4 lessons learned from American Apparel’s filing for bankruptcy
The clothing company American Apparel has filed for Chapter 11 bankruptcy protection. The publicly traded company listed numerous creditors in its filing on Monday, Oct. 5, according to CNN Money, with investment firm Standard General L.P. having the largest unsecured claim at $15 million.
The news comes as no surprise to most, as American Apparel has faced decreasing sales over the past few years and ousted its controversial CEO, Dov Charney, over allegations of misconduct last year.
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“In partnership with our bondholders, we can work towards a new future for the company and concentrate on what matters: making and selling great clothing,” Chief Executive Paula Schneider said in a statement.
There are five major reasons that led to the company’s demise, as profiled by MarketWatch. Here is what other retailers and businesses alike can learn from American Apparel’s mistakes.
1. Choose the right leader.
Having the right people at the top can make all the difference. American Apparel’s founder and former CEO, Dov Charney, faced allegations of sexual harassment and other outrageous behavior before being ousted in December 2014. Paula Schneider was given the role in January 2015 but it was too late for the company to turn its image around.
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2. Avoid malpractice and eliminate lawsuits.
While much of American Apparel’s legal fees did come as a result of firing Charney, businesses can avoid employee lawsuits by respecting them, making them aware of company policies, establishing open lines of communication and perform annual employee evaluations where concerns can be voiced from both parties, if needed.
3. Beware of growing debt.
This isn’t the first time that American Apparel has faced bankruptcy. In March 2009, the company avoided Chapter 11 bankruptcy when it sold 18 percent of the company to private-equity firm Lion Capital, reported MarketWatch. In order for your business to avoid this fate, revisit the budget and cut unnecessary costs. Prioritize debt payments, speak with creditors and, if necessary, seek counsel. It is better to ask for help than drown in debt once it is too late.
4. Establish a target audience and stick to your brand.
American Apparel was known for its racy advertising and controversial branding. It went for a remodel of its look in June 2015 but this ended up alienating its current fan base rather than attracting new customers. Conduct research of your market to see what works and once you establish your brand presence, stick with it. Minor adjustments as time moves forward is acceptable but a complete redesign can lose customer trust.
Marketing matters: from IBM to Kyndryl
Prior to joining Kyndryl as Chief Marketing Officer, Maria had a 25-year career at IBM, most recently as the tech giant’s CMO where she oversaw all marketing professionals and activities across North America, Canada and Latin America. She has held senior global marketing positions in a variety of disciplines and business units across IBM, most notably strategic initiatives in Smarter Cities and Watson Customer Engagement, as well as leading teams in services, business analytics, and mobile and industry solutions. She is known for her work with teams to leverage data, analytics and cloud technologies to build deeper engagements with customers and partners.
With a passion for marketing, business and people, and a recognized expert in data-driven marketing and brand engagement, Maria talks to Business Chief about her new role, her leadership style and what success means to her.
You've recently moved from IBM to Kyndryl, joining as CMO. Tell us about this exciting new role?
I’m Chief Marketing Officer for Kyndryl, the independent company that will be created following the separation from IBM of its Managed Infrastructure Services business, expected to occur by the end of 2021. My role is to plan, develop, and execute Kyndryl's marketing and advertising initiatives. This includes building a company culture and brand identity on which we base our marketing and advertising strategy.
We have an amazing opportunity ahead at Kyndryl to create a company brand that will stand apart in the market by leading with our people first. Once we are an independent company, each Kyndryl employee will advance the vital systems that power human progress. Our people are devoted, restless, empathetic, and anticipatory – key qualities needed as we build on existing customer relationships and cultivate new ones. Our people are at the heart of this business and I am deeply hopeful and excited for our future.
What experiences have helped prepare you for this new opportunity?
I’ve had a very rich and diverse career history at IBM that has lasted 25+ years. I started out in sales but landed explored opportunities at IBM in different roles, business units, geographies, and functions. Marketing and business are my passions and I landed on Marketing because it allowed me to utilize both my left and right brain, bringing together art and science. In college, I was no tonly a business major, but an art major. I love marketing because I can leverage my extensive knowledge of business, while also being able to think openly and creatively.
The opportunities I was given during my time at IBM and my natural curiosity have led me to the path I’m on now and there’s no better next career step than a once-in-a-lifetime-opportunity to help launch a company. The core of my role at Kyndryl is to create a culture centered on our people and growing up in my career at IBM has allowed me to see first-hand how to prioritize people and ensure they are at the heart of progress in everything Kyndryl will do.
How would you describe your leadership style?
I believe that people aren't your greatest assets, they are your only assets. My platform and background for leadership has always been grounded in authenticity to who I am and centered on diversity and inclusion. I immigrated to the US from Chile when I was 10 years old and so I know the power and beauty that comes from leaning into what makes you different from other people, and that's what I want every person in my marketing organization to feel – the value in bringing their most authentic self to work every day. The way our employees feel when they show up for themselves authentically is how they will also show up for our customers, and strong relationships drive growth.
I think this is especially true in light of a world forever changed by the pandemic. Living through such an unprecedented time has reinforced that we are all humans. We can't lead or care for one another without empathy and I think leaders everywhere have been reminded of this.
What’s the best leadership advice you’ve received?
When I was growing up as an immigrant in North Carolina, I often wanted to be just like everyone else. But my mother always told me: Be unique, be memorable – you have an authentic view and experience of the world that no one else will ever have, so don't try to be anyone else but you.
What does success look like to you?
I think the concept of success is multi-faceted. From a career perspective, being in a job where you're respected and appreciated, and where you can see how your contributions are providing value by motivating your teams to be better – that's success! From a personal perspective, there is no greater accomplishment than investing in the next generation. I love mentoring younger professionals – they are the future. I want my legacy as a leader to include providing value in work culture, but also in leaving a personal impact on the lives of professionals who will carry the workforce forward. Finding a position in life with a job and company that offers me a chance at all of that is what success looks like to me.
What advice would you give to your younger self just starting out in the industry?
I've always been a naturally curious person and it's easy for me to over-commit to projects that pique my interest. I've learned over years of practice how to manage that, so to my younger self I’d say… prioritize the things that are most important, and then become amazing at those things.