MANAGEMENT: Smooth transition seen at Pathmark

"We'll be fine." It's not unusual to hear folks say that when they think the opposite, but those words apparently ring true for many of Pathmark's store-level and headquarters associates, and the company's newly appointed c.e.o. Eileen Scott is the reason.

In the days immediately following the mid-October announcement that c.e.o. Jim Donald was exiting the 143-store, Carteret, N.J.-based chain after an impressive six-year run to join Starbucks Corp., news that Scott, who began her Pathmark career as a part-time clerk, would take the top spot was met with favorable reaction from rank-and-file store employees and headquarters staffers questioned by Progressive Grocer.

"Certainly it's devastating that we lost Jim. I'm going to miss him personally," said one veteran operations executive who praised Donald's leadership style. "It made you feel like you were working with a friend, not a boss, but there are a few very important things about his successor that I feel very good about.

"First off, if Jim had to go, I would have picked Eileen to take over at this point. Eileen's been with us for the past 30 years, and let me tell you, she's a real operator. Maybe she's not all that well-known outside of the company," he added, "but over the last few years she's really proven herself to many around here, and I'll be proud to work with her. We'll be fine."

Donald, 48, joined Pathmark in October 1996, after successful stints with some of the top names in the retail business, including Safeway, Wal-Mart, and Albertsons. With a down-to-earth, team-building management style that focused heavily on the chain's 27,000-plus work force, Donald is credited with reviving, restructuring, and restoring the once-beleaguered chain.

The announcement that Donald was leaving caused Pathmark's stock price to take a hit. The next day it dropped 34 percent, to close at $5.25. At presstime, the shares were selling for a bit above $4.50. Pathmark's 52-week high was $25.96.

Aside from Scott's appointment, which also earns her a seat on the board of directors, Pathmark's former c.f.o. Frank Vitrano was named president and chief administrative officer, and board member Steven Volla became the board's non-executive chairman.

Scott's promotion comes at a time when more women are breaking the glass ceiling in the supermarket industry, a fact that scored high marks with one female customer-service clerk in a South Jersey Pathmark. "Frankly, I am ecstatic to see that a woman has made it to the top of our company, and especially one that has come up through the ranks," she said. "It gives us all something to shoot for now."

During a conference call with securities analysts the day the announcement was made, Scott, 49, discussed her background and philosophies for tackling what many in the trade see as a tall order: increasing market share and improving the company's financial results in one of the nation's most competitive and densely populated areas.

Scott, who worked side by side with Donald the past six years, has held various positions in Pathmark during her 33-year career at the company, which she began in 1969 as a part-time cashier in high school.

Upon graduation from college, Scott was selected for the company's management training program. The first 12 years of her career, she says, were spent in the stores "learning first-hand the importance of customer service and associate relations."

She then held various procurement and merchandising positions—from buyer to manager to director in dairy, deli, seafood, meat, produce, and grocery—where she interacted extensively with vendors.

Scott moved on to positions of increasing responsibility, including heading up the sales and advertising departments.

Named v.p. of nonfoods and pharmacy, she introduced category management to nonfoods and instituted various pharmacy initiatives.

In 1997, Scott was promoted to e.v.p. of warehousing and distribution. While she held that position, Pathmark's warehousing and trucking operations were successfully transitioned to C&S Wholesale Grocers and GHI Trucking Co. Scott was also instrumental in developing a new store prototype that emphasized perishables and in lowering the HBC gondolas to enhance the chain's drug store-within-a-store image.

Last year, Scott moved back into store operations as e.v.p. Her key focus areas included increased training and development to improve productivity, reduce turnover, and enhance customer service.

She called good, open communications "clearly one of my top priorities with associates, customers, vendors, shareholders, and the financial community," and pledged to be open, honest, and direct. "As c.e.o., I'd rather be coach than scorekeeper. I've seen the customer as a store manager, as a merchant, and as a marketing executive, and I know the things you need to do to increase customer loyalty."

Scott said both she and Vitrano intend to continue capitalizing on the strategies they've helped build together at Pathmark, and said she is convinced they will continue to make progress.

"We established our strategic plan six years ago, when we focused on great service, concentrating on top line sales, spending capital wisely, and reducing expenses by becoming more productive," she told the analysts. "That's our plan, and it's a good one."

Scott said greater use of technology is key to making the company more productive. The chain will also continue pursuing capital improvements and emphasizing better execution of programs at store level.

In passing the torch to Scott and Vitrano, Donald, who will become president of Starbucks' North American division, said they "could not be more prepared to assume the top leadership roles here at Pathmark." He added, "This company has been run with Eileen and Frank—not through them—and that's very important, because as the baton gets passed, nothing gets dropped, delayed, or falls through cracks."

He added, "I am saddened to leave this great organization, but the opportunity was too compelling."

The charismatic Donald will be missed on the front lines. "But it's not like he was leaving us for another supermarket competitor," said a store associate who requested anonymity. "This transition brings excitement to our program. Other than the initial shock that comes with the known versus the unknown, I see us in good hands. I am confident in Eileen's ability."

He added, "She's passed the test with Jim Donald as the anointed successor, and if he believed in her, then so do we."

Said another middle manager: "I think it's a very positive thing that Eileen got the job, and even though it's human nature to be a little nervous when faced with a change, everyone has confidence in her abilities. In my limited encounters with Eileen, I have found her to be very easy to talk to. She seems to 'get it,' and I respect that."

The news was also viewed favorably by people at the company's headquarters. "These are dyed in the wool Pathmark veterans, and I don't expect any radical changes to be made in the immediate future. This is being viewed positively, and we know what we're getting with Eileen and Frank," said one.
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