Nobody is bigger than the business, it’s often said, and the test of great companies is that they continue to perform when leadership changes.
But in retail, so often led by big personalities, who is in charge frequently defines sentiment towards particular companies.
In that respect, the industry is a bit like football, where there is sometimes a messianic belief in superstar managers or ferocious debate about who would do best at Manchester United – and whether the manager is more important than the club.
This week, retail’s Man U – or perhaps its Real Madrid – Spanish fashion giant Inditex, surprised the market by installing a new chair and chief executive. That unnerved investors and its shares fell on the news.
That was partly because the changing of the guard was unexpected, but also reflected nervousness about the departure of executive chair Pablo Isla.
Isla has been at the Zara owner since 2005, served as chief executive and took up his current role in 2019. During his time Inditex consistently scaled new heights and consolidated its position as one of the world’s biggest fashion retailers.
So it is unsurprising that his departure unsettled investors.
However, in all the noise about his exit and contribution it is easy to forget that when he joined there was similar unease about his own appointment – was a former lawyer the right person to run a fashion retailer, it was asked.
Throughout his tenure at Inditex, however, Isla has proved a worthy custodian of what is fundamentally a family business, founded by Amancio Ortega who retains a 59% stake.
Strength in humility
Unlike some of his UK counterparts, or certain football managers, he has always remained modest about his achievements – and that was one of his greatest strengths.
On the contrary, humility was Isla’s guiding principle. He once told Harvard Business Review: “The strength of our company is the combination of everybody, much more than of any single person. And I can tell you that as a company, we try to be a low-profile company, being humble, of course being very ambitious, but being humble.”
That culture of humility runs through Inditex like the letters in a stick of rock, according to people who know the business well.
Assuming so, there is no reason to doubt that it will change under new chair Marta Ortega Pérez, the founder’s daughter, and Óscar García Maceiras, Inditex’s general counsel who is now stepping up to become chief executive.
There is reassurance too in the team around the new pair at the top. Carlos Crespo, Inditex’s chief executive since 2019 and an Inditex staffer for two decades, will remain at the retailer as chief operating officer, leading operations, digital transformation and sustainability.
That too is evidence of true company culture – others would have walked rather than be ‘demoted’.
That culture of humility runs through Inditex like the letters in a stick of rock
Many members of Inditex’s management committee have similar or even longer periods of service under their belts than Crespo, so there should be no danger of the retailer spinning off in an eccentric or wayward direction.
There seem to be no grounds for fear either that Marta Ortega’s elevation represents family interest over other shareholders.
She has worked her way through the company, starting on the shopfloor in London, and according to the retailer has since “led in the strengthening of Zara’s brand image and fashion proposition, an area she will continue to oversee”.
In fact, family dynasties at public companies need not be a bad thing – just look at the Weston family’s custodianship of Primark owner ABF. They can bring deep affinity with a company’s heritage and values, and replicate them anew as times change.
Inditex should also be protected by its unique model, spanning the whole chain from manufacturing to store insight on the styles that fly, a model that has propelled the retailer’s growth and speed to market.
While Inditex’s shares fell on the news of Isla’s departure, they have since recovered some of the ground lost.
This indicates that the market, having paused for thought, believes Inditex’s strengths remain – the business is bigger than the person. There could be no greater testament to Isla.
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