Blog Article

Reimagining the retail CEO

Posted by Cory Morrow

Cory Morrow

What will retail leadership’s tenure and sourcing look like in the future?

During the last two years, CEO changes at major retail chains like Walmart, Best Buy, Kroger, J.C. Penney, American Eagle Outfitters, and Target (among others) have dominated the headlines. In some cases, these leadership changes were planned, while in others, the changes were made in reaction to performance challenges and internal turmoil.

In any case, retail uncertainty is only expected to continue in the next five years, so industry watchers have been speculating about the right type of CEO needed to lead retailers in the future. They’ve also been searching for potential links between tenure and performance—and wondering aloud whether the rapidly-evolving industry will come to require a more external focus for CEO talent.

To help answer these questions, STORES Magazine, the flagship publication of the National Retail Federation, published a cover story on Reimagining the CEO, a look at the current and future role of retail industry leadership based in part on Hay Group retail CEO tenure research completed exclusively for STORES.

“Retail needs highly conceptual leaders who can assess future trends and understand the relative importance of future changes on business, employees, and customers,” Hay Group vice president Christine Rivers told STORES editor Susan Reda. “That may require fresh thinking from outside.”

Leaders need to make a concerted effort to challenge their assumptions, Ethan Allen Interiors’ Chairman, CEO and President Farooq Kathwari told the magazine. Having been at the helm for more than 25 years, Kathwari is no stranger to an evolving business landscape.

“We ask ourselves over and over, ‘Are we relevant? Do you we have a relevant offering and taste level? Are we serving the right demographic?’”

This mindset is one that might serve retail CEOs well. Hay Group’s recent research, published in the book Leadership 2030, discussed the six megatrends that retail CEOs need to keep in focus as they prepare for the future. The megatrends, including globalization, technological convergence and demographic change, will require a different kind of CEO, one who “will be tasked with generating loyalty among increasingly diverse, independent and remote teams. They will need to relinquish personal power in favor of collaboration,” says Yvonne Sell, one of the book’s authors.

The Hay Group data Reda examines in “Reimagining the CEO” found—among other conclusions—that more retail CEOs have led their companies for a year or less than have led their company for 15 years or more. She points to CEO hire success stories like Walgreen’s Greg Wassan—and failures like Ron Johnson at J.C. Penney—to conclude that, no matter what, “retail companies need to do a better job of succession planning.”

The research also sought to find links between a company’s financial performance and the length of its leaders’ tenure. Of the 17 CEOs who have led their companies for 15 years or more, 10 have increased total shareholder return and earnings per share in the last three years. However, Reda writes, the data is inconclusive as to whether longer CEO tenure leads to these types of improvements or vice versa. She concludes that retail’s unique “amalgam of art and science” makes these links harder to establish.

This post is based on Reimagining the CEO, published in STORES Magazine by Susan Reda and summarized here with permission. For more, including a downloadable CEO tenure chart, please view the full text of the article.

 

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