HS analysis Lauri Sipponen, who excelled in Lidl, was fired from VR after a quick boss pest – Was it due to a shaky decision-making or a deliberate palace revolution?

Rail transport CEO of VR Group Lauri Sipponen got fired unexpectedly on Monday. He only had eight months to work.

The starting points were challenging.

VR’s Board of Directors had chosen Sipponen from outside the grocery trade.

Sipponen had managed the Finnish operations of the German Lidl from 2010–2019.

At Lidl, he worked in various positions for a total of 20 years. During that time, Lidl had managed to break into the Finnish food trade to the detriment of the K and S groups.

Lidlin The success made VR Group’s then Board of Directors excited about Sippos.

The Board thought that VR would need a good human resources manager and a leader who understands customers’ mood swings and consumer behavior.

These properties were believed to combine in Sippose.

In the grocery trade, the movement of goods, ie logistics, customer service and marketing, are in many ways similar to public transport, or so did recruitment and Sipponen hoped.

The past eight months have shown that the rules of the game in public transport companies are different.

Sipposen the appointment news in early July 2021 was a slight surprise, also because he had been out of work since 2019.

VR’s situation was quite challenging.

Traffic seemed to be waning and concentrating on growth centers. Therefore, growth had to be sought in the public transport of the growth centers, the Pohjolan Liikenne bus company owned by VR and the international expansion.

The need for internationalization was mainly due to the fact that Finnish rail traffic was also under pressure to open up to competition.

VR’s exclusive right to operate trains expired on 1 January 2021. Since then, anyone has been able to invest in trains and apply for a license to operate rail..

VR’s recent successful operations have been the conversion of Pohjolan Liikenne’s Tampere buses to electronic ones and now the recent acquisition of the Swedish train and bus operator Arriva Sverige.

Read more: VR Group’s acquisition in Sweden may have come at a favorable time when the German DB was in short supply

Only the future will show whether there was something in the purchase process of Arriva Sverige that could be rolled around Lauri Sipponen’s neck. Now nothing like that has been told.

In all these projects, however, Sipponen jumped on the moving train to implement the strategy created by VR Group’s Board of Directors.

When any large company will be led by a new CEO from outside that company’s own industry, resistance is often expected within the organization.

Why was a person chosen who did not know even the clearest laws in the industry?

A similar abrasion has been well seen in Finnair, which is majority-owned by the state, for example. The question is often pertinent.

Sipposen can say you have failed to convince your own management team. They had massively criticized Sippo for VR’s board on the grounds that this was not rigid enough in its decisions. The managerial experience was despised on the grounds that, as Lidl’s country manager, Sipponen was accustomed only to carrying out the orders given to him, not acting independently.

For VR’s Board of Directors, such a message could have sunk exceptionally well when three people known as hard-working professionals were appointed only on March 17, 2022 at the Annual General Meeting to the government.

Sanoma’s CFO started as a new member at the time Markus HolmCEO of Keva Jaakko Kiander and the CEO of Posti Turkey Kuusisto. In the process Heikki Allonen and Roberto Lencioni left the government.

Even the old board members were relatively light in experience.

Old as the saying goes, corporate culture eats strategy for breakfast.

In VR’s case, Sipponen at least learned that the strategy is difficult to implement without the support of old VR executives.

Sipponen’s task had to be a good pot, for example in negotiations with various ministries, while the director of passenger transport Topi Simola appeared as a more severe chamber.

Such a setup eats up the credibility of the CEO for a long time, even though it is a division of labor that is understandable at the beginning of the CEO term.

In VR Group the situation escalated last weekend, partly due to problems with Russian traffic.

Sipponen felt that he was left alone due to difficult solutions for traffic in Russia, and according to HS data, he asked for guidelines from various ministers of the Finnish government as well as the company’s board, some of them too diligently.

The situation was difficult.

If Sipponen made his own decisions, he alone was to blame for the solutions.

If, on the other hand, Sipponen asked for higher guidelines, the opponents of Sipponen were able to communicate to the board that Sippone, who only served as Lidl’s country manager, did not have the required managerial experience and therefore asked for instructions from higher authorities.

This was particularly the case for VR executives who wanted to get rid of Sippos.

However, VR could not give up these leaders, as Sipponen himself did not yet have deep experience in the laws of train and bus traffic.

Indeed, it seems strongly that the board had to choose between key personnel or Sipponen’s departure.

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“We made the decision first, and then I called Tuppurainen.”

“We thought only the best of VR, ”Chairman of the Board of VR Group Kjell Forsén told HS on Tuesday without further disclosing the reasons for its decision.

“I say from the bottom of my heart that he didn’t say anything,” Forsén assured HS on Tuesday.

Forsén also said that the decision to dismiss had taken place without the Minister of Corporate Governance Tytti Tuppurainen (sd) would have contributed.

“We made the decision first, and then I called Tuppurainen.”

Other board members reached by HS say the board has agreed that Forsén will handle all comments related to the dismissal.

State rail traffic to Russia is an interesting sideline in Sipponen’s separation line.

According to HS’s information, Sipponen asked the government for guidance on how VR should react to the continuation of Allegro train traffic.

VR’s communications then erroneously stated that Allegro traffic would continue at the request of the ‘authorities’.

That message annoyed the government, as it had only been a wish expressed by the Foreign Ministry to secure the return of Finns in Russia from Russia to Finland. It was also hoped that this would allow other EU citizens to leave Russia via Finland.

Caring for citizens of other EU countries would have been a good message from Finland to the EU as well, HS is told.

Russian freight transport was in many ways a difficult issue.

Freight traffic and VR’s co-operation with a Russian railway company was not on the EU’s sanctions list, but strong public opinion and many politicians called for it to be stopped.

Goods on the EU’s sanctions list were stopped at the border and wagons were seized. In this respect, the Minister responsible was the Minister of Justice Anna-Maja Henriksson (r).

For example, the fertilizer industry was pleased to receive the raw materials it needed from Russia. The Security of Supply Center tweeted that they are also needed for security of supply reasons.

Lauri Sipponen asked the owner control for a cargo control letter, which Tytti Tuppurainen reportedly submitted to VR on March 24, 2022.

According to HS, the letter has also been seen by the Minister for Foreign Trade Ville Skinnari (sd) and the Minister of Transport and Communications Timo Harakka (sd).

In a letter of formal notice sent to HS, Tuppurainen emphasizes that the Finnish state, as the owner of VR, requires VR to comply with all sanctions, but leaves the decision-making responsibility to the company’s Board of Directors and executive management.

Regarding Allegro traffic, Tuppurainen warns in the letter that by continuing Allegro traffic, VR may “involuntarily” commit a sanction violation and its risk increases “significantly” due to sanctions against Karelian Trains.

In practice, Tuppurainen therefore instructs VR’s Board of Directors and management to stop Allegro traffic. The Minister for the Future of Freight and Freight will leave the company to make its own decisions.

At VR and Sipponen then had a growing concern about whether VR’s freight traffic would become a major political problem. Concerns were heightened by an announcement on the last weekend in March that Britain had extended its boycott to Russian cargo.

VR was concerned that the continuation of Russian cargo could disrupt VR’s cash flow, as part of the financing was tied to agreements with British banks.

Due to this concern, freight and cargo traffic to Russia was cut off, VR’s Chairman of the Board Forsén told HS on Monday.

Read more: HS information: VR’s President and CEO Lauri Sipponen was fired due to growing distrust of the Management Team

Since worries about the disruption of cash flow proved futile. Freight traffic could continue.

However, the closure had already made it difficult for independent operators such as Nurminen Logistics, Operrail and Fenniarail to operate.

When cargo traffic was then reopened, the time coincided with the Butch massacre. The timing of the opening of freight traffic led to a wide range of public reactions and increased public pressure.

These the pressures were not the reason for the dismissal, according to Forsén.

However, they were likely to increase the pressure on Lauri Sipponen. Only those who have followed the matter closely enough know how well Sipponen withstood the pressure or how he should have acted.