Halfords finance director Nick Wharton is the winner in a family business succession plan that sees him move from being a non-executive director of FTSE-250 furnishings retailer Dunelm to its next chief executive.
Current CEO Will Adderley, who has been Dunelm’s CEO for 15 years serving alongside his father who holds the title of founder and life president, moves to fill a newly created role as executive deputy chairman following a management review by the board. Wharton, FD of Halford’s since early 2007, will become chief executive designate on 1 December and take over as CEO proper next February.
He has been a non-executive director at Dunelm since last August, also sitting on its remuneration nominations committee and serving as chairman of its audit committee.
The decision to elevate the family CEO after a long tenure to a newly-created, senior role is consistent with the approach family businesses often make to succession planning. Often criticised for stifling outside voices, hiring a well-regarded FD from a public company and a non-family individual to the CEO role is a sound move – particularly for Dunelm, which has pointed to the September 2011 expiry of a £40m bank loan with Lloyds as a financial risk it sees on the horizon.
Halfords has not yet announced Wharton’s successor but says that he will oversee the renewal of the group’s bank facilities before he leaves on 30 November.
CFO headhunters and interim finance management specialists think making a non-executive director into an executive director in the same business crosses some governance boundaries – and may indicate that Dunelm is readying itself for a challenging period in which a familiar person is preferable to an external candidate.
“It is an unusual move and one I normally associate with trouble brewing,” one CFO headhunter tells Financial Director.
A strong relationship
The managing director of a company that sources interim FDs thinks that elevating a non-executive director to its CEO could reflect the strength of the relationship Wharton has established with the board.
“It may be the case that he was brought in with the idea of becoming CEO and had a period of bedding in while the business identified a succession plan,” he says.
“They may want an insider who understands the internal politics of the board while protecting the legacy of the founding family. Chemistry is important at that level and Nick has already been with the business for more than a year. But other companies may think it unwise to hire someone to the CEO role who has had access to sensitive and granular information on things such as board salaries.”
Dunelm chairman Geoff Cooper said Wharton has already built strong relationships with Will Adderley and group FD Will Stead while serving as a non-executive director, adding that his understanding of Dunelm’s “business philosophy and values” was the most important element of his appointment.
“I wonder if Nick’s non-exec role was always a mutual ‘get to know each other’ with this in mind,” one FD who is a non-executive director for a number of listed companies tells Financial Director. “I cannot think of any examples of non-executives becoming CEOs other than in distress situations.”