May 30, 2007

Roehm Is Burning (Wal-Mart)

I've no doubt that the higher-ups at Wal-Mart rue the day they'd ever heard Julie Roehm's name.
Because the damage she's doing to their respective reputations is far worse than anything they'd ever imagined.

There's always been something of a cloud over the post- Sam Walton leadership, with many suspecting that Wal-Mart's phenomenal success was due to his genius and his genius alone.

So when Wal-Mart abruptly fired Roehm last December and pulled their newly-awarded account from DraftFCB, there were many who saw it as a sign that management was again in disarray. Why had she been left alone to run the agency review? And given her relatively sparse resume, why had they hired her in the first place?

As allegations of Roehm's misdeeds spilled out into the press, Wal-Mart management was left with egg on their faces again: If she was as unstable as they'd been painting her, why had they hired her in the first place? And, if they suspected something was up, why hadn't they intervened sooner?

Then Roehm filed a lawsuit and Wal-Mart hit back hard, with evidence of marital infidelity, blatant favoritism, violations of company policies and attempts to secure a job for herself and her paramour. Which seemed like a clever position for Wal-Mart to take... until the Wall Street Journal ran a front page story detailing how Wal-Mart hired former CIA and FBI agents to run a black ops operation of sorts on their own employees.

This then got tied up with an unrelated story about how some Wal-Mart employee was intercepting emails sent to a reporter and Wal-Mart's reputation took another hit.

Which might not have mattered as much, had their profits not been sinking faster than Bush's approval ratings. The business press was awash in stories about Wal-Mart's missteps in trying to take their merchandise upscale, an operation they'd entrusted primarily to some woman named Julie Roehm, who, by the way, they wound up firing and is now suing them for all sorts of things.

Roehm did not go down quietly, firing off various retorts both legal and PR-related, most of which resulted in stories about Wal-Mart's financial woes, the incompetence and lack of vision of the current leadership, their failed marketing plans and by the way, they're being sued by some woman who used to work in marketing who claims that everyone from the CEO on down was on the take and violating company policy.

Which they vehemently denied, of course, until today's Journal comes out with a story that starts "Wal-Mart Chief Bought Ring From Firm's Vendor" and details the sweetheart deal CEO Lee Scott got from the Aaron Group.

Oops.

Now Wal-Mart is not going to go out of business because of this. Far from it. But the current leadership may not be able to hold onto their jobs much longer unless they turn the ship around fast. A feat that's going to be that much harder given the lack of confidence from investors, both potential and current.

Bet Lee Scott is wishing he'd bought out Roehm's contract, let her go quietly and waited another six months before switching agencies.

But what really sucks is that it's not the Lee Scotts or Julie Roehms who will get screwed here. It's the low-level Wal-Mart employees who'll get laid off or have their hours cut as the company attempts some sort of "cost-cutting."

11 comments:

Anonymous said...

This subject has been analyzed to death, particularly on George Parker’s blog. The opinions are varied—and certainly spirited—with plenty of speculations, proclamations and hearsay.

We’ve clearly had our disagreements on key points, Mr. Toad. Nonetheless, here are additional notes to consider.

It’s fairly safe to say that no one will ever know what actually happened between Wal-Mart and Roehm. Both parties seem to be oblivious to any reality outside of their own self-absorbed existences.

According to people who worked on the Wal-Mart account before, during and after Roehm’s reign of nonsense, the woman was the classic control freak in absentia. That is, she insisted nothing be done without her direct approval, but remained difficult and/or impossible to reach. In hindsight, one has to wonder how many of her disappearances could be attributed to lusty jaunts with paramour Womack. The demanding-yet-AWOL personality is common in the business world, and it usually resides in immature, paranoid and unqualified individuals.

Roehm was not necessarily left alone to run the pitch. The woman is not a team player. Remember, she produced TV commercials that her superiors ultimately rejected. As the relationship degenerated, Roehm further distanced herself from the Wal-Mart brass. The other executives were not apprised of her whereabouts and decisions. Draw whatever conclusions you wish. Even Roehm admits the chemistry was bad. She just won’t admit the toxic nature of her own composition. Someone in her position should have worked hard to build alliances. You can’t believe she was checking in to share details like dinner at Nobu and cruises in Howard Draft’s Aston Martin.

You say Wal-Mart management was in disarray. It’s hard to disagree that the group is not a collection of rocket scientists. At the same time, they were quite focused and unified in the ruling to terminate Roehm, Womack and DraftFCB.

Roehm’s charges against Wal-Mart only confirm her firing was justified and long overdue. Surely she had signed confidentiality agreements that she’s now ignoring. Granted, you could argue that she’s no longer bound by any contractual obligations. But her eagerness to air the dirty laundry sure makes her look bad and untrustworthy. Unprofessional too.

All the hand-wringing over the alleged hypocrisy of Lee Scott is, well, stupid. Scott got a deal from a vendor. So what? It’s only considered outrageous because of Wal-Mart’s conservative internal policies (which are not laws!) and a public disdain for rich CEOs. Few CEOs refuse favors from vendors. Cynical as it sounds, you’d be hard-pressed to identify a Fortune 100 CEO with unblemished integrity and high morals. Power corrupts; absolute power corrupts absolutely. Roehm and Womack demonstrated that minimal power corrupts absolutely too.

It’s lunacy to think Wal-Mart should have paid hush money to Roehm. No one thinks Roehm has a real case. No one. Corporations should not settle cases with no legal merits. It would be the equivalent of negotiating with terrorists.

The notion that Roehm’s antics have inspired and/or ignited more bad press doesn’t seem right. Wal-Mart was a PR disaster long before Roehm started sending loving emails to her fuck buddy.

A final point to ponder: Wal-Mart inevitably awarded their business to The Martin Agency. Do you honestly believe DraftFCB is a better choice than The Martin Agency? It looks like once Roehm was erased from the equation, Wal-Mart had no problem doing the right thing.

—Denny Crane

Toad said...

Denny - you seem intent on overlooking a few key points.

First off, this is not a discussion of morality. Or good vs. evil. You tend to view it in that light, and unfortunately, in the real world, good doesn't always win as often as it should.

Second, you vastly downplay the damage to Lee Scott's reputation. He hired Julie Roehm. And while you make much of the fact that she willingly kept him in the dark, her misdeeds are still HIS problem: a rogue employee is ultimately a black mark against the manager who hired them. Regardless of how swiftly or forcefully they reacted when she was caught.

Finally, while Wal-Mart certainly did have PR problems in the past, this case has provided Wal-Mart with far more bad publicity than they'd ever bargained for. Roehm's just become another example of their mismanagement. And the fact that she's so closely tied to the failed upscale marketing program just gives that failure more and more play. The salacious details, while certainly troubling to you and other Parkeristas, are just background noise to the investor community.

Anonymous said...

Actually, I’m viewing it as a legal issue. Roehm has no legal case. Her subsequent charges border on extortion tactics. As we saw in today’s NY Post story, her targets are threatening to sue her for slander. She is setting herself up for legitimate legal cases.

Lee Scott’s reputation deserves scrutiny. But hiring Roehm is less than a needle in his haystack of troubles. She’s coming off like the spurned girlfriend—she’s more ridiculous and pathetic versus a serious threat. Can it be that our advertising backgrounds are actually drawing her to the forefront? That is, the general public is more aware of Wal-Mart’s political maneuverings abroad, its poor treatment of workers and the way it crushes mom-and-pops versus the nettlesome buzzing of Roehm.

In the end, I predict Roehm will make Wal-Mart look like the victim.

—Denny Crane

Toad said...

Well Denny, legally, she's never had a case.

But civil cases of this nature are settled in the press, not in the courts. And that's what Roehm is counting on.

The business (e.g. non-advertising) press does indeed pay a lot of attention to the Roehm story. But only as a conversation starter, e.g. "Troubled Wal-Mart Faces New Allegations From Fired Exec" which then segues into a broader story of their woes.

Don't underestimate the "Curse On Both Their Houses" effect: the more Roehm and Wal-Mart throw mud at each other, the more people grow disgusted with both of them, the more pressure Scott gets from shareholders to settle the lawsuit and make her go away. I think we've reached that point already. The cost to Wal-Mart already exceeds whatever it would cost them to pay her off. The shareholders must realize that the media is so primed to bash Wal-Mart, it doesn't take a whole lot to set them off. Hence the "Black Ops" story of page 1 of the WSJ.

As for her targets threatening to sue her, as KBAM pointed out, that's a lot of hot air: they're just defending their business partners and Aaron's Jewelers has already verified one of her claims.

Too many on Parker's blog see this as a case of the assholes in advertising getting away with it once again. And don't seem to realize that Wal-Mart is not a privately held company and that the shareholders will not sit still as Lee Scott engages in an all-out PR battle with some minor executive.

Anonymous said...

I’d challenge a few of your contentions.

You’re probably right that Roehm is hoping to play this out in the press. But I’m probably right that she’ll lose, and thoroughly shred any prayers of salvaging her career.

If the shareholders were so doggone timid about the hoopla Roehm allegedly inspires, wouldn’t they also push to settle all the other gazillion employment-related lawsuits? I’ll bet the shareholders quietly support the efforts to crush Roehm.

It’s a popular myth that cases are settled in the press. But in the end, these things are settled via laws. Wal-Mart has a storied tradition of dealing with lawsuits on its own terms, oblivious to the media-generated pressures.

I continue to argue that Wal-Mart is used to the negative hype. This company has seen books and movies bashing them. How many anti-Wal-Mart blogs are there? Even Hillary Clinton is criticizing them. If anything, the company is probably adamant about not caving in to people like Roehm who try to take advantage of them.

Roehm will release a statement saying, “It’s time for me to move on” long before Wal-Mart concedes.

Toad said...

For some reason though Denny, Roehm's story seems to have captured the attention of the mainstream press and gets front page coverage in the Journal.

But rather than rely on the guesswork of two ad guys, I'd defer to the reporters at Fortune magazine who have a more impartial viewpoint.

This is from this week's issue:

It's not clear if Roehm's allegations will stand up in court. But that may not matter. This is a public-relations battle. And right now, it looks like Roehm has the upper hand. Scott has plenty of things to worry about.

Wal-Mart's stock is an underperformer. It's not clear if the retailer has a viable long-term strategy. Meanwhile, Wal-Mart's hardball tactics are drawing fire. It recently had to apologize to the New York Times after it revealed that one of the former members of its Threat Research and Analysis Group had eavesdropped on a reporter's cell phone calls.

The last thing Scott needs is more questions about his jewelry purchases.

If nothing else, Wal-Mart's CEO should have paid more attention to the part in the company's ethics policy about avoiding appearances of impropriety.

Wal-Mart's lawyers may still find a way to avoid paying Roehm her severance.

But she's already had her revenge.

Anonymous said...

If that entire excerpt came from Fortune, the editors need to be evaluated.

Unless Roehm manages an OJ Simpson-like court victory, her severance is already gone. Months ago. Taken off the proverbial table. Then the table was demolished, probably with her stepladder and cans of Dutch Boy.

Regarding the “mainstream” coverage, I don’t know. She didn’t appear in a flattering light when Newsweek profiled her a few weeks ago. Ditto other publications.

To say Roehm has already had her revenge seems pretty strange. With every charge and revelation she leaks to the media, her chances of a career turnaround become more unlikely than Wal-Mart’s retail turnaround.

Toad said...

So now you know more about the world of business than Fortune's staffers?

How did you develop this expertise, along with your legal qualifications?

You still don't seem to grasp what's going on here.

Roehm's made Wal-Mart look bad. Very bad. Which just makes Lee Scott et. al. look bad. For mishandling the whole situation starting with the day they hired her.

Where you see tough and ruthless, the rest of the world sees pure incompetence. She's wounded the giant.

Making Wal-Mart squirm and quite possibly helping to dethrone Lee Scott is Roehm's revenge. The fact that publications like the Wall Street Journal and Fortune are even raising the possibility is pretty astounding.

Anonymous said...

I never used the terms "tough and ruthless." I simply said that Wal-Mart is not a company prone to settling baseless lawsuits.

I believe I completely grasp what is going on. An executive with lousy skills and a lack of ethics got caught screwing around. Rather than walk off with tail between legs, she's doing what every unethical hack does—she's concocting more lies under the guise of whistle-blowing to deflect attention to her own shortcomings.

I'm not sure why you see her as a heroine.

Anonymous said...

One more thing. I do believe Roehm's made Wal-Mart look very bad. They clearly hired a lying hack. And now they're paying the price.

Toad said...

Denny: Never said I see Roehm as a heroine of any sort. I was saying that the anti-Wal-Mart team seems to (e.g. the union groups that may or may not be paying for her legal fees and PR firm)

You and I are in complete agreement as to her moral character or lack thereof. And while I'm no union organizer, this is one time where I believe that sometimes you get what you deserve.