long international search the board approached Fletcher, who accepted the offer they made and assumed the role of managing director and CEO on September 10, 2001. Not everyone was enamored with the choice, however, including the board member Solomon Lew. Although Fletcher had gained an impressive reputation at Brambles, he had no retail experience; he even admitted to Michael Rowland of Radio National that until just a few days before their interview, he had never been into a supermarket and had no desire to enter one (August 18, 2001).
Fletcher was undaunted by the challenge he faced. He felt his business skills to be the most important factor in the equation, not the type of business in which he had honed them. He did acknowledge, however, that with no experience in retail he would have to negotiate a steep learning curve and would need to spend a significant amount of time in supermarkets and department stores. "I'm going to have to learn fast. But I think I'll learn fast enough to understand when someone's got a proposal that's going to create value; and if he doesn't, he'll only do it once," he told Rowland (August 18, 2001).
Martin Duncan, the retail analyst from Macquarie Equities, commented in an interview with Radio National that Fletcher had an excellent business reputation. He expressed confidence in Fletcher's logistics and supply-chain experience and felt that Fletcher's lack of retail experience would allow him to make decisions people with emotional ties to the industry could not. "It would be hard to walk away from some of the things that Coles has been doing for the last few years if you were an out-and-out retailer. So he can perhaps take a harder approach" (Daniel, March 30, 2002). Fletcher's appointment brought confidence to Coles Myer investors: while Brambles shares fell 10 percent following his departure, Coles Myer shares soared 13.7 percent the day Fletcher's appointment was announced and another 1.9 percent the following day.
CLEANED HOUSE, CHANGED CORPORATE CULTURE
Fletcher wasted precious little time in letting his executive team know how he would approach the challenge before him. He indicated that strategic plans would be reassessed, all opinions would be considered, nothing was sacred, and everything was up for debate. His first task was to launch "Operation Right Now," a company-wide strategic review under which upper management received a major shakeup. After receiving his first management report in early 2002, he was unimpressed with the corporate culture. He found it lacked cohesion and failed to foster communication or cooperation. He felt that the company's clothing retailers—Target, Kmart, and Myer Grace Brothers—were competing with each other instead of pulling together as a team in the best interests of the corporation; many top executives from the different businesses had never even met.
Under Fletcher's plan for cultural change, the businesses would share a common goal rather than cannibalize each other. In a first step toward cohesion, Fletcher took two hundred of his top executives from around Australia and New Zealand to a three-day retreat in Melbourne. For some, it was their first corporate meeting. A new company slogan arose from that conference: "Group first, brand second, both winning." He was determined that his senior executives and top two hundred managers would work together as members of one company rather than of eight different ones.
Fletcher's plan included streamlining and cutting costs by 5 percent, or approximately AU$300 million, by 2004. He would slash top-level bureaucracy in the supermarket and department-store arenas and centralize administrative functions. He received four direct reports when he first stepped in as CEO; a year later he received eleven. His plan also called for some large capital expenditures—of approximately AU$800 to AU$900 million annually over a four-year period—primarily on information technology, supply chains, and logistics. This sum was about AU$200 million higher than most analysts had predicted it would be. His radical changes stirred up considerable animosity in some quarters, particularly with the board member Lew.
UNREST AT THE TOP
Lew, an entrepreneur who created a small dynasty out of his father's failing clothing business, was asked in 1983 by the Myer family to invest in their financially struggling clothing chain. He did so, becoming chairman of Coles Myer in 1991. Along the way, he developed a reputation for being somewhat of a bully, perpetually believing his way was the right way. Although he owned a substantial chunk of the company, "being director of Coles Myer was still his passport to recognition and respectability," one close observer was quoted as saying in an article in the Sydney Morning Herald (November 23, 2002).
Lew vehemently opposed Fletcher's vision for Coles Myer, did not like his independent management style (Fletcher seldom sought Lew's advice), and disagreed with his concept of cultural change. Following the company's annual meeting in November 2002, the chairman Rick Allert announced that eight of the ten board directors, including Fletcher, had recommended that shareholders not reelect Lew at the next annual meeting, stating that they wanted a harmonious board that would provide full support to Fletcher and his team. They noted that some of Lew's director-related entities—companies on whose board he served—and other parties with whom he had business ties, supplied goods to Coles Myer's competitors. Fletcher, meanwhile, had committed to taking Coles Myer from being not only the largest but also the most successful retailer in Australia. Allert stated that during Fletcher's first 12 months, he had brought a "new perspective, different culture, and an inspiring style of leadership. There is genuine enthusiasm in the business and the results are beginning to speak for themselves" (November 16, 2002).
Adele Ferguson cited Fletcher as saying prior to the board meeting, "Lew's reelection would cause me to revisit my role"; in other words, Fletcher virtually forced shareholders to choose between him and Lew, a stance that set a precedent in Australia's corporate world. "A chief executive is, in effect, deciding who should be on his company's board, rather than the board deciding on the chief executive" (November 14, 2002). Shortly thereafter, Lew was voted off the board entirely following the largest public reelection campaign in the corporate history of Australia.
HITTING THE TARGET
When addressing shareholders at the company's annual general meeting on November 26, 2003, Fletcher said Coles Myer would continue its "rigorous and disciplined approach" to business management and capital investment in order to ensure continued growth. "This team is committed to unlocking the full potential of our combined businesses for our customers and for you, the shareholders, for the first time in Coles Myer's history," he said.
Indeed, in 2003 Coles Myer shares rose more than 20 percent, well outperforming the broader market increase of about 6 percent, and the company achieved a better-than-expected net profit of AU$455 million for the year. Second-quarter sales reached AU$8.6 billion, an increase of 14.5 percent over the 13 weeks ending January 25, 2004. Fletcher was confident that the company would reach a net-profit target of $800 million by 2006.
See also entries on Brambles Industries Limited and Coles Myer Ltd. in International Directory of Company Histories.
sources for further information
Allert, Rick, "Time for Change to Coles Myer Board," The Age, November 16, 2002, http://www.theage.com.au/articles/2002/11/15/1037080914736.html.
"Chairman's and Chief Executive's Address to the Annual General Meeting, Sydney," Brambles Industries, November 10, 2000, http://ir.brambles.com/brambles/investorcentre/shareholder/agm/agmdownloads/docs/2000-11-10aus.pdf.
Coles Myer, "Coles Myer Second-Quarter Sales Up 14.5 Percent," news release, February 12, 2004, http://corporate.colesmyer.com.au/shared/SecondQuarterSales_120204.pdf.
Daniel, Zoe, "Analyst's Response to Coles Myer Moves," Radio National, March 30, 2002, http://www.abc.net.au/rn/talks/8.30/busrpt/stories/s519862.htm.
Ferguson, Adele, "Strategy: Fletcher Returns Fire," BRW.com, November 14, 2002, http://brw.com.au/stories/20021114/16916.asp.
Fletcher, John, "Address by CEO," Coles Myer, November 26, 2003, http://corporate.colesmyer.com.au/shared/261103CEOsAddressAGM2003X.pdf.
Hewett, Jennifer, "Director's Cut But the Show's Not Over," Sydney Morning Herald, November 23, 2002, http://www.smh.com.au/articles/2002/11/22/1037697879113.html.
Rowland, Michael, "Coles Myer's New Billion-Dollar Man," Radio National, August 18, 2001, http://www.abc.net.au/rn/talks/8.30/busrpt/stories/s348509.htm.
—Marie L. Thompson