Schafer: Impatience was a virtue for Target on Canada

Brian Cornell explained just after he took the top job at Target that a deep analysis of the retailer's struggling Canadian operation already was underway.

Then, just days ago, he said there was no scenario in which Target makes money north of the border "until at least 2021."

Mission Canada was officially over.

If not making money until 2021 was already in the air when Cornell first got to Target's headquarters last summer, then every additional day he kept Target open in Canada wasted more money.

Patience in business can be an overrated virtue.

Cornell quickly found out when he took the job how thin patience was wearing among investors. The first meaningful question directed at him during his first quarterly conference call with investors was about how much more time he would give Canada, the company's first major push beyond U.S. soil.

Cornell had been on the job for all of a week. And it was absolutely the right question.

But it's just as easy to think of examples where a CEO dithered, and stuck with businesses losing money quarter after quarter after quarter, all the while hoping a new plan or a new manager or a new ad campaign somehow helps turn the corner.

Investors have every reason to be frustrated with such thinking. The analyst who asked Cornell about Canada used a pleasant enough tone, but he also delivered an important message: Please don't waste the capital we give you by being unwilling to quit a failed venture.

Unfortunately for Target, the conversation about whether to get out of Canada must have started not long after its first Canadian grand opening. The company got into Canada in a very big way — by rolling out more than 120 stores in 12 months. Then, the whole operation promptly got off on the wrong foot with empty store shelves and prices that weren't competitive.

By the time the company gathered all of its institutional investors and analysts together for an update in October 2013, Target's executives had to explain that while sales had been dismal there, it was way too soon to panic. When expanding in some regions of the United States, they said, Target had badly missed when estimating first-year sales, but by the fifth year sales came pretty close to their initial projections.

So by 2017 we will know.

There are many moving parts in a big retailer's operations, certainly, so it wouldn't be fair to suggest it would be easy to analyze options for what to do with the operation. Yet the principles are easy enough to grasp.

Forget the billions of dollars that have been spent. That doesn't matter. Starting from today, can we earn a return on the additional money we have to keep investing? Or would we earn far better returns investing that additional money in other parts of the business?

The reason why decisions to exit a business are so difficult, and can keep some companies stuck for years, is that the answer can't just come from a spreadsheet. We humans aren't always rational. We don't like taking losses. We don't like admitting defeat.

In the case of Target, pulling out of Canada means pulling 133 pins out of the map. It means laying off more than 17,000 people. It means putting on ice any plans for growing outside of the United States.

Target had one big advantage as it faced this kind of decision, and that's that its CEO had been on the job for less than six months.

A great case study in this kind of thinking came from Intel nearly 30 years ago. CEO Gordon Moore and his partner Andy Grove were once again discussing, as they and their colleagues had been for many months, whether to quit the money-losing business of making memory chips.

As Grove later described, he glanced out the window at a distant amusement park and its rotating Ferris wheel, then asked Moore what a new Intel CEO would do if the board fired them.

Get out of the memory chip business immediately, Moore replied.

Stunned, Grove then said, "Why shouldn't you and I walk out the door, come back in, and do it ourselves?"

Cornell was a CEO who had just walked in the door. And he showed just enough impatience.