The likelihood that Hank Mullany will ever join CVS Caremark as president of its drug store unit is rapidly vanishing.

CVS Caremark, Hank Mullany, Walmart, CVS/pharmacy, Larry Merlo, David Pinto, CVS/pharmacy president, CVS, Helena Foulkes, Mike Bloom, Jon Roberts, drug store, pharmacy

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Inside This Issue - Opinion

What’s behind the CVS decision on Mullany

January 3rd, 2011
by David Pinto

The likelihood that Hank Mullany will ever join CVS Caremark as president of its drug store unit is rapidly vanishing.

However, as often happens where senior management choices are concerned, the process by which the decision to try to hire the former Walmart executive was reached has become a center of focus and second-guessing — while calling into question CVS’ judgment in considering Mullany in the first place as CVS/pharmacy president.

Indeed, there is in all of us an impulse to ridicule that which doesn’t work out, to deride a chain of events that appears, in retrospect, to have been ill-conceived from the start. Why hire an individual who has been restrained by a noncompete clause in his contract? Why look outside an organization for a president when so many capable people reside within that organization?

Why select an individual about whom so little is publicly known — and whose resume is so apparently thin? Why choose a financial and operating executive to run a retail organization grounded in pharmacy and run, to a considerable extent, by merchants? Why? Why? Why?

This is an easy game to play. But to play it seriously one has to assume that CVS is an organization run by people who don’t really know what they’re doing. To make that assumption is to admit to a lack of knowledge and understanding of a company that has become, under its current management team, one of the great retail organizations this country has produced in the past two ­decades.

So let’s for a moment introduce a different logic. Let’s assume that CVS knew exactly whπat it was doing when, after an extensive and thorough search for a new drug store president that began by examining in-house candidates, it offered Mullany the job. Viewed in that light, it can be argued that this process, which ended so unfortunately, was among CVS’ most impressive hours.

Several key decisions obviously went into the process. For one, the retailer determined that, capable as its senior staffers are, none would be offered the president’s job. Why, when people of the caliber and ability of Helena Foulkes, Mike Bloom and Jon Roberts could capably head up any retail organization in America? Clearly because, in the opinion of the people responsible for the decision, the company would remain stronger with these executives in their present roles, where they had shown themselves to be among the most effective that mass retailing has produced in some considerable time.

Thus, the decision to look outside the company was both logical and comprehensible. Why, then, select an individual with Mullany’s background and skills? Clearly because this was the skill set CVS determined it most needed. In marketing, merchandising and pharmacy, CVS’ core competencies, the retailer was particularly well positioned. But with Larry Merlo about to ascend to the position of CEO of CVS’ parent, a key operating talent was about to be lost to the drug chain.

Clearly, the thinking was to replace that talent with an operating executive who could, if not replicate Merlo’s contributions, certainly succeed him with minimal disruption. Add in Mullany’s financial background and the choice becomes more compelling. Again, it is difficult to argue with that logic.

The word in some retailing circles is that, whatever his strengths, Mullany was nowhere near the equal of Merlo, and, moreover, that more capable operations and financial executives were available. Perhaps. But this position assumes that CVS’ search was a sloppy one. And CVS is not a sloppy ­organization.

Let’s assume then that, industry speculation aside, Mullany was indeed capable, and that he would be surrounded and supported by some of the best chain drug store executives this industry has to offer. Suddenly, Mullany becomes, if not a compelling choice, an understandably acceptable one.

What about the noncompete, which was the issue that finally made CVS’ choice insupportable? Noncompete clauses in contracts are like cotton candy. When put into play, they usually dissolve or melt away. Unfortunately for CVS, Walmart decided to make an issue out of this case — internally to send a message to staffers to the effect that walking away from a contract would, in the future, not be all that easy; externally to warn competing retailers, even those that, like CVS, compete only peripherally with Walmart, that they would approach its senior executives at their own peril.

Once Walmart determined to contest this hire in the courts, whatever the ultimate outcome — and most observers believe Walmart would have lost — CVS’ position became untenable, particularly when a judge determined that Mullany could embark on his new duties no earlier than March. The questions of whether CVS knew in advance about the noncompete and, if not, why not, are yet to be answered.

Finally, there remain the pain and justifiable feelings of being slighted, overlooked or undervalued that several senior staffers have likely come to harbor in the aftermath of this process. Certainly these feelings are understandable and perfectly normal. Any capable executive works with the ultimate goal of heading the organization to which that executive has contributed so much for so long. That’s one of the cornerstones of the American business system.

On the other hand, an organization’s primary responsibility should never be to the individual, but to the organization. In going outside the company to fill a senior-level position, CVS was not playing politics with peoples’ careers.

Rather, as any great company should do, it sought to find that individual best positioned to perpetuate and extend the company’s success. If, in the opinion of senior staffers misguided or ill-considered decisions were made along the way, it is only human for those individuals feeling bypassed or overlooked in making those decisions to second-guess them. But being human is not necessarily being right.

In the end, then, only the myopic or the immodest could reasonably fault CVS Caremark, arguably one of the dozen or so great retailers America has thus far produced, for looking to bolster an already deep and impressive senior management team by adding one more weapon, one more arrow, one more quality manager to an arsenal that is even now the envy of the retailing community.

Who was it that said that the enemy of great is good — or that good is not necessarily good enough?