Photo: Starbucks
Has it gotten harder to find a top notch retail CEO?
Retail C-suites have seen a lot of turnover the last few years, and at least one recent case shows that the CEO role is harder to fill than it once was.
Shortly after former Stitch Fix CEO Elizabeth Spaulding stepped down in January, venture capitalist and Stitch Fix board member Bill Gurley put out a tweet seeking someone to fill the role, Business Insider reported. Mr. Gurley himself referred to the step as “unconventional” in the tweet.
A number of other major retailers have lost CEOs in the past year and at least some of them have been unable to find full-time replacements. The article points to a few factors that may be making it harder to get a CEO on board.
One is the current absence of the sort of management training that once prepared superstar CEOs in retail’s earlier generations to climb the ranks.
Another relates to the many new demands retail C-suites now confront, with the industry facing disparate issues like rapid changes in technology and a resurgence in labor demands and activism.
In the case of Stitch Fix, the startup’s founder Katrina Lake was brought back in as interim CEO to replace Ms. Spaulding for either six months or until the company found a full replacement, according to a press release.
More established retailers have similarly brought back familiar faces to temporarily helm the C-suite.
Starbucks, most notably, brought CEO and founder Howard Schultz back to the role in 2022 after his departure in 2017, CNBC reported at the time. Mr. Schultz’s return represented his third time coming back to the CEO position. He has no plans to return for a fourth stint after Laxman Narasimhan, current Reckitt CEO, takes the helm in April.
Starbucks, in the meantime, is having additional executive problems with an ongoing exodus of upper -level leaders, Fortune reports.
A study from Challenger, Gray & Christmas from December 2022 found that CEO exits were slightly down year-over-year in November, but were up from October 2022. The consultancy anticipated another wave of CEO changes in 2023.
- Retail CEO crisis: Why the industry’s top job is suddenly the hardest to fill – Business Insider
- Outgoing Starbucks CEO Howard Schultz says he won’t return for a fourth stint – CNBC
- Starbucks is experiencing an executive exodus following the return of CEO Howard Schultz and another top lieutenant just left – Fortune
- CEO EXITS SURGE IN NOVEMBER; AFTER SUMMER LULL, NOVEMBER SEES MOST RETIRING CEOS SINCE JANUARY 2020 – Challenger, Gray & Christmas
Discussion Questions
DISCUSSION QUESTIONS: Do you see a broader problem of getting qualified people to take on retail CEO roles or is this limited to specific companies? What skills and qualities does it take to be an exceptional retail CEO in the present moment?
Poll
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Obviously, to be an exceptional retail executive, the CEO needs to be have an exceptional knowledge of the products sold. The learning curve can be tough with no room for trial and error or failure. It is really serious out there, and some experience is close to nothing.
We live in a world where everyone assumes retail is easy. Your “some experience is next to nothing” comment is spot on.
Hiring a great CEO is a challenge period, not just for retailers. And as history makes clear, founders often don’t make great CEOs. When you consider that the average tenure for a CEO in the U.S. was under five years, turnover goes with the territory. Dealing with the pandemic, hyper-inflation, labor issues and myriad challenges, many of which can be existential for a company, takes courage, vision and leadership. And to be a really great CEO the leader needs humility, empathy and integrity.
I think the problem is the type of CEO most retailers choose. Playing musical chairs with current CEOs is a losing game. The next top notch CEOs can rise up from within their current companies or make a diagonal move from elsewhere. Very few CEOs come from the ranks of CIOs, and that is a mistake. Retail today is a tech-based enterprise, yet most CEOs come from the merchant or financial disciplines. So one qualification has to be met: they must understand technology and, more importantly, how it can support their specific retail business.
Retailers must invest in infrastructure to compete with Amazon, yet almost all are batch-oriented and not real-time as they are unwilling to make the commitment to invest in the infrastructure necessary to make this dream a reality. Until those investments are made, retailers will continue to cede ground to Amazon.
Good question, which starts with another question: define “qualified.” It reminds me of cases where brands are looking for someone who will check all the boxes rather than the right person. Look at Gap. They can’t get it right, but boy were they all qualified or what? Time to expand the searches and get out of the “right stuff” mentality and ignore some past bumps and bruises. Retail is about the customer, not the money. The customer will lead you to the money, not the other way around.
The answer depends on the definition of “qualified.” Companies are hiring executives from other industries (e.g. Marriott and Starbucks) with less regard to a traditional retail background. With the long-term consolidation of the retail industry, the pool of candidates who cut their teeth “in the business” gets smaller and smaller.
While broad skill sets are portable from industry to industry — for example, leadership and brand building — there is still an argument for retail CEOs who have run stores or merchandising teams. That being said, companies like Bed Bath & Beyond have learned the hard way that there is no simple solution.
One further thought: A CEO placement guide should read that the candidate can show substantial success and specific experience of the business. Playing fill the slot with a good name or the right connections is like fishing in a swimming pool.
Being a CEO in a large retailer today is a very tough assignment, it requires a huge amount of stamina and staying power or resilience and also an understanding of retail, technology, finance and merchandising. Many retailers in the UK have opted for bringing in people from CPG manufacturers with I think limited success. I would always advocate finding someone with retail experience however, as many of the largest retailers have reduced their training and management development to cut costs. Finding the right person with that experience is tough. The best people today find it easier and more lucrative to head for CPG or even Private Equity jobs.
Too many retail operations are not offering a future. Those candidates with exceptional talent will not move into a situation they forecast for failure, no matter what. I am not suggesting that talented people will not take on challenges. Some of these turnaround jobs are beyond a challenge and fraught with failure.
There are plenty of “qualified” CEOs but the real variable is how “qualified” is defined. Qualified today means very different things than it has in the past. Retail CEOs need to not just understand finance but also be both merchants and data-driven and customer-focused marketers. If they don’t understand retail selling and merchandising — and if they are not laser-focused on the customer, inclusive of being data driven — they will be unlikely to succeed.
Today’s retail CEOs need to be as good at learning as they are at leading. There are too many changes happening on too many fronts for any CEO to say that they fully embrace what needs to happen on every front. So they have to hire and empower the right lieutenants. And the whole executive team has to have enough humility to recognize their own individual blind spots and therefore respect the fact that somebody else on the team will address that blind spot. Humility is an uncommon trait in retail, or in life for that matter. CEOs used to be able to say “damn the torpedoes” and press on. These days the torpedoes actually have to be dealt with.
I wonder where the humility went?(I know where it went — but it’s worth asking.)
You are correct, CEOs have to keep learning while they are leading and unfortunately it doesn’t happen too often. CEOs have the best intentions, but the big issue is that there is no room for error and boards quickly judge and they want to replace them before the actual work is finished. I believe this happens more when a business is already in trouble and no matter what is changed, the CEO will always be behind the 8-ball.
Everyone wants a winner, and when that doesn’t happen the patience factor in today’s market is a nano-second, which is why the average tenure of most CXOs is three to five years, depending on the stat you look at. Has this been brought about by the explosion of data, the digital transformation age, the continuous bar-raising of what consumers expect from products, services and experiences? Certainly it’s a factor. But what about companies and their succession planning? In years past, it seems companies spent more time and investment on succession planning, grooming young associates into future leaders. Today, I don’t see this discipline being exercised with the same vigor. Are companies putting promising merchandisers into tech and data roles, so they start to understand the impact of digital on operations? Are companies putting top talent in uncomfortable roles to challenge their critical thinking? The great companies are doing this. Perhaps more should as well and we might see better CEOs in the future.
Long on anecdotes, short on evidence … or logic: with more people, better educated than ever before why would it suddenly be harder?
I think what’s changed — and I would describe it as evolutionary rather than revolutionary — is the intense coverage given to even the most trivial of corporate events: sixty, thirty … maybe even twenty years ago business reporting, other than the WSJ, was usually a press release and perhaps a paragraph or two of comment; the “Stitch Fix”s of the world existed in a perpetual night of no coverage.
The retail CEO role is extremely challenging especially for publicly-held companies that are measuring your performance by the most recent quarter’s financial performance. It makes it difficult to make significant investments in operational improvements. Additionally, competitive pricing, labor challenges and supply chain disruptions continue to create huge challenges for growth and profitable operations. In some cases, I think the problem is more about unrealistic expectations than underperforming CEOs.
Finding the right professional is more art than science. Remember Ron Johnson? Total hero at Apple Stores, goes to JC Penny and … not so much. Retail is in a state right now … more and more leaders are tying the fortunes of the business on better analytics and with good reason, however, I believe the industry is experiencing a dearth of true “merchants” — someone that can walk the floors, relate to customers, or just generate excitement from THEIR enthusiasm for walking the floor.
I used to love shopping at Whole Foods — and I still enjoy it — but the thrill of discovery is gone. Instead of people wandering around the produce section (or the wine section or whatever) at my local store, it feels like an extension of a warehouse now, what with all of the “remote shoppers” constantly looking at their phone for the next item on the shopping list. John Mackey is not there anymore … and it shows.
No, it’s always been tough finding a top notch retail CEO. The persistent changes in customer behavior and technologies have constantly challenged modern organizations. The last twenty years or so have also brought the social media dimension to the set of business challenges.
The research literature typically uses traits, qualities, and behaviors to define leadership. A focus on traits ignores the contextual environment that factors into a leader’s effectiveness. Behaviors are clustered around people-oriented activities (labeled consideration) and task-oriented activities (labeled initiation of structure).
A successful leader needs to asses and drive the organizational capabilities and culture as well as flexibly guide the people and task levers of the organization. The nature of the relationships the CEO develops with and within her leadership team will cascade to the organization. All the work on vision/mission/purpose provides the means to impact culture and expose the desired values.
The bottom line, top notch retail CEOs are not brilliant merchants or amazing CFOs, or supply chain gurus. They are, first and foremost, in touch with the organizational levers and culture just as much as they are capable of creating and communicating a credible path forward to new and bold vision.
I think it might be harder to recruit a top-notch CEO because retail is changing so rapidly that almost nobody has the right experience.