President and chief executive officer, Staples
Born: 1955, in Fort Thomas, Kentucky.
Education: Harvard University, BA, 1977; Harvard University Graduate School of Business Administration, MBA, 1979.
Family: Son of a mechanic and a housewife; married; children: two.
Career: Kroger Company, 1979–1989, various management and planning positions; Staples, 1989–1991, various positions including regional vice president for operations; 1991–1994, executive vice president of Contract and Commercial Division and vice president of Direct Sales Division; 1994–1997, president of Contract and Commercial Division; 1997–1998, president, North American Operations; 1998–2002, president and chief operating officer; 2002–, president and chief executive officer.
Address: Staples, 500 Staples Drive, Framingham, Massachusetts 01702; http://www.staples.com.
■ Ronald L. Sargent moved up the ranks of Staples to become its president and chief executive officer (CEO) in 2002. After more than a decade of holding various positions in the corporation, he became CEO during a critical time in the company's history. Profits and stock prices had stalled after years of growth, and analysts were predicting a bleak future for office-supply superstores. Sargent's leadership and notorious frugality paid off, however. A smooth transition to the role of CEO was highlighted by effective cost-cutting measures while successfully exploiting growth opportunities, ultimately leading Staples to outpace the industry in operating profit margins.
Ron Sargent's career in retail sales began when he was a teenager working the cash register and stocking shelves for a
Kentucky branch of the grocery-chain Kroger. Choosing Harvard over a position on a professional Roller Derby team, Sargent eventually returned to Kroger where for ten years he held management positions in operations, human resources, strategy, sales, and marketing. Referring to his decision in 1989 to leave one of the largest grocery chains in the nation to join the then small and barely profitable Staples, Sargent told his wife that either it would be the greatest thing he had ever done or he would find himself unemployed within the year. Time has proven his first instinct to be true.
Before Sargent took over the role of CEO from Staples's chairman and founder, Thomas G. Stemberg, the two approached Microsoft's chairman and founder, William H. Gates, and his new CEO, Steven A. Ballmer, for advice. Gates and Ballmer had recently gone through a similar transition themselves. Ballmer, a classmate of Sargent's from Harvard, urged Sargent and Stemberg to proceed with the transition in spite of the gloomy economic outlook and stalled profits of 2001. Sargent had already proven himself an effective leader when in 1990 he was asked to take over the Contract Division, which was responsible for selling directly to large and midsize companies. At the time, this division brought in $20 million to $30 million annually. Less than ten years later, the unit had ballooned to $3.4 billion in revenues and accounted for Staples' highest operating profit margins. As CEO, Sargent led Staples to the front of the office-supply business, outpacing the industry in a number of areas.
Sargent compared himself to the 1992 Toyota Camry with over 100,000 miles on it that he drove: steady, inexpensive, and deadly reliable. He kept key financial data inside an aged file folder that was heavily taped to hold it together. This thriftiness did not translate into skimping, however, nor did Sargent plan to implement a whole new vision or strategy for Staples as CEO. One of the key ideas that remained with him from his days at Kroger was that "everything starts with the customer." Sargent recognized that in order to improve Staples and allow it to evolve naturally he would have to cut costs while neglecting neither the customers nor the company's sales associates. In an interview with American Executive , he explained the logic behind cutting costs while increasing spending on people: "If you treat your associates well, they're going to treat the customers well, and that's going to treat the stockholders well. It's a virtuous circle."
After taking over as CEO, Sargent refocused Staples in a number of ways. More attention was paid to the small-business and home-office customers that research showed were Staples's core base and who typically shopped for higher-priced items with higher profit margins. Staples rechanneled some of its marketing budget away from newspaper inserts and into direct marketing in order to better target these customers. The company eliminated over 800 less-profitable items aimed more at the casual consumer, including novelty pens, cartoon notebooks, and inexpensive telephones and shredders, and added over 400 items targeted at the small-business customer, such as multiline telephones, large filing systems, and bulk items. Sargent used his experience in the grocery business, where private-label brands play a big role, to expand the Staples storebrand product mix.
Eliminating low-margin items allowed Staples to reduce its inventory and its number of vendors while still maintaining its focus on customers. In a BusinessWeek Online interview, Sargent explained, "We're going to squeeze the daylights out of every imaginable cost except two: We are not going to cut back on marketing, and we are not going to cut back on instore service. In fact, we're spending more in both of these areas." In keeping with his reputation as an aggressive costcutter, within his first few months as CEO, Sargent set up 45 task forces to find savings anywhere they could, from negotiating price cuts with vendors, to lower rents on building leases, to paper expenses. One change that helped Staples to raise its operating profit margins was to open up its vendor-bidding process to an online-auction format. Where previously they would have two or three suppliers bid on a specific job, such as providing plastic bags for the register area, the online-auction format brought in triple the number of bids and ultimately saved the company millions of dollars.
Pulling back on store-expansion plans, Sargent closed stores in smaller towns and opened new ones in metropolitan areas where they already had a presence. This strategy allowed marketing dollars to be stretched further and higher-volume outlets to thrive. Additionally, approximately one-fourth of the stores were remodeled to look more like boutiques than warehouses, reflecting Staples's newly intensified focus on customer service. Customers could move around more easily and find items more quickly, and the overall supply-chain processes benefited as well. Initially, this new store format outsold its warehouse-styled counterparts by 8 percent.
Sargent liked to keep up with what was happening at the store level by visiting, unannounced, up to three hundred Staples stores every year. On his first day as CEO he paid a visit to the original store in Brighton, Massachusetts, to work the floor dressed in the same red shirt and black pants worn by all of the sales associates. He also visited the competition. This hands-on approach allowed him to observe how changes were affecting the day-to-day life of both customers and sales associates. Sargent eased Staples's 30-day return policy; he wanted associates to have the flexibility to use their best judgment rather than be held to hard-and-fast rules. He personally emailed clients and once cinched a large bank contract when he impressed the bank president by answering his own phone. Sargent began volunteering at the starting line of the Boston Marathon in 1991, promoting his company by passing out Staples-branded giveaways.
In addition to personal visits from the CEO, Staples began keeping track of customer satisfaction through the mysteryshopper program begun under Sargent. A mystery shopper rated each store every month and associates received bonuses based on the scores. Overall store scores improved steadily as a result of this program, reflecting increased customer service. Staples began offering a reward program to its customers, using its sophisticated customer-management system to offer items of interest and possible savings based upon a customer's past preferences. And to better serve Staples's direct-delivery customers, Sargent reorganized the sales force into "hunters," who acquired new accounts, and "farmers," who serviced the accounts, with both groups having more time to spend with customers.
In his early days as CEO, Sargent also worked to broaden Staples's commitment to corporate responsibility. He responded to pressures from environmental groups on the entire industry by making environmental leadership a goal for Staples and working to create demand for recycled products. He also worked to start the Staples Foundation for Learning and supported other charitable organizations related to education and youth.
Sargent continued to cut costs while seeking potential growth areas. Staples began opening stores in Europe in 1991; as of early 2004 European stores accounted for 12 percent of sales but only 6 percent of profits. Shortly after becoming CEO, Sargent executed Staples's successful acquisition of the French mail-order business Guilbert. He replaced Americans with Europeans as heads of European store operations, recognizing that success in Europe required a cultural familiarity that had been lacking under the previous model. He also continued to look for expansion opportunities to boost profitability. Other areas targeted for growth by Sargent included Staples's copy-center operations, its contract sales to large companies, and its delivery operations to small businesses in Europe and the United States.
See also entries on The Kroger Company and Staples, Inc. in International Directory of Company Histories .
Eyriey, Nick, "The Executioner: Does Staples' Move to the Top of the Sales Charts Signal a New Order?" Office Products International , April 2003, p. 31.
Fasig, Lisa Biank, "CEO Returns Staples Chain to Winning Ways of Its Past," Knight-Ridder Tribune Business News , April 20, 2003.
Hilleard, Steve, "Ron Sargent (The Big Interview)," Euromoney , August 2003, pp. 56–63.
Rose, Jill, "Out of the Box," American Executive , http://www.americanexecutive.com/features/f_05_04_Cover.asp .
"Staples: Riding High on Small Biz," BusinessWeek Online , http://www.businessweek.com/magazine/content/04_14/b3877642_mz073.htm .
Symonds, William C., "Thinking Outside the Big Box," BusinessWeek , August 11, 2003, pp. 62–64.
—Celia A. Ross