Why Jim Gabbert Fired Himself

All these stresses reinforced Gabbert’s desire to remove himself from the CEO role. “I have been wanting to work out of the day-to-day business functions, as that is not my strength, and focus on my strengths—understanding the industry,” he says. “I am a visionary. I see trends. My talent lies at the strategic level.” As CEO, he adds, “I was having to deal with the management stuff. It’s not that I couldn’t do it, but I wasn’t utilizing my gifts to the fullest.” For instance, Gabbert says, rather than implementing a strategy such as “sell the room not the item,” and making sure the sales staff followed through, he would rather watch the trends and conceive of the sales strategies that need to be implemented to take advantage of those trends.

Finally, in January 2005, Gabbert called in Mike Knight, president of Alliance Management, a Minneapolis firm devoted to working with distressed companies, and named him CEO. Gabbert had fired himself.

Texas Blues

Knight soon discovered where Gabberts had gone astray. “The market was changing, and the company’s response to the changes didn’t help,” Knight says. The strategy of lowering prices and expanding the customer base hadn’t worked: “Gabberts was trying to talk to everyone instead of talking to the core customer.”

Some of Gabberts’ woes resided 990 miles away in Texas—specifically in Dallas, where the company owned both a full-service retail store and an outlet, and in Fort Worth, where it had another store. By 2000, the Texas operations accounted for roughly half of Gabberts’ revenue. But those stores were also responsible for most of the company’s cash burn.

Don Gabbert and Jim’s brother, John, began Gabberts’ Texas operations in 1973. “John and Don wanted Gabberts to be a national chain,” Jim says. “They looked at a variety of markets—Chicago, Kansas City, Houston, Dallas, Denver—and their perception was that Dallas had similar demographics and culture to Minneapolis.”

Instead, they learned that Texas has “a very different culture.” Jim says. “Texas is either hot or cold. Texas consumers can turn off the buying spigot in an instant.” What’s more, he adds, “the complexity of running a home furnishings store at a distance was more than imagined. Since 1973 until last year, the focus was making the Texas market work, without having the opportunity to even consider expanding into other markets.”

When Knight came on board, he and Jim Gabbert took a cold, hard look at the Texas business. By September 2005, they decided that keeping the Texas stores alive “would not be a good use of capital,” Knight says. “The flagship store is here. And we wanted to invest in Minneapolis. It was easy to say, ‘This is where our attention should be.’” Gabbert had put the Texas stores on the market a year before bringing Knight on board, but they didn’t sell. The only choice left was to shut them down, but he wanted Knight to confirm his decision. Knight did. The closing process, which took several months, began in February 2006.

A wise decision, no doubt, but a painful one as well. It meant laying off half of Gabberts’ 600 or so workers—most of them stationed in Texas, along with 30 or so in Minneapolis whose jobs involved managing the flow of communication and order processing between Minnesota and Texas.

With the Texas stores gone, the Edina flagship was looming large in the minds of Knight and Gabbert. Too large.