REVOLUTION FROM ABOVE AT SEARS An iron-willed CEO transformed the company -- and let a reporter view the turmoil from the inside.

(FORTUNE Magazine) – It was no secret, eight or ten years ago, that Sears Roebuck was a troubled company. Between 1978 and 1980, Sears merchandise sales actually fell by 2.4% while the consumer price index was rising at double-digit rates. Sears' stock price fell from $62 a share in 1972 to $14.50 in 1980. But even if you had read some of these details, you almost certainly did not know just how sick the company was in those days. You can now read the awful truth in The Big Store (Viking, $22.95), by Donald R. Katz, an absorbing inside account of a giant corporation in turmoil, and of the management revolution that made it healthy again. Sears survived largely because of two guys named Ed: Telling, the chairman and CEO from 1978-85, and Brennan, a retailing star who has since moved up to chairman. Telling was visionary and intellectual, Brennan a born merchant. Together they recast the company into an immensely successful consumer services conglomerate that last year earned $1.35 billion on revenues of $44 billion. Katz was able to view these events from an extraordinary perspective. In addition to interviewing many of the players, he got Telling's blessing for his project and with it access to the company's confidential records. A contributing editor of Esquire, the author had intended to spend three months researching the book, but ended up poking around Sears for several years. Telling deserves a lot of credit for having the nerve to let Katz in the door at a time (January 1983) when there was still plenty of turmoil to observe; just about every other Sears executive, it appears, was horrified by the arrangement. The Sears that got into trouble in the Seventies was a vast, ungainly bureaucracy still heavily influenced by the management style of the legendary General Robert E. Wood. Earlier he had built the Panama Canal; as boss of Sears in the Twenties, he had got the company into retailing. Wood had divided Sears into two parts, quaintly called Field and Parent. Field (that is, the stores) did the selling, and Parent (the Chicago headquarters) did the buying. Each side had considerable independence: Parent bought whatever merchandise it deemed suitable, but the Field was under no obligation to accept it. The Field was further delineated into five territories, with groups and zones within each division, and store managers who had absolute authority over displays, advertising, and pricing. Somehow or other, these entities negotiated a mutually profitable existence, particularly in the two decades after World War II. In the late Sixties, however, the weight of the culture began to sink the enterprise. The fiefdoms were beginning to look top-heavy -- Katz cites a drapery department with 40 executives -- and the company's goods were often overpriced. Furthermore, Sears traditions made it hard to get control of the beast. Katz observes acidly: ''Every numerical indicator was tainted by politics and history and held close to the vests of guys named Doc and Charlie.'' By the Seventies the growth of shopping malls and competitors like K mart / was encroaching on consumer territory that had once been all Sears'. When profits fell by $170 million in 1974, Sears Chairman Arthur Wood (no relation to the General) sensed that the company was in deep trouble and brought in Hay Associates to look over the organization. To assist in the restructuring, Hay organized a committee of younger Sears managers to tear the organization apart. One of the most zealous, known as ''the kid,'' was Eddie Brennan. Wood also called in McKinsey & Co. One McKinsey principal, Phillip Purcell, soon found himself spending more and more time with a fascinating and totally unconventional territorial manager named Telling. For all its hoary traditions, Sears had an individualistic culture that tolerated mavericks, and in Edward Telling it got a whopper. A small-town boy from Illinois, Telling had a standard Sears apprenticeship and detested everything about it: the Main Street stores, the early management jobs that sentenced him to weeks in roadside motels, the constant uprooting of his family. According to Katz, ''Telling used to say that his vision of hell was beginning a day in front of a Holiday Inn waiting for a Sears store manager.'' AN INTUITIVE THINKER, Telling perceived early in his career that the ''Sears way'' was leading nowhere, and he resolved to change it. Put in charge of the Eastern territory -- the despised, decadent East -- Telling soon moved it from a ranking of fifth in profitability to first. He did it by bludgeoning everything sacred he could find. He consolidated divisional zones, and when he found uninspired managers in Sears' big-league ''A'' stores, he swiftly relegated them to the ''C'' leagues. Katz tells us that other Sears people were awed by this defiance of tradition: ''It was there, in the strangely methodical fury with which he fell upon the corruption of the group and the profligacy of powerful store jockeys, that certain individuals around him began to feel inspired by his quiet power . . . He was possessed of a determination to promulgate change such as none of them had ever seen before, and certain hard-bitten veterans found themselves strangely moved.'' In the world of senior executives, Telling was odder than three-legged pants. He sometimes left work at noon to go home and rake leaves -- and instructed his secretary to tell this to the CEO should the man call. In Chicago he would often leave to take in an exhibit at the Field Museum or catch a few races at the track. If he was traveling, he tended to take in the local sights. Once, in Boston, he decided that he wanted to see Fenway Park; the Red Sox were not playing that day, but Telling pounded on a door until someone let him in. His trips afield by company plane were always planned to take him home in time for dinner with his wife, Nancy. When Telling became chairman and CEO in 1978, he knew he had to transform Sears' diseased culture while upgrading an ongoing, unhealthy business -- all without killing the company. Among other things, he was determined to make the buying and selling sides work together. But he soon found himself at war. ''The old cultures were protecting themselves at all costs,'' Katz reports. In the end, Telling solved a lot of his problems by simply lopping off some parts of the business. Between 1978 and 1983 Sears closed more than 50 stores and reduced total employment by 21%; the departures included over 1,500 career executives who were bought out in an early-retirement incentive plan in 1980. Katz's blow-by-blow account of this purge, and its resolution, is told largely through the participants, and it is vivid stuff. One of Telling's lieutenants was Jumpin' Joe Moran, an ex-paratrooper and philosopher-king of the buyers, whose raging intellect would not let go of him until far into the night, after he had committed to paper his deepest, poetry-laced thoughts about ready-to-wear. Moran tried to rein in the buying staff by sheer intimidation, and he used Telling's imprimatur in attempts to cram his program into the Field. His nemesis, we learn, was a Sears executive named Charlie Wurmstadt. ''Neither a creative merchant nor an inspired leader,'' in Katz's unkind characterization, ''Charlie was a Sears soldier, Field bred, and for all of his working life that had been exactly what was called for.'' Like a good soldier, Wurmstadt dug in to defend the honor of the Field, effectively blunting Moran's attack. By 1979 the buyer-seller stalemate had pushed Sears to the edge. In an economy ravaged by 11% inflation, Sears sales were flat, and Telling was being widely judged one of the country's worst executives. None of the characters in The Big Store is more compelling than Eddie Brennan. Telling had first spotted Brennan brilliantly managing a ghetto store in Baltimore and quickly promoted him to the division's biggest store. Over the next several years, Brennan and Telling moved up together until both reached the Sears Tower. Brennan's grandfather, mother, father, uncle, and brother had all worked for Sears; his mother even took a Sears assignment in Mexico, at considerable inconvenience to the family. (But his brother Bernard left Sears and later served for a while as president of Montgomery Ward.) Brennan shared Telling's belief that Sears must change, but unlike his mentor he genuinely loved the stores and had a feeling for the older Sears culture. Ultimately it was Brennan, as president of the Sears merchandising group, who stopped the internal war and provided the new belief system needed by the company. Telling had asked Brennan, somewhat expansively, to do nothing less than ''destroy a thing called Headquarters and a thing called Field and create a thing called Sears.'' To Brennan, Sears meant stores, and he used his mandate to create the so-called Store of the Future. Every item and every line in the stores was evaluated. The dumpy Sears stores that had been scaring customers away either measured up or got buried. Brennan saw to that personally, having visited almost every store himself, prodding and leading the managers. The name was a bit of an overstatement, but the Store of the Future at least got Sears into the present. KATZ WRITES WITH a passion that could have come only from years of living with the cast of characters, and most of The Big Store artfully reflects their shifting moods and ideas. Unhappily for readers, the passion ebbs, and things become much less interesting, when the Sears crisis is resolved and the revolution is complete. The last quarter of the book -- covering Telling's frustrating attempts to diversify and the race to succeed him as chairman -- is slow going. The moral of his book is obvious, and Sears has certainly not been the only retailing company you could apply it to -- W.T. Grant, Korvette's, and most recently Gimbels also come to mind. The moral is that retailers must endlessly change. Just about all CEOs in retailing talk about the inevitability of change, even as you watch some of them working to preserve the status quo. The Big Store might help them overcome some of those bad habits.