The Team Test: What Lululemon's C-Suite Overhaul May Teach About Underwriting a New CEO's First Hires

New here? Every two weeks, I look at a leadership decision in the news through a diligence lens. What did the decision-makers actually know, and how did they know it? Issues 1, 2 and 3 on Disney, Skydance and Mattel, are already out.

Boards spend months checking out a new CEO. Then she hires her senior team in a few weeks, and those hires often get far less scrutiny. Before you judge a new leader's plan, look at who she picked to carry it out and how each of them was checked.

Lululemon's new leadership team starts work a week from today.

On October 7, CEO Heidi O'Neill named Maggie Gauger as President and Chief Product Officer and Joseph Godsey as Chief Operating Officer. Both are new roles, and both start October 26 (press release). Two senior executives are leaving November 6: Nikki Neuburger, who led brand and product activation, and Ted Dagnese, who ran the supply chain (8-K).

O'Neill had been CEO for a month. The stock had lost nearly half its value this year (Reuters via Economic Times). Most coverage treated this as a new boss cleaning house. I read it differently.

Lululemon's leadership troubles started well before O'Neill showed up.

Here's what I'd underline. When the board named O'Neill in April, the stock fell about 5% after hours, analysts called it a surprise, and the founder said so publicly (FashionUnited).

Here's who she brought in.

Gauger will run merchandising, design, footwear, product innovation and materials science. Like O'Neill, she spent a long career at Nike, and she became Athleta's CEO a little over a year ago (Retail Dive). Godsey was Chief Growth Officer at Walmart Canada and spent 15 years at Adidas before that (Retail Dive).

Gauger's job is the one to watch. Lululemon's product hasn't been landing with shoppers for months (Retail Dive), and O'Neill wants product and design at the center of the company. That puts a big piece of the turnaround on Gauger.

We saw this in Issue 1. Disney's board knew Bob Chapek well, and that felt like enough. A shared Nike background can create the same comfort. It shows how someone did at Nike. It doesn't show how they'll do in a new job at a different company.

Gauger's latest job is also her shortest. A little over a year running Athleta isn't long enough to show much, and it's the role closest to what Lululemon needs from her now. If I were checking this hire, I'd start with people who worked for her at Athleta and look at what changed there while she was in charge.

The press release said Neuburger and Dagnese are leaving "to pursue other opportunities." The SEC filing says both exits will be treated as terminations without cause under their contracts (8-K).

That happens all the time, and it says nothing bad about either executive. Companies usually soften the wording when they're the ones making the call. It's still worth checking.

The team isn't finished. Lululemon still needs a chief brand officer, a chief communications officer and a chief technology officer, plus a chief strategy officer who will report to Frank (Retail Dive). Until those jobs are filled, Frank also oversees brand and technology (8-K).

Frank and Maestrini ran the company together after McDonald left, and both are staying (Retail Dive). That's a plus. They know the business, and they give the new team some continuity.

To be fair, new CEOs bring in people they trust all the time, and it often works. O'Neill didn't only hire from her past. Godsey comes from Walmart and Adidas, and she kept the two executives who ran the company before her. Investors seemed fine with it. The stock rose about 1% the next day (The Logic).

I'm not saying Lululemon picked the wrong people. I'm saying...

These work for a board overseeing a new CEO, and for an investor or family office backing a leader who's rebuilding the team under them.

Lululemon's board did its job. It ran a search under a lot of pressure, stood up to two activist camps and hired the leader it believed in. Then, in her first month, she made the hires that will shape the next couple of years.

Most boards won't go through a proxy fight this public. But the setup is common: a new leader comes in and rebuilds the team fast.

If you are weighing a CEO, a founder or a successor right now, the free Source Map at gannett.partners lets you check your own evidence in about ten minutes. Enter who told you what, and see how many of your sources are really the same source. Nothing you enter leaves your browser. And if you'd like to talk a situation through, I'm glad to.

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Chris Gannett is the founder and CEO of Gannett.Partners, a nationally recognized, Dallas-based firm that provides independent diligence on the founders and CEOs a business depends on. Boards, investors, sponsors and family offices use that work to price and protect the value they're betting on.