Mixed reception for Lululemon’s new CEO highlights challenges for HR with changes in top leadership
‘The real risk is a leader who arrives without legitimacy and handles that deficit badly’
Mixed reception for Lululemon’s new CEO highlights challenges for HR with changes in top leadership
Recently, Lululemon announced it was hiring a new CEO, Heidi O’Neill. A long-time Nike executive, she succeeds departing CEO Calvin McDonald but must wait four months to take on the role because of a non-compete agreement.
For a brand that’s been struggling for a few years now, Lululemon’s leadership announcement on April 22 was met with a mixed response.
Notably, the Vancouver-based company lost nearly $2 billion in market value the next day with the stock value falling 13%.
Then there were complaints about the four-month delay before O’Neill takes on the role — not ideal given the urgency to revitalize the company’s sales and overall vision due to challenges around its products and market share.
Plus, O’Neill is moving over from a 28-year stint at Nike, which has also been facing challenges with declining market share and revenue.
“We do not expect the market to receive this appointment positively given O’Neill’s longstanding tenure at Nike, which overlaps with the brand developing many challenges that parallel the ones LULU is currently facing,” BTIG analyst Janine Stichter told CTV News in April.
On the other hand, some analysts were more upbeat: “She brings a significant breadth of knowledge in women’s performance apparel and her experience accelerating speed-to-market is particularly welcome at lululemon where lead times have ballooned to about 24 months,” said William Blair analyst Sharon Zackfia in the Wall Street Journal.
Not-so-welcome CEO
Given this muted reception, how might the new CEO be received by employees when she takes the mantle in September, with questions about her fit, her legitimacy, her successes?
Any controversy around O’Neill’s appointment seems to be more about investor reaction and shareholder pressure, along with issues around the founder Chip Wilson — who has criticized Lululemon for making poor business strategy choices — than employee discontent, according to Nick Turner, professor and area chair of organizational behaviour and human resources at the University of Calgary.
But it’s a valid issue faced by many organizations changing top leadership and the academic cautions against assuming employee silence equals acceptance.
“The real risk isn’t a CEO/leader who arrives unloved. The real risk is a leader who arrives without legitimacy and then handles that deficit badly. If organizations protect fairness, voice, trust and middle manager discretion early, scepticism can soften. If they don’t, the likely pattern is growing silence, eventual loss of key talent, and so on,” he says.
A starting point would be finding out exactly how your workforce feels about the change in leadership. This goes beyond mere complaints, says Turner.
“Sometimes, the more serious warning sign is what disappears. When employees lose trust, they often don’t complain more and speak up less.”
That means HR should watch for a declining employee voice, such as fewer candid questions in town halls, less upward feedback and “respected insiders becoming unusually quiet,” he says.
Surveys can help, he says, but they have to ask the right questions, looking at: trust in leadership, perceived fairness of the transition process, confidence in the organization’s direction, psychological safety, perceived fit between the leader and the organizations’ values, and intent to stay, says Turner.
“I’d also pay close attention to middle managers because they often hear the concerns before those concerns show up in formal HR metrics. So, I’d say look for silence not just noise. In a bad leadership transition, important signals often disappear before the people do.”
Management caught in the middle
One challenge is the middle managers caught in the middle, trying to represent the company’s overall direction while supporting their teams.
But they shouldn’t just be treated as message carriers, says Turner, highlighting the heavy load they bear.
“In leadership transitions, they’re often asked to absorb employee anxiety, defend decisions they didn’t make, translate vague strategy into local action, and keep performance steady at the same time. That’s a heavy emotional and operational load.”
That’s why management should be given information earlier than employees to absorb the messages before conveying them, he says.
“Managers need clear talking points and also discretion. They need to know what’s fixed, what’s still open, what they can adapt locally, and where employee concerns should go. They may also need coaching on this and opportunities where they can compare what they are hearing across different units/teams.”
Does it matter if the CEO is unpopular?
But how much does it matter if a new leader isn’t popular with staff? Often, companies hire top-tier leadership to make big changes, to turn things around, and that individual or team may be more direct, more cut-throat, in contrast to previous leadership — with good reason.
So, should HR be worried about employee sentiment?
“It matters but isn’t fatal,” says Turner, and employees don’t need to love a new CEO on day one. What they do need is trust, fairness and opportunities to speak out so they keep implementing the organization’s strategy, rather than withdrawing from it, he says.
This is where many organizations make a critical mistake — treating employee sentiment as a soft concern rather than a strategic one.
“Employees aren’t just passive observers of CEO/leader succession. They’re the people who make strategy real,” says Turner. “Employee perceptions are not just ‘soft’ morale data. They can be meaningful signals about whether the leader has legitimacy inside the organization.”
To get past that early skepticism from employees, new executives can earn acceptance by communicating clearly, treating people fairly, showing respect for the organization’s history and identity, listening before imposing too much change and allowing employees to speak up, he says.
Focus on top performers
Finally, a company like Lululemon should be considering its top performers as it transitions in a new CEO. If they’re worried about the new direction for the company, or the credibility of new leaders, they could well be planning their exit.
That’s why retention should not be generic, says Turner, and “stay conversations” should be held with the top talent, preferably with someone they trust such as their direct manager.
“The question should not be ‘How do we persuade you to tolerate the new CEO?’ and instead should be ‘What would [you] need to remain true … to keep doing your best work here?’”
While compensation is often a top factor, it’s not the only one, says Turner, citing other factors such as meaningful work, advancement opportunities, fairness, great working relationships, fit and organizational commitment.
“For top performers, it’s especially important to preserve development opportunities, involve them in decision-making where possible, and give them evidence that they can still have influence and a future in the organization.”
Ultimately, the Lululemon situation shows how leadership transitions are rarely just about the person at the top. They're felt across the organization — by managers translating strategy into daily action, by top performers weighing their future, and by employees figuring out their loyalties and motivations.
Whether O'Neill succeeds in winning over both investors and employees remains to be seen. But Tucker’s insights suggest that the employers that navigate these transitions best aren't the ones that wait to see how a new leader lands — they're the ones who do the groundwork long before the CEO walks in the door.
