Leadership: Mudo

Unit 3, Professor Jeff Polzer, Leadership: The Transformation of Mudo.

A founder hopes his company can keep running without him, and still waits every day for the sales figures. Mudo's transformation took place while both of these wishes were alive at once.

Here goes — enjoy:

Case Summary

Mustafa Taviloğlu founded Mudo in 1964, starting with a small record and gift shop and gradually moving into apparel, furniture and home goods. He had a gift for spotting trends, and deep business relationships. Many of the key decisions in the company's growth came from his intuition and drive.

As the company grew, this reliance on one person began to strain. Managers were used to taking orders, and cross-functional coordination was weak; his son Ömer had been with the company for years, and father and son wanted professional managers to run the business, with the next generation taking on the chairman's role. They chose to keep family control and drive the reforms themselves.

In March 2012, Accenture partner Barış Karakullukçu became CEO. She knew systems and organizational change well, but had no direct experience running a retail business. The company had more than two thousand employees at that point, and its merchandise, store formats, logistics and management relationships were all complex.

The apparel business faced more and more competitors, and its original value-for-money proposition and positioning had eroded. Furniture sold relatively well in large dedicated stores, but when placed in mixed apparel-and-home department stores, it was constrained by display space, storage and logistics. The two kinds of customers also had completely different purchase cycles.

The new CEO overhauled the information systems, supply chain, performance management and team. Complaints fell from about 200 a month to 20. The head of home goods cut redundant merchandise and adjusted pricing and delivery; from 2012 to 2014, home goods EBIT went from a loss of 5.7 million lira to a profit of 7.7 million. Over the same period, apparel EBIT fell from a profit of 10.7 million to a loss of 1.6 million.

By the end of 2014, professional management had gained some authority, and budgets were getting tighter and tighter. The founder still wanted to open 50 new stores over the next three years; the CEO's analysis supported only a few of them. What she had to answer was how, in the next phase, to make the organizational improvements truly show up in business results.

My Thinking

The transformation needs to be evaluated piece by piece

The progress in home goods and the decline in apparel need to be acknowledged at the same time. The former's EBIT improved by 13.4 million lira; the latter's worsened by 12.3 million. Calling it either "a successful transformation" or "a failed transformation" flattens the very difference most worth understanding.

My own judgment is that this CEO made changes worth keeping, but has not yet delivered on her promise of economic results. Backing her to continue doesn't mean accepting a self-assessment of nearly full marks; holding her accountable should also acknowledge the constraints imposed by the business cycle and the way shareholders make decisions.

Professionalization has to reach everyday decisions

Authority is only real when everyday behavior acknowledges it. A new org chart can show a chairman, a CEO and business heads, but if employees still receive instructions that bypass their superiors, they'll keep guessing whose word counts more.

Late in the case, the CEO and her team handle about half of decisions on their own, about 40% require consultation with the son, and the remaining 10% still need the father's approval. These changes are meaningful, and they also show that professionalization is still under way. What needs to be spelled out further: which issues can be challenged, when discussion ends, and who owns execution once a decision is made.

The founder's experience deserves to be translated

Good governance should make experience usable by others. For someone who created a company, giving up decision rights doesn't mean ceasing to care about it. His ability to see opportunities doesn't disappear with a change of title, either.

I would keep his observations on merchandise, trends and locations, ask him to explain the signals behind his judgments, and then have the team validate them. That's more constructive than simply treating intuition as an obstacle. At the same time, when validation doesn't support an investment, the rules must allow the company to say no.

The successor's caution needs an outlet

Prudence without a standard of evidence can turn into endless waiting. Ömer explains his conservatism by the fact that he once bore the consequences of bad decisions. Understanding this is what keeps a governance conflict from being reduced to a clash of personalities.

My own leaning is to agree up front on what information is needed, how big a loss is tolerable, and when a decision will be made. The chairman needs to keep overseeing, and also needs to let the team act once the information is sufficient. Trust is sometimes built by jointly acknowledging uncertainty.

The next phase should reduce the number of simultaneous changes

What a company spends isn't only project budgets, but also its limited management attention. Launching 50 projects in the first 18 months shows the force of the reform; still running a large number of projects afterward may also mean resources are spread thin. The late arrival of the apparel head is a timely reminder that building support systems and fixing commercial problems need a sensible sequence.

I would first make cash, apparel merchandise and conversion, home goods shrinkage, and store-format economics the core tasks. For new stores not yet committed, hold off on taking on further obligations, and compare store by store the cost of continuing, adjusting, renegotiating the lease or exiting. Marketing can be tested on a small scale, but the merchandise has to be good enough to hold the customers it draws into the store.

Takeaways for Arcus42

Responsibility needs matching decision rights. When someone is asked to be accountable for results, they should also be clear about what they can decide, and which questions need to be decided jointly.

Passing on experience has to land on specific judgments. Rather than asking the team to imitate the founder's style, explain which signals a judgment looked at and which options it discarded.

Process metrics need to connect to service outcomes. Better processes have value, and they also need to be checked continually for whether they reduce customers' confusion, waiting or repeated confirmations.

Priorities mean being willing to pause some things. When every project is important, it's hard for managers to truly protect the most important work. Carrying a few things all the way through to results is an organizational capability too.

Before Class

My pre-class choice is to keep the CEO, narrow the next phase's mandate, and hold off on large-scale, unvalidated store openings. At the same time, get the father, the son and the professional managers to form a clearer shared agreement on authority.

A company can carry on its founder's heart and effort, and it also needs, gradually, to gain the ability to make good decisions without him.

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This is a personal study analysis of a course case; the figures and people's circumstances refer to the period described in the case. It does not assess the current state of the companies or people involved. The sequence of actions in the text reflects my personal pre-class judgment.