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Meet the new Wesfarmers Stepford CEO

Elizabeth Knight

Rob Scott: He's a former Olympic silver medallist in rowing, an accomplished, successful and understated man who has tasted most parts of the Wesfarmers empire. As such he is the perfect candidate to be the next Wesfarmers Stepford chief executive.

Wesfarmers has its own DNA, its own culture, its own way of doing things. Former chief executive and current chairman Michael Chaney have it and so does the departing boss Richard Goyder. The group will recruit expert outsiders to run divisions but this corporate cult likes to grow its own CEOs.

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Robb Scott named new Wesfarmers CEO

Wesfarmers announces Rob Scott will succeed Richard Goyder, who will step down from the role towards the end of this year. Vision courtesy ABC News 24.

There were those among the talented direct reports like Bunnings former boss John Gillam and Target/Kmart chief Guy Russo who on paper looked like strong candidates. They both have serious operational credentials, stellar credentials at growing their respective businesses and of course loads of appropriate experience – given 80 per cent of Wesfarmers' earnings come from retail.

But neither fits that Wesfarmers mould well enough – not the right personalities.

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The chief financial officer, Terry Bowen, was in the mould but, word has it, genuinely bowed out of the running for health reasons.

Rob Scott was the bloke inside left standing. As Chaney put it on Tuesday, "Rob has a clear focus on The Wesfarmers Way".

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While Scott says that in 10 years the conglomerate may look very different than it does today, its evolution will be managed in the same way. It will retain its focus on tradition on longer-term returns to shareholders even at the expense of short-to-medium-term returns on equity.

To say that its management and board are not concerned when investments are not performing or the share price is under pressure, is nonsense. It is just that Wesfarmers has a belief that it is best placed to judge when and what assets to buy and sell and how to allocate capital to each of the businesses.

No better example is Target – which has been a basket case for years but one that Goyder has steadfastly refused to close or attempt to sell – despite calls from shareholders to do so.

He had to white-knuckle the years following his acquisition of the Coles retail assets after the global financial crisis made that mammoth deal appear like a nuclear-size explosion of shareholder funds.

To his credit Goyder held firm, put the right people in place to turn around Coles. He also found an expected ally in its major competitor, Woolworths, which engaged in a series of strategic blunders on which Coles-Wesfarmers capitalised. It was a particularly lucky break for Goyder.

Goyder now counts this acquisition as his major success, although notes that post-acquisition was a challenging period "because people were throwing things at us".

Scott is walking into this role with a different set of challenges. Where Goyder needed to – and did – turn around retailers Coles and Kmart, Scott has to defend those wins.

Woolworths – from five or more years of losing market share to Coles – is now in comeback mode. It has a new fightback strategy and next week when it reports its result, we will see the first real signs of its closing the gap on Coles in terms of growth.

Scott will also have the challenge of making Wesfarmers' first foray abroad – its acquisition and expansion of hardware into Britain – work. It is a risk that many analysts are not particularly comfortable with. Goyder took the plunge but Scott will be judged on the execution and its success.

The key message that the Wesfarmers board has sent by appointing Scott is that the company's conglomerate tag will remain – even if it proceeds with the sale of its coal business.

Scott has served time outside as an investment banker and within Wesfarmers' head office strategy team, which is in effect its internal deal-finding division.

Goyder wasn't a retailer either but when he took the role, the retail assets were a much smaller part of the overall business – not 84 per cent of the enterprise value that they are today.

Scott has had a taste of the many segments of Wesfarmers, served as chief financial officer for Coles for a while and most recently has run the industrial division.

He is not a retailer but he IS a Wesfarmer.

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