Going From CEO to HR Minder at Kohl’s

At first blush, the move by retailer Kohl’s to replace chief executive Larry Montgomery and assign him functions including HR looks odd. It seems like a demotion, even, for the longtime executive.

But the recent shift, which included promoting company president Kevin Mansell to CEO, is likely a wise one in keeping with Kohl’s reputation as a talent management leader, observers said.

If anything, the fact that an ex-CEO is supervising HR at a major corporation may be a sign of how important human resource issues are becoming.

“In a lot of ways it makes sense,” said Anne Brower, senior partner at retail consulting firm McMillan Doolittle. “Talent and talent management are critical in a retail organization.”

Kohl’s announced August 21 that Mansell, who has been the retailer’s president since 1999, had assumed the role of CEO. The company said Montgomery, who became CEO in 1999, will remain chairman of the board and “will hold full-time management responsibilities for the organization’s strategic growth and talent management initiatives.”

Kohl’s said Montgomery would continue to manage the human resources, legal and real estate departments.

Montgomery made $2.8 million in total compensation during the company’s 2007 fiscal year. Mansell made $2.3 million.

Menomonee Falls, Wisconsin-based Kohl’s is a department store chain that operates 957 stores in 47 states. Like other retailers, Kohl’s has been wrestling with a sluggish economy. Its net income for the quarter ended August 2 dropped 12 percent, to $236 million, though its net sales rose 3.8 percent, to $3.7 billion.

Brower dismissed the idea that Montgomery’s new role is punishment for poor performance.

Kohl’s looks to be operating well “in a very difficult environment,” she said.

In its press release, Kohl’s portrayed the executive changes as well thought out.

“As one of the fastest-growing department stores in the country, a strategic, long-term succession plan has been integral to Kohl’s success,” the company said. “Mansell’s promotion is the most recent demonstration of this strategy.”

It’s not unusual for a CEO to want to stay involved with a company’s talent, said Jeffrey Cohn, a succession-planning advisor.

When a veteran executive coaches the company’s rising stars, he or she benefits as well. It’s a “way for them to cement their own legacy,” Cohn said.

Montgomery’s HR role is a natural for Kohl’s, he said. “It’s a great company for talent management,” Cohn said. “They spend quite a bit of time mentoring young talent.”

The management shake-up at Kohl’s comes as many companies are tapping business execs to take on HR. A quarter of the Fortune 1,000 have selected their HR chiefs from outside divisions, according to the Center for Effective Organizations, a research group.

Boston University management professor Fred Foulkes said that keeping and developing talent is a challenge for the retail industry. Montgomery’s new role could increase the visibility of the HR function at Kohl’s, he said.

Foulkes also credited Kohl’s for promoting from within to fill its CEO post. That reduces risk and sends the right message to employees moving up the ranks.

“It’s very motivating to the people coming along,” he said.

—Ed Frauenheim

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