By Hua Wang • July 03, 2013•Writers in Residence
Karen Katz has been the Chief Executive Officer of Neiman Marcus Inc. since fall 2010. Her career at Neiman spans over a period of 27 years. She began as a store merchandise manager, and rose through the ranks as a divisional merchandise manager, store manager and store director. Katz is a graduate of the University of Texas.
Hua Wang: In 2010, you became CEO of Neiman Marcus. That was when the recession was ending and Neiman had lost over $1 billion in revenue. How did you handle your leadership position during such a challenging time?
Karen Katz: I was a senior leader in the organization pre-recession and recession. What took place during these periods had a significant effect on how I think about the organization today.
During 2004-2007, luxury was really hot. The customers were really coming into money and were out spending in ways that even at the time were ridiculous. The customers were spending with abandonment. If something came in two or three colors, they were buying it in two or three colors. They weren’t looking at prices. That really branded our business--the more over the top, the better.
Everything came crashing down in 2008 and 2009. We lost almost $1 billion in sales at Neiman Marcus Group. Even though I wasn’t the CEO, I was the #2 in the organization. We had to make very difficult decisions about our business. We were and are a highly leveraged company because we are owned by several private equity companies. Our biggest fear was that we wouldn’t be able to meet our interest payments. We managed to survive. Most importantly, our brand came through the recession untarnished. When my predecessor and mentor retired, I really felt like it was time we recreate our company and really think about the kind of company I want to lead as we move forward.
There were a few things we had to think about. The customer had changed in the way she shopped. It wasn’t that she didn’t want the highest luxury, because she did. The way she viewed how she was going to shop (being very deliberate in her shopping) and the channels she shopped had changed dramatically in just a few years. I really had to think about the changes the customer had gone through during the recession. We had to be more flexible. We had to have the confidence to not take the path of least resistance. If we didn’t innovate, we were going to evaporate.
What did the time look like for you and your senior leaders? Can you talk more about not taking the path of least resistance?
We have a very strong culture. We have over a century of Neiman Marcus history. We had to figure out how we were going to take the heritage and move it forward and make sure our 15,000 associates around the country believe that if we didn’t change, we were going to be a lost cause or a casualty along the way. Changing the culture has been probably the most challenging thing that we face. There are pockets of our associates who have embraced the change beautifully. There are also pockets of people who said, “We don’t do it that way at Neiman Marcus.”
Neiman Marcus can do things differently and still be rooted in its great heritage. We always made sure we listened to our customers and their needs. Our customers are changing. That is the message I keep communicating throughout the country.
You probably have seen a lot of changes in the past 27 years. How are things different now?
The big difference is that I am in charge now. I have been fortunate to learn from world-class leaders in retail, especially from my predecessor Burt Tansky. As a person coming up during these times, I try to learn from all the great things they did, as well as from the mistakes they made. I knew that I wanted to make my own mark on the organization. Although one of the three founders of Neiman Marcus was a woman, I am the first CEO the company has had. I clearly bring a different touch and tone to the business.
Can you tell us about your history at Neiman? What advice would you give to women who are setting career goals?
I never had aspirations to be CEO when I was a buyer. My goal was to run a merchandising division. When I was running the handbags merchandising division, I had five buyers who brought all the handbags for all the stores in the country. When I reached my goal, I realized that I never looked further than the position in front of me.
One of the reasons I went up in the organization is that I was always taking jobs that my supervisors thought were interesting opportunities for me and also beneficial to the company. I let them lead my way. I am not sure it is the textbook way of having a career. As opportunities came up and they asked me if I was interested, I always said yes and tried it. I didn’t know if I was going to be successful.
I was appointed a Director of Stores. They wanted me to run several stores in a region. I did that for about a year and I was having a lot of fun in the job. The CEO then came to me and wanted me to run all the stores. I was so freaked out that I took a bunch of Advils because I had an excruciating headache at the thought of what he was asking me to do. I eventually took the job, which was an amazing learning experience.
Was there a time when they offered you a position where you didn’t think it was the right role or fit for you?
Absolutely. The President of our Direct Business (which includes our catalog business and our new e-commerce business) was open. I didn’t understand what value I could bring. It was an island in our organization. I thought I knew retailing, but no one from the store organization had gone to the Direct Business. I didn’t know if they were sticking me out there because they didn’t want me in the main organization. I was way over my head when I arrived. I realized quickly though that it was a great experience. We were the first luxury site. I spent two and a half years there. That experience really influenced me in how I think now as CEO.
What were your decision points about staying at Neiman Marcus?
When you have a dual income family, it is difficult to make all the decisions. My husband had an active career and was commuting for a few years. I don’t know if it is realistic today to expect to have a career in one place. When I had my son, I had to make career choices then and decide whether I should even be working. There are multiple crossroads in our lives and in our careers. I am not one to advocate staying in one place for a long time. I have no regrets, especially given the position that I now have. I do wonder if I could have been smarter and think differently if I had experience somewhere else. I try to make up for that lack of worldliness by hiring people who can be my external eyes and ears.
Do you have any advice on work-life balance?
You have to make sure you have a good partner in life. You can’t do it all. Something has to go by the wayside. Family dinner was important to us. It was a pivotal time for us to catch up. I’m lucky to have a direct supervisor who understood it and got it. Although he had a stay-at-home wife, he understood it was important to have good, smart women around him, even if they wanted to have a family. My advice is to find a good boss.
Has there been a time in your life when you wanted to go down one path, but people disagreed with you on where you should go?
I have three successive positions that I interviewed for, and I didn’t get any of them. It was pretty devastating. I ended up getting other positions. For whatever reason, another candidate was perceived to be better for the position. My lesson from that is to always be humble. What helps me the most long-term is that I was extremely resilient after those disappointments. I did get a reputation for being resilient even when the cards were stacked against me.
What are some of the challenges for Neiman Marcus? How will you overcome them?
One challenge is the ease of entry to creating online businesses. It has never been this simple. Instead of having a few key competitors, there are now many small competitors who are eating away at our business. There is no obligation for the first few years for these startups to make real money. We have to figure out whether we are going to be defensive or offensive.
The other challenge—Offline-Online-Offline--is also a huge opportunity. Our brand is extremely well represented online. It is one of our single biggest opportunities. That kind of challenge gets me very excited and makes us think strategically about where we are placing our bets. Anecdotal feedback from our sales associates in our stores, actively gathering data from customers through questionnaires, and rigorous measurements of customer satisfaction help us realize the importance of the seamlessness of the shopping experience. The more we do to enhance the seamlessness, the happier the customer is.
What are your thoughts about personal development? How do you learn more about your industry?
I am a big believer in both formal and informal continuing education. I got my MBA at night, when I was working. I had fallen in love with retail and I didn’t want to stop my career. I also went to two executive education programs at Harvard Business School.
Can you talk about your mentors?
I only had one mentor. I didn’t understand the concept of networking and mentors when I graduated from college. I didn’t pursue them. It was by accident that my predecessor and then CEO took me under his wings. He saw something in me that was worth investing his time and energy. He was the first person that saw more than what I saw in myself. He helped me develop and learn about my strengths and weaknesses. He pushed hard on my weaknesses. It was not fun, but I appreciate how he helped find people to work on my weaknesses. He helped bring me to this spot. I do think about him everyday and I think about how I am developing my team and people further down in the organization. I hope I am as direct as he was with me.
What is a typical day for you?
There is no typical day. Retail is a very fast-moving business. We get a report card every single day about what our customers think about our business and our service, and how much merchandise has moved. I spend about 15% of my time on merchandise. I spend some of my time on the day-to-day and future financials of the company. I spend time on our strategic plan and the transformation of the company. I also meet with external people to understand their point of view about our strategy. The final thing is the time I spend thinking and visiting with our team members. I spend a lot of my personal time interviewing candidates, vetting candidates, and taking a personal approach on key positions. The best CEOs surround themselves with people who are smarter than they are. I surround myself with people who are smarter than me. It takes time to find those people. I also spend a few weeks a year going to fashion shows in New York and Europe.
What are the keys to your professional success?
Whether I put my hat in the ring or opportunities came, I work extremely hard. I also develop relationships all over the company. I am a pretty strong-willed person with a strong point of view. People who knew me ten years ago will say that I am fair, I can be trusted, I am tough, and that I make Neiman Marcus my priority. What can I do to make Neiman Marcus a better company, a better place to work, a better business? Hard work, trustworthiness, and respect for everyone around me were the keys to my success. People wanted me on their teams.
How do you differentiate Neiman Marcus from the other retailers?
We have more luxury products on our web site than any of our competitors, and by a long stretch. We also develop online relationships, which is different from what you get in the stores. You can come to our site and learn about fashion trends and what luxury means today. Our goal is to make people really happy. A lot of people talk about service. We actually believe in it and spend a lot of time thinking about it.