Following the surprise exit of Simon King, Asda has found its new COO in Judith McKenna, its long-term financial chief. Ian Quinn looks into the reasons for casting CFOs in operational roles
Is it a sign of the times when one of the UK’s leading supermarket chains promotes its chief financial officer to chief operating officer? The simple answer, as retailers batten down the hatches for more stormy weather, is yes.
But the rise of Judith McKenna, long-term CFO at Asda, also illustrates how money men and women are becoming increasingly adept at casting off their stereotypical images as glorified bean-counters to take on key operational roles.
McKenna was appointed last week following the surprise exit of Simon King, who lasted less than six months after allegedly failing to see eye-to-eye with Asda CEO Andy Clarke. That doesn’t seem to be the case with McKenna, who recently joined Clarke on stage at an Asda shareholders’ meeting dressed as Kate Middleton to his Prince William.
In taking over King’s role, she will no doubt be hoping to channel some of Kate’s ability to charm the masses. She has clearly already won over the Walmart senior hierarchy. Clarke claims McKenna, who has been at the retailer for 15 years, “lives and breathes Asda” and goes so far as to say she has “reinvented our retail future” in the wake of her key role in driving Asda’s £778m acquisition of Netto. His comments echo Walmart CEO Doug McMillan who in May said she had done a “great job” on the Netto deal.
However, the honeymoon is unlikely to be a long one. They’ll be expecting to reap the rewards of the deal on McKenna’s return in September from a planned family holiday. “The Netto deal was Asda’s first big acquisition of this kind,” says one senior retail insider. “Asda is effectively saying to her: ‘You’ve done the numbers, now go and make it work’.”
As COO, McKenna, who prior to Asda held roles at KPMG, Allied Domecq and Carlsberg Tetley, will be responsible for all the retailer’s retail operations, including its stores, distribution network and IT systems. Her finance background will prove invaluable in the current climate, believes one former supermarket CEO.
“I think it says a lot about where Asda is today, but I think it’s also a complete reflection of where the market’s at today,” he says. “Previous COOs at Asda have very much been product and trading people. Putting someone from a financial background in signals a change but it’s a very sensible move. The COO job is really a very nuts-and-bolts job. She is obviously trusted by Walmart and they need somebody who knows the numbers inside out.”
Dr Martin Scott, a partner at McKenna’s old firm KPMG, agrees. “I believe Asda having someone move into a COO role from a CFO background might prove to be an extremely enlightened move,” he says. “In this day and age, financial professionals are not bookkeepers. They are completely involved in all aspects of the business. In this ferocious climate, having a complete understanding of the economic strategy of the company is critical.”
Morrisons holds its finance chief in similarly high regard. It gave its group finance director Richard Pennycook a £1.25m shares package to keep him on board following widespread speculation he might follow former chief executive Marc Bolland to M&S. Pennycook had been tipped as a potential candidate for the top job, but lost out to Dalton Philips. Some experts now regard McKenna as a possible successor to Clarke. John Rogers, CFO at Sainsbury’s, is also being tipped as potential CEO thanks to his strong financial and property track record.
McKenna wasn’t the first and won’t be the last CFO to be promoted to a more operational role. The big question is whether a financial heavyweight can ever reach the very top of the grocery tree which still tends to be occupied by those who’ve come through the retail route like the two Clarkes, who both started out on the shop floor.
McKenna now will have the eyes of Asda, Walmart and analysts on her as never before, but if she can make the Netto acquisition work, who knows perhaps she’ll take that next step.