Pablo Isla
Spanish lawyer who became world's best performing CEO
Pablo Isla is a Spanish lawyer who became CEO and Chairman of Inditex, the leading fashion retailer, from 2005 to 2022. In 2017 he was recognised as the world's best performing CEO by Harvard Business Review.
Under his leadership, Inditex (parent company of fashion retailers including Zara, Pull & Bear, Massimo Dutti, Bershka, and others) became the largest public Spanish company with a market cap of €81.6 billion in 2019. He tripled the size of the company during his time in charge, and multiplied its value by seven. Inditex has more than 7,400 stores and sells online in more than 200 markets. It has a workforce of more than 170,000 people. Since 2005, Inditex has opened on average one store a day.
His success in adapting the business’ strategy in order to compete in the online marketplace is viewed as one of the key reasons for the company’s growth. Another of his strengths is his strategy of placing an emphasis on ensuring employees are highly motivated. He has said the “most important thing in a company is the people.”
Down to Earth
Colleagues say his style of management is humble, bordering on shy at times. He spends a lot of his time travelling to visit stores – at the company’s head office he is understood to manage by walking around rather than holding formal meetings. This philosophy is based on his wish to ensure the company retains an entrepreneurial, ‘startup’ culture despite the firm’s massive size.
The company has grown dramatically in recent years, and its expansion shows no signs of abating. In FY19, Inditex’s net sales increased by eight per cent to €28.3 billion. Like-for-like sales growth was 6.5 per cent. Inditex reported growth in sales from its online platform of 23 per cent to €3.9 billion, which is 14% per cent of the total. Net profit registered growth of six per cent to €3.6 billion – it would have increased by 12 per cent, but the business decided to recognize an inventory provision of €287 million in response to the coronavirus pandemic.
He has not been afraid to sanction substantial investment to fully integrate Inditex’s stores with its online operation – in the 2019 financial year, the company invested €1.2 billion in this project. Inditex operates in 96 markets, with stores and online fully integrated in 66 of these.
Driving innovation
Isla has also adopted a highly effective strategy of harnessing technological innovation to improve Inditex’s customer service. A key aspect of this has matching supply to real customer demand by deploying RFID technology throughout its integrated offline-online store platform. The RFID system codes each garment in the logistics centers, which means that when shipments reach the stores twice weekly, the system immediately pinpoints which sizes need replenishing.
This strategy has enabled Inditex to limit the damage inflicted by the coronavirus pandemic. Inditex’s 2020 Q1 sales slump was limited to 44 per cent, despite the fact that up to 88 per cent of its stores were closed. Meanwhile, Isla’s shrewd investment in Inditex’s online operation has paid off handsomely – while overall sales dropped in the first quarter of this year, online sales were up 50 per cent. In April this year, online sales jumped 95 per cent. By 2022, Inditex’s online sales are expected to account for more than 25 per cent of the total, compared to 14 per cent in FY19.
He said: “Our priority through the crisis has been and continues to be the health and safety of our people and our customers. I would like to thank all of our people for their tremendous commitment.”
World’s Best CEO
HBR’s 2017 ranking of World’s Best Performing CEOs put Pablo Isla in #1 spot. It said “This year’s top performer—his first time in that spot—is Pablo Isla of Inditex, the parent of the retail fashion chains Zara, Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, and Uterqüe and of the housewares retailer Zara Home.”
Since becoming CEO, in 2005, Isla has led Inditex on a global expansion during which the company has opened, on average, one store a day. That growth has increased its market value sevenfold and made it Spain’s most valuable company. Colleagues describe Isla’s management style as humble and at times almost shy. Although he spends much of his time traveling to visit stores, he rarely attends store openings, choosing to avoid the limelight. At headquarters he prefers management by walking around over holding formal meetings—part of his attempt to maintain an entrepreneurial, small-company culture even as the firm has grown very large.
Among apparel retailers, Inditex stands out for two things: Its success in helping consumers easily migrate between physical stores and online shopping, and its “proximity sourcing” system, under which more than half of production takes place close to home. This allows it to keep inventories low and jump on trends to get new merchandise into stores quickly.
Measured on financial returns alone, Isla comes in 18th in our ranking; his company’s performance on environmental, social, and governance (ESG) factors, which count for 20% of a leader’s score, propelled him to the top spot. ESG-rating firms praise Inditex’s transparency in managing, monitoring, and auditing its supply chain. The company encourages consumers to bring worn-out clothing to its stores for recycling (in Spain it runs an at-home-pickup recycling program), and the Join Life brand of Zara, its largest chain, is produced using recycled fibers and with careful attention to the consumption of water and other resources.
Legal background
Born in 1964, Pablo Isla graduated with a Law degree from the Complutense University of Madrid in 1987. He joined the State Lawyers Corps in 1988. From 1992 to 1996 he was Director of Legal Services for Banco Popular Español. In 1996, he left that position and became the General Manager of the National heritage department of the Treasury. In 1998, he rejoined Banco Popular Español as General Secretary. From 2000 to 2005, he was chairman of Altadis group. He was named CEO and deputy chairman of Inditex in 2005 and was then chairman of the board in 2011.
He is now Chairman of the International Advisory Board of IE University, where I lead the top executive programs.