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Paul Krugman Takes Down Eddie Lampert

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Sears CEO Eddie Lampert hasn’t figured out a way to attract customers, but he’s peerless when it comes to attracting criticism.  Economist and New York Times columnist Paul Krugman is the latest to volunteer scathing judgment.

“If the different divisions of Sears have no common interests, if the best model is competition red in tooth and claw, why should Sears exist at all? Why not just break it up into units that have no reason not to compete?” opined Krugman.

The most withering criticism of Sear’s performance has been focused on Lampert’s radical restructuring of the 120 year-old company’s divisions. In an effort to generate better, deeper and more actionable data, and to revitalize the company’s performance by infusing it with a  spirit of internal competition, Lampert splintered the company into thirty warring divisions.

But rather than a productive rivalry, a corrosive war ensued. Division’s began to compete directly with each other, cannibalizing Sear’s customer base. Each division’s bonus is based on its own individual performance incentivizing one division to inflate its numbers at the expense of another. Kenmore, a stand-alone unit within the Sears constellation, discovered it could gin its numbers by selling outside merchandise, a maneuver to the advantage of the division but disadvantage of the company at large.

And the internal fight for resources rose to the level of adversarial rancor. Insiders report that division heads annually petition for  funding directly from Lampert, who presides over the solicitations remotely by computer at his $38 million mansion in Florida. They desperately inflate their revenue projections while Lampert distractedly dispatches emails, hardly ever looking up from his computer’s screen.

Lampert, a former hedge fund manager, actually runs Sears like a hedge fund portfolio, fracturing the sprawling company into a series of compartmentalized units, all locked in battle with one another. Ideologically committed to free market principles, Lampert believes that competition in divisions should catalyze better performance, compel budgetary streamlining and encourage more rational business strategies.

 

 

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