Former True Religion & American Apparel CEO Chelsea Grayson On Five Things You Need To Be A Highly Effective Leader During Uncertain & Turbulent Times
Stay healthy. This means staying hydrated, exercising, sleeping and keeping your medical (including therapy!) appointments. And most of all, allow yourself time for introspection and preserve your dignity and center. Don’t say or do anything in the heat of the moment, out of desperation or for self-preservation that will destroy relationships or your long-term career path (or that you might regret later because it was inconsistent with your honorable core values).
As part of our series about the “Five Things You Need To Be A Highly Effective Leader During Turbulent Times”, we had the pleasure of interviewing Chelsea A. Grayson.
Chelsea A. Grayson is an experienced CEO, corporate board member and advisor to public and private companies, most recently as CEO of Spark Networks and previously as the first-ever female CEO of True Religion. She also served as CEO and board member at American Apparel, where she significantly improved the company’s operations and supply chain before successfully selling the company to Gildan Activewear Inc. and has sat on boards of directors of companies including Sugarfina, Morphe Cosmetics (Forma Brands), Delta Dental and Xponential Fitness, among others. Grayson is a frequent public speaker and panelist on corporate resilience and brand protection in a crisis, corporate culture, leadership and corporate governance, among other topics.
Thank you so much for your time! I know that you are a very busy person. Our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?
My pleasure! I always say that I’ve had three chapters to my career (so far). My first chapter, I was a lawyer — even though I am still actively licensed, I no longer practice, so I guess you could say that I’m a recovering lawyer. I began my legal career as a law clerk for a federal bankruptcy judge; I was not at all interested in becoming a bankruptcy lawyer (at that time, the etiquette was that you said yes to the first federal judge who made an offer), but little did I know how many opportunities that clerkship would garner me down the road. I went on to practice at Jones Day, first as a corporate finance lawyer. When I was still a baby associate, the post-9/11 mini recession dried up the financing markets, so I played up my clerkship experience and offered my services to the restructuring group. I spent the next few years assisting with distressed mergers & acquisitions and when healthier times returned, I made partner in the M&A group, where I focused on public and private M&A and private equity, as well as corporate governance and board advisory work.
In 2014, I was recruited to join American Apparel as its General Counsel. At the time, American Apparel was trading on the NYSE and was dealing with multiple crises, including a liquidity crisis (the company had lost over $300 million in the previous five years) and a culture and leadership crisis (the CEO had been suspended for cause, pending the results of an internal investigation into sexual harassment and misuse of corporate funds). Not many people would have been willing to run into this “burning building,” but American Apparel was the rare public company that was headquartered in my hometown of Los Angeles and as a vertically integrated apparel manufacturer and retailer, approximately 7,500 of its 10,000 global employees were based there. The barriers to entry for a company like this were so high that it was unlikely another would fill the void if American Apparel had to shut down, and it would be a great loss to the local economy and labor market. So, I dove in head-first.
That first year, most of the company’s business flowed through my office: We successfully battled over half a billion dollars’ worth of litigation (including shareholders derivative, fraud, defamation and class action claims), an SEC investigation into former management, a proxy contest and a unionization attempt. We had to do a wonky at-the-market capital raise to make our bond payment, and we negotiated a debt-for-equity swap with our bondholders through a pre-arranged Chapter 11 bankruptcy filing. Oh, and we also sold t-shirts! At the end of the year, I had gotten to know the bondholders (our new owners) so well (including Goldman Sachs, Monarch Capital, Coliseum Capital and Pentwater Capital), that they suggested I step into the CEO role. And that’s how I crossed over from the legal world into the business world, and never looked back — kicking off the second chapter of my career.
Ultimately, we beautified the company by replacing its e-commerce platform, revamping the marketing technologies, reducing SKUs and inventory and streamlining the manufacturing operations and global brick-and-mortar footprint before successfully selling the company to Gildan (another giant in the space). It was then that Goldman Sachs asked me to step into True Religion jeans (which they also had a stake in) — initially as a board member and ultimately as CEO of the company. As the CEO of True Religion, I took the company through a brand and style transformation and completely modernized its marketing technologies. I also focused on improving wholesale relationships and strategies.
After leaving True Religion, I focused on the third chapter of my career: board service. Aside from American Apparel and True Religion, I have served on the boards of directors of Sugarfina, Morphe Cosmetics (Forma Brands), Delta Dental, Xponential Fitness (NYSE: XPOF) and Spark Networks (NASDAQ: LOV), among others. I also sit on the Board of Trustees for the UCLA English Department.
Last year, I again answered the call of duty for one of my boards — Spark Networks (which owns several popular dating apps including JDate, Elite Single, Silver Singles, Christian Mingle and Zoosk) — and stepped in first as the interim and then as the permanent CEO. I’ve just recently completed my term in that seat.
My role at Spark had me in Berlin at least once a month, but I am still based in Los Angeles and, having sent my two kids off to college, am a happy empty nester. My pleasure! I always say that I’ve had three chapters to my career (so far). My first chapter, I was a lawyer — even though I am still actively licensed, I no longer practice, so I guess you could say that I’m a recovering lawyer. I began my legal career as a law clerk for a federal bankruptcy judge; I was not at all interested in becoming a bankruptcy lawyer (at that time, the etiquette was that you said yes to the first federal judge who made an offer), but little did I know how many opportunities that clerkship would garner me down the road. I went on to practice at Jones Day, first as a corporate finance lawyer. When I was still a baby associate, the post-9/11 mini recession dried up the financing markets, so I played up my clerkship experience and offered my services to the restructuring group. I spent the next few years assisting with distressed mergers & acquisitions and when healthier times returned, I made partner in the M&A group, where I focused on public and private M&A and private equity, as well as corporate governance and board advisory work.
In 2014, I was recruited to join American Apparel as its General Counsel. At the time, American Apparel was trading on the NYSE and was dealing with multiple crises, including a liquidity crisis (the company had lost over $300 million in the previous five years) and a culture and leadership crisis (the CEO had been suspended for cause, pending the results of an internal investigation into sexual harassment and misuse of corporate funds). Not many people would have been willing to run into this “burning building,” but American Apparel was the rare public company that was headquartered in my hometown of Los Angeles and as a vertically integrated apparel manufacturer and retailer, approximately 7,500 of its 10,000 global employees were based there. The barriers to entry for a company like this were so high that it was unlikely another would fill the void if American Apparel had to shut down, and it would be a great loss to the local economy and labor market. So, I dove in head-first.
That first year, most of the company’s business flowed through my office: We successfully battled over half a billion dollars’ worth of litigation (including shareholders derivative, fraud, defamation and class action claims), an SEC investigation into former management, a proxy contest and a unionization attempt. We had to do a wonky at-the-market capital raise to make our bond payment, and we negotiated a debt-for-equity swap with our bondholders through a pre-arranged Chapter 11 bankruptcy filing. Oh, and we also sold t-shirts! At the end of the year, I had gotten to know the bondholders (our new owners) so well (including Goldman Sachs, Monarch Capital, Coliseum Capital and Pentwater Capital), that they suggested I step into the CEO role. And that’s how I crossed over from the legal world into the business world, and never looked back — kicking off the second chapter of my career.
Ultimately, we beautified the company by replacing its e-commerce platform, revamping the marketing technologies, reducing SKUs and inventory and streamlining the manufacturing operations and global brick-and-mortar footprint before successfully selling the company to Gildan (another giant in the space). It was then that Goldman Sachs asked me to step into True Religion jeans (which they also had a stake in) — initially as a board member and ultimately as CEO of the company. As the CEO of True Religion, I took the company through a brand and style transformation and completely modernized its marketing technologies. I also focused on improving wholesale relationships and strategies.
After leaving True Religion, I focused on the third chapter of my career: board service. Aside from American Apparel and True Religion, I have served on the boards of directors of Sugarfina, Morphe Cosmetics (Forma Brands), Delta Dental, Xponential Fitness (NYSE: XPOF) and Spark Networks (NASDAQ: LOV), among others. I also sit on the Board of Trustees for the UCLA English Department.
Last year, I again answered the call of duty for one of my boards — Spark Networks (which owns several popular dating apps including JDate, Elite Single, Silver Singles, Christian Mingle and Zoosk) — and stepped in first as the interim and then as the permanent CEO. I’ve just recently completed my term in that seat.
My role at Spark had me in Berlin at least once a month, but I am still based in Los Angeles and, having sent my two kids off to college, am a happy empty nester.
It has been said that our mistakes can be our greatest teachers. Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?
This is a hard one, as most of the mistakes I have made are still not at all funny (to me, anyway!). However, I do have one that qualifies. I was in my third or fourth year as a lawyer, and I was pulling an all-nighter on New Year’s Eve getting a deal across the finish line. A colleague and I had a casual e-mail conversation about what losers we felt like for working on NYE rather than being out at parties. After the transaction closed, as is common with public company M&A, there was some post-closing litigation. Because other parts of the e-mail chain between my colleague and me were somewhat related to an issue in the case, our e-mails were turned over in discovery and attached as exhibits many times over. Though no actual harm was done, we both felt ridiculous. I learned two very simple lessons. First, treat all written communications as if they are Exhibit A in what is likely inevitable litigation and consider any potential damage, embarrassment or other fall-out before committing anything to the page. Second, keep business and personal communications separate when possible, making sure to retain a reasonable amount of formality and professionalism when it comes to interacting with colleagues.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?
The late, great Bert Zweig was a corporate partner at Jones Day and an early mentor of mine. Bert had been a commissioned officer with the U.S. Navy before launching his legal career, and he carried himself with a unique military dignity to the end. Bert taught me that no matter how tense or hostile things get, to always conduct my business with honor and according to my core principles. That advice has kept me centered through the years and allowed me to burn very few bridges; I don’t say or do things that I will regret or that will alienate me from people or organizations, regardless of what the short-term rewards or gratification might be for saying or doing those things.
The first time I met Bert, he was hosting a Summer Associate event. He was an avid sailor and was taking us out on the water, carefully explaining that at times we would be “tacking,” i.e., heading essentially upwind, but by zig-zagging at angles, so that our sails wouldn’t deflate. In this way, we could reach our destination (which was in the direction the wind was coming at us from), even if we looked a bit off course at times. He later explained that while you should have a long-term career goal, you should always be prepared to “tack” (or zig and zag) and be comfortable with looking off course so long as your long-term navigation is true.
I would be remiss if I didn’t also mention Paul Charron, who chaired the board when I was CEO of American Apparel. Among other roles, Paul also chaired the Campbell Soup Company’s board (leading the organization through its brand transformation) and was previously CEO and board chair of Liz Claiborne. Paul taught me most of what I practice today when it comes to clean and efficient governance and a healthy boardroom culture. Paul was a very strong chair — a stickler when it came to agenda items, staying on track during a board meeting and back-channeling with directors in between board meetings so things would run smoothly once we got into the room itself. He taught me a lot about how to achieve consensus and get things done when there is dissension and even disruption in the boardroom. We had an unusually large board (some of whom had been designated by various shareholders), and two of the directors were vestiges of the prior CEO (who was by then averse to the company). At one point, we had to get board approval to move forward with a litigation strategy, but we feared the strategy might leak and spoil our timing advantage. Paul preempted the issue by assembling the Nominating & Corporate Governance Committee, which comprised a majority of the members of the board, and holding a preliminary vote there, to ensure he would ultimately have a majority in the boardroom. It was only later, just before we had to pull the trigger on the strategy (and at a time when the move could not be scuttled) that he took the issue to the full board, assured he had the votes needed to ensure the two contrarians could not impede our strategy. He never had to pick a fight and they never knew how concerned we had been about their leverage. This taught me how to be creative with the process while keeping the peace with disruptors.
Extensive research suggests that “purpose-driven businesses” are more successful in many areas. When your organization started, what was its vision, what was its purpose?
American Apparel was a clothing company, yes. But, if you purchased the apparel, you were standing up for the company’s core values: The name said it all — we stood for ‘Made in the USA,’ more specifically, made in Los Angeles. We employed 10,000 people globally, 7,500 of whom were textile workers (cutters, sewers, dyers, knitters) in our L.A.-based factories. We stood for pro-immigration rights — the majority of our textile workers were immigrants who we helped achieve status. We also stood for body positivity — we hardly ever used professional models and didn’t use airbrushing or Photoshop in our marketing campaigns. Finally, we were staunchly pro-LGBTQIA; among other things, we had a long-standing collaboration with the HRC and donated the majority of the proceeds from that partnership. In short, American Apparel was a call to action even though we never logoed our clothes … if you knew, you knew. We did many brand studies over the years, and topping the list of reasons for customer loyalty was that we were a purpose-driven organization (before the term “purpose-driven” even existed). Today, so much attention has been directed at “purpose” that companies must be careful of appearing “performative,” but if an organization can do it authentically, it’s the best way to cultivate a truly loyal customer base.
Thank you for all that. Let’s now turn to the main focus of our discussion. Can you share with our readers a story from your own experience about how you lead your team during uncertain or difficult times?
Taking the unknown out of the equation is the key to effective leadership during uncertain or difficult times. In the instances where I’ve joined an organization as the CEO immediately following an unexpected parting of ways with the previous CEO, the employee population (even much of the C-suite) is usually surprised by the transition. Most have realized the company was struggling, some knew that the CEO was in trouble, but few were aware that the CEO would be replaced. Immediately, many employees will resign or have one foot out of the door; loyalists to the former CEO will be angry or disgruntled and others simply anxious about the status of their jobs. But most employees will give new leadership a chance. That’s not to say that during this “grace period” employees won’t be nervous — the company was in turbulent times before I was brought on, and my onboarding usually involves big changes including reductions in force, cost-cutting and changes in strategy. I always make sure to over-communicate my vision for the company as well as the tactical plan and timeline driving the overall strategic plan so that people know what to expect.
Did you ever consider giving up? Where did you get the motivation to continue through your challenges? What sustains your drive?
I have never considered giving up in any of my professional endeavors. I owe it to my ancestors to succeed and continue to put one foot in front of the other — they didn’t do all that work just for me to give up.
I’m an author and I believe that books have the power to change lives. Do you have a book in your life that impacted you and inspired you to be an effective leader? Can you share a story?
There are so many good books out there, and I read A LOT (I earned my degree from UCLA in English Literature and currently sit on the board of that department). Apologies for breaking the rules here, but there are three I need to share — two business books and a novel. First, “Shoe Dog,” by Phil Knight (the founder and former CEO of Nike). The book goes deep into the origin story of Nike — inarguably one of the most impactful and daring companies of our time. I was inspired by Phil’s relentless drive to serve excellence to his customers (and treat them the way he would treat himself) and the artful way in which he built his management team and continuously moved the pieces on the chessboard. Second, “Who is Michael Ovitz,” by Michael Ovitz (the founder of Creative Artists Agency). Michael architected the talent agency industry (especially as it operates from the West Coast) and The Wall Street Journal called him the “Steve Jobs of agenting.” He was notoriously sharp-elbowed and very honest about mistakes and enemies he made along the way, but he still managed to emerge as one of the top dealmakers in an industry filled with expert dealmakers. (*Side note/fan-girl moment: Ovitz is engaged to the incredible Tamara Mellon, founder of Jimmy Choo and her eponymous luxury footwear brand, Tamara Mellon). And finally, “Random Family,” by Adrian Nicole LeBlanc. I loved this nonfiction book so much that I ran down the TV and film rights and (unsuccessfully) attempted to acquire them. To this day I cannot believe no one has brought this work to a screen. The author immersed herself for a decade in the lives of a family in the Bronx and the way she brings the energy, interactions, emotions, dialogue, music and surroundings to the page is remarkable, as is the generosity of the family that opened their lives to her. Aside from being just a beautiful read, this book subtly shows how to be an effective observer, which is a trait all great leaders must acquire: the art of not just hearing and watching but listening and seeing.
What would you say is the most critical role of a leader during challenging times?
To do no harm. Leave things alone that don’t need fixing, and don’t try to fix everything all at once.
When the future seems so uncertain, what is the best way to boost morale? What can a leader do to inspire, motivate and engage their team?
Remain a cheerleader and an ambassador for the organization (and the brand, if applicable). Demonstrate to your team that at its core, you fully believe that the organization remains sturdy and worthy of fixing and supporting.
What is the best way to communicate difficult news to one’s team and customers?
I am a firm believer in face-to-face, in-person meetings and conversations. At American Apparel, I regularly trekked to all six of our manufacturing and distribution facilities to hold town halls and one-on-one meetings with employees. I also dropped in on our retail locations (which commanded a huge global footprint) to interact with the staff and our customers on the ground. We had very significant wholesale customers as well, and I took monthly meetings with them to ensure they knew that, notwithstanding what they were seeing in the press, we would deliver on all orders in a timely manner, consistent with the quality they expected.
How can a leader make plans when the future is so unpredictable?
During unpredictable times, a good leader will seek counsel from her board, her management team and outside advisors to innovate and integrate a flow chart-like strategic plan, which contemplates as many potential scenarios as possible. This plan will help her preempt risk and be as prepared as possible to make critical decisions. That said, in truly unpredictable times, even a well-thought-out plan is no safety net, so a good leader will be flexible and unafraid to change course in real time.
Is there a “number one principle” that can help guide a company through the ups and downs of turbulent times?
Teamwork. The team that sticks together will always be stronger, more efficient and better able to protect the company against risk and attack. Without the distractions of in-fighting or internal disruption, the team can execute the leader’s vision and pivot as a group more easily when necessary. Kobe Bryant famously said, “I’ll do whatever it takes to win games, whether it’s sitting on a bench waving a towel, handing a cup of water to a teammate, or hitting the game-winning shot.” Take your ego off the table, roll up your sleeves, and pitch in!
Can you share 3 or 4 of the most common mistakes you have seen other businesses make during difficult times? What should one keep in mind to avoid that?
Many companies are hesitant to make critical cost reductions. Good leaders will see that certain cost cuts are inevitable and delaying them will only further spiral the company. This can include reductions in force, hiring freezes and holding back on bonuses or raises. Sometimes a leader must make tough decisions that are good for the long-term future of the company (whether as an operating entity or to have a successful sale process).
On the flip side, many companies wait too long to engage critical advisors who can facilitate a successful emergence from the crisis. Advisors can be expensive, but the good ones are seasoned in ways that the company’s management team might not be. They can handle the heavy lifting to manage through the crisis while allowing the company’s employees to continue operating the business with as little distraction as possible. Spending money in the right ways, even while simultaneously cutting back elsewhere, is the path to a long-term solution.
Finally, in distressed times there can be a jostling for power among those at the top of the company (the board and management) and its advisors, not unlike a feeding frenzy where it’s each person for themselves, whether driven by self-preservation or even greed. You must be aware of each person’s motivations and incentives in the various scenarios confronting the company and make decisions based on what maximizes value for the stakeholders, rather than what maximizes value (fees, raises, promotions) for a particular individual.
Here is the primary question of our discussion. Based on your experience and success, what are the five most important things a business leader should do to lead effectively during uncertain and turbulent times? Please share a story or an example for each.
First, you must communicate regularly, frequently and transparently with all stakeholders. This can include the board, employees, shareholders, lenders, the auditor, customers, vendors and suppliers. Each of these categories of stakeholders has their own concerns (some may conflict with those of other stakeholders) and some are consistent among all stakeholders. For example, employees might be concerned about their jobs, but they could also have stock in the company. So, while non-employee shareholders might encourage management to cut jobs, they share an interest in the stock price with the employees. Lenders might be concerned about the company’s ability to make payments on its debt, which may conflict with the board’s general primary fiduciary obligation to its equity holders, though the board will of course be concerned with the company abiding by the terms of the credit agreement. Vendors and suppliers will be concerned about the ability of the company to pay for goods and services and could impose harsher contract terms, and the CFO may want to “slow pay” some of them to preserve cash for other purposes, while at the same time wanting to pay the bills so production can continue. Customers might be concerned whether the company will be able to deliver goods or services ordered, while the board and management may be looking to cut customer service. In any case, the company will be facing a multitude of very concerned stakeholders, and a lot of that concern can be alleviated with honest communication, even if the communication contains bad news or no news.
When I was CEO and both American Apparel and Spark Networks, I had weekly calls with my lenders and usually included my CFO as well. We prepared documents for the lenders to review in advance that generally included information the lenders had requested. In this way, I was able to negotiate a debt-for-equity swap with my lenders at American Apparel, which resulted in a successful pre-arranged Chapter 11 restructuring from which we emerged in record time. While CEO of American Apparel, True Religion and Spark Networks, I held weekly town halls with all employees (some attended virtually and some had to watch a recording, depending on the geography and time zone), each of which I ended in an open mic Q&A session that went as long as there were questions to be asked. I scheduled one-on-ones with any employee who requested, and, on this point, I want to emphasize the importance of employees feeling that they are the “first to know,” and that they don’t have to hear about the company’s news via the media. With public companies, there is a fine line between what information can be disseminated internally and when, which is determined by the materiality and non-public nature of the information, but generally, a good leader can find a way to share appropriately.
Second, be bold. If you are leading a group of people, you are there because you earned it based on your seasoning, skills and judgment. Be confident, make decisions, be creative. The state-of-the-art marketing technology skills I acquired as CEO of True Religion and later as an Executive-in-Residence with Wunderkind armed me with confidence in my role as CEO of Spark Networks to make the tough decision to outsource our performance marketing function (the primary source of revenue generation at the company).
Third, make sure you have the right board of directors for the moment. During healthy times, a company’s board might be packed with former industry operators, governance experts and compensation specialists. When trouble hits, you may need to add restructuring professionals, people who have been through Chapter 11 bankruptcies and distressed M&A and, importantly, seasoned crisis and “special situation” veterans who don’t scare easily. Distress is not for the faint of heart: liquidity crises, culture crises (think #metoo), litigation (shareholder and labor & employment actions immediately come to mind), government investigations (whether by the SEC or other agency), shareholder activism (or agitation) and proxy contests, perhaps even union-related issues. No matter how expert and networked your board is for healthy times, they might not have the toolkit or stomach for bad times and may not understand that turbulent times can be looked at as an opportunity to transform the company and its business, rather than simply survive and continue doing the things that spiraled the organization in the first place.
Fourth, preserve optionality. Always be ready to operate long term, sell or file a Chapter 11. Run several tracks concurrently, because when a business is in trouble, more trouble always seems to find it and there are always more skeletons in the closet. One key to preserving optionality is having a truly strategic CFO who is fearless and can help you pivot quickly without much handwringing. Not every CFO is a wartime consigliere, so you might have to make the difficult decision to part ways with your “happier days” CFO and bring in a new one.
Fifth, stay healthy. This means staying hydrated, exercising, sleeping and keeping your medical (including therapy!) appointments. And most of all, allow yourself time for introspection and preserve your dignity and center. Don’t say or do anything in the heat of the moment, out of desperation or for self-preservation that will destroy relationships or your long-term career path (or that you might regret later because it was inconsistent with your honorable core values).
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
Martin Luther King Jr. said, “A genuine leader is not a searcher for consensus but a molder of consensus.” A good leader will form an opinion on an issue (usually after gut-checking with trusted advisors) and will then go out to the various stakeholders to market test the position prior to making a decision. In this way, the stakeholders will feel they have a voice in the decision-making process, even if they don’t perfectly get their way, and they will see the leader as being decisive but also accepting of differing viewpoints. This is a guided approach by the leader, and circles back to what I emphasized earlier: teamwork. You cannot successfully lead without it, not for the long term, in any case. Involving team members in the decision-making process (even with the understanding that they might disagree with the ultimate decision) usually results in better cooperation and smoother implementation of what was essentially the leader’s original approach. I attribute much of my success to learning how to achieve a consensus without imposing my position on anyone.
How can our readers further follow your work?
You can find me on LinkedIn at https://www.linkedin.com/in/chelseagrayson24/ and I am @ChelseaGrayson on Instagram and Threads. I also have a website where readers can generally keep up with me (www.chelseagrayson.com) and, finally, my YouTube channel, Chelsea Grayson Network (https://youtube.com/@chelseagraysonnetwork5976?si=krUdr).
Thank you so much for sharing these important insights. We wish you continued success and good health!
Former True Religion & American Apparel CEO Chelsea Grayson On Five Things You Need To Be A Highly… was originally published in Authority Magazine on Medium, where people are continuing the conversation by highlighting and responding to this story.