How American Apparel Can Move On--Without Dov Charney
Stop the presses. You'll never believe this, but the board of a large company recently voted to oust its CEO, citing an "ongoing investigation into alleged misconduct."
You know from the headline that I'm talking about American Apparel's Dov Charney. But with a few tweaks to the verbiage, I could just as easily be describing recent rocky times for leaders at Lululemon, Mozilla, the Los Angeles Clippers, or even (going back to 2012) Yahoo. Why does it create such headlines, when leaders (allegedly) misbehave? Doesn't it happen too often to be newsworthy? Shouldn't we all yawn at the news, the way we do when we learn that yet another politician is involved in an ethics probe or sex scandal?
Besides, there's plenty of evidence that consumers quickly get over scandals. Sometimes the company even emerges with an enhanced reputation. The Tylenol recall is the textbook crisis-management example. But more recently, you can look at the auto industry, where it seems as if there's a recall every day. Life goes on. The CEO of General Motors is still respected.
So the question is not whether American Apparel can move on. It can.
American Apparel's board has already taken the first step: It has positioned itself not only for new leadership, but also, reports Shan Li in the Los Angeles Times, for a potential sale.
Here's a thumbnail sketch of three steps American Apparel can take to move on:
1. Stress the enduring positives of the brand. If you're one of those leaders who still wonders if it's "worth it" to care about sustainability initiatives, here's why you should: You'll create a crisis cushion. If ethical questions arise about your company or its leaders, you can point to a track record of decision-making that's based on ethics, rather than strictly profits.
This is one advantage American Apparel enjoys. "American Apparel differentiates itself from low-cost competition with socially acceptable and sustainable production (e.g., domestic production, higher average wages, and compliance with environmental interests)," noted Dr. Thomas Deigendesch on Interbrand. He wrote that five years ago. But that doesn't mean American Apparel can't redefine itself around these eminently respectable points of differentiation.
Also: It's called American Apparel for a reason. There will always be branding and marketing advantages for companies who can tout themselves as domestic manufacturers who pay fair wages.
2. Find a leader the company can rally around. In their attempt to move on from the Donald Sterling scandal, the Clippers recently promoted Doc Rivers--who was already the head coach and senior VP of basketball operations--to president of basketball operations. (He will remain head coach as well.) The move allowed the Clippers to posit the eminently likeable Rivers as the face of their senior leadership team.
To the extent that the Clippers' leadership is now epitomized by the respected Rivers, rather than scandalized Sterling, this move was a no brainer. Leaders are brand ambassadors and role models for their organizations. That, at least, is how legendary Ford CEO Alan Mulally defines the job. It will be up to American Apparel's board to find a leader whose presence can help combat whatever brand damage they believe has accrued from the Charney allegations.
3. Fight for your reputation, extra hard, for the rest of your life. In 1993, when The Body Shop had $650 million in sales and 1,050 shops in 45 countries, the company was also well known for opposing animal testing and embracing fair trade practices with indigenous groups--long before those tenets were sustainability norms.
A funny thing happened, though, 13 years later. Consumers started accusing The Body Shop of betraying its core values. It began when French cosmetics giant L’Oréal--which at the time used animal testing--acquired The Body Shop in 2006. "Rumors raced online that the Body Shop would knuckle under to its new owner," writes Fran Hawthorne in her book, Ethical Chic, an exerpt from which is on ChiefExecutive.net. "Animal rights groups called for a boycott, even as company officials insisted that their policies wouldn't change."
The Body Shop retained its policies and its place on PETA's list of non-testers. But the point here is that The Body Shop had to work extra hard to defend its reputation--even though it had done nothing wrong. Consumers looked to The Body Shop to be a standard bearer, so even the prospect of abandoning its core values after the acquisition caused a reaction.
And so, American Apparel finds itself in an analagous position. When you tout yourself as an ethical leader, you also put a target on your back.
In some ways, you are like a local restaurant overcoming a food-poisoning scandal. Everything needs to look extra clean and extra orderly. For even the faintest traces of misconduct will make customers nervous.
The benefit of the doubt is gone.