According to a study from recruiting firm Russell Reynolds Associates, retailers are seeing a notably higher turnover rate at the CEO level than firms in other sectors and also face a limited crop of replacement candidates.
The study examined turnover and recruitment trends between January 2006 and April 2011 at 81 multi-channel retailers based in the U.S. with annual revenues of $1 billion or more.
Some of the findings:
- Fifty-nine percent of retail companies studied experienced a change in CEO leadership during the five-year period.
- Forty-two percent of the CEOs who left did after having served five years or less, compared with 32 percent of Fortune 1000 CEOs. Slightly more than a quarter (27 percent) left after serving three years or less in contrast to only 16 percent of Fortune 1000 CEOs over the same time frame.
- Of the 18 external CEO appointments made during the period studied, only eight were sitting CEOs making a lateral move. Russell Reynolds found that while most boards traditionally prefer to fill CEO slots with current CEOs, there simply are not enough sitting CEOs to meet demand.
- Of the 18 retail CEOs in its five-year sample who were recruited externally, 16 were recruited from the same subsector of the retail industry.
Russell Reynolds said the recruiting challenges come as the industry "needs stable, transformational leadership" to meet unprecedented changes ranging from over-storing to supply chain disruption and the mobile-empowered consumer. Other industries have shown a greater propensity to cast a wider net externally for such transformative leadership.
At the same time, the lack of legendary training programs such as Abraham & Straus' and other systematic efforts to groom young talent makes it more challenging to find promising talent internally.
"Few stores today methodically rotate their rising executives through various key operating divisions as was the case in the past," Russell Reynolds wrote in the report. "As a result, at many companies, the talent pipeline is uneven at best."