“Goddammit Peter, we need someone with charisma — y’know, rally the troops, get people pumped to work in this place. That’s what’s going to fix sales”.
“I disagree Kenny, we need a marketing whiz — its our public image thats the problem, no one wants to shop here any more”.
“No no no, you’re all out of line, I think we need someone with general retail experience. Someone who has done the turnaround thing before. The Brits are brilliant at this stuff, maybe we should look there”
“Its a brave new world out there folks, we need to accept that the game has changed and we might have to bring in someone who can help us make sense of the technology landscape, a bit less of a traditional hire”
“Duh, light switch”
Whilst obviously fictitious, the above conversation between our merry band of company directors highlights one of the most glaring issues facing retailers in this day and age — how the hell do you hire a great retail CEO; one who can drive performance and new value creation in an increasingly uncertain arena?
Just think hard for a moment about the number of factors that a retail CEO has to get right in order to be successful — its enough to make a honey-badger keel over.
Below is a minimal list of the areas today’s retail CEOs must master just to be “in the game”.
- Product — “How do we make sure we select the right range to match our position?”
- Staff — “Are our people happy, productive — how do we make sure?”
- Stores — “Do customers like coming here?”
- Competition — “Is our offering better than the ‘other guys’?”
- Finance — “Are we making the right margins?”
- Technology — “Are we using it effectively. Do we have an eye on the guys coming to eat our lunch?”
- Supply chain — “Do the right things get to the right places fast enough?”
- Customers — “Who are they? what are their needs?”
Most companies can succeed by simply getting 2-3 of these right. Retailers need to get them all right all the time. Its any wonder that 5 of the top 9 most maligned CEOs are retail CEOs. Whaaaaaaat? yep, you read right — their companies don’t poison the water supplies of developing nations, cause cancer, nor peddle grotesque financial instruments that unleash economic armageddon, but yet, they are amongst the least liked execs on the planet.
Despite their obvious inability to get this right consistently, boards (for the most part) still look at picking candidates in a manner akin to picking horses — every
One thinks they have a winning system or formula that they rationalise to themselves. But yet, they’re for the most part, wrong. “Oh, look at her catalogue print numbers to store visit ratio” or “They’re a supply chain wizard”, “The fourth moon phase intersects with scorpio’s nether regions this month”.
After wading through this morass of premonitions, hunches and gut feelings that different companies have used over the years to pick their chiefs, it all starts to sound like some kind of alchemy and that at any moment, they feel gold bars will rain from the sky.
So why have retailers gotten it so wrong for so long? Much of the root of the problem lies in many of the underlying assumptions used as a proxy for the quality of candidates and extrapolating these factors as a sort of causation for performance.
Lets take a look at the usefulness of some of the most popular considerations used for choosing CEOs in retail. For this, I looked at 30 new CEO announcements at prominent retailers to uncover the mix of virtues that are considered “important” by the board and sector analysts in making an appointment. Here are the results.
Internal Vs External
This is a hugely contentious one, especially where a new boss is being brought in to shake things up. When things have really gone down the toilet at a retailer, things really hit the fan — write-downs are enormous, sackings happen on a biblical scale and there is enough square footage of floor space closed to eclipse the land mass of a small nation. Retail screw-ups
are very obvious and often very public, so the pressure to “fix it” is immense. Boards and analysts alike often debate the significance of “Native” vs “Introduced” species in these tetchy ecosystems.
“Whoso Pulleth Out This Sword of this Stone and Anvil, is Rightwise King Born of all Englandn ”n
There is a common perception that only someone with retail experience can really fix a broken one or realise its true potential. This reminds me of the legend of King Arthur, where only the “chosen one” may release excalibur from its stoney confines. Is there truth in this legend, or like the story of Arthur, does this notion also belongs firmly in the fiction category?
This is a controversial one, as past performance is very subjective. What does “performance” actually mean? The goals of a CEO trying to chaperone a retailer into a new era, completely uprooting their image, reinventing their product line, flipping their service offering etc are going to be substantially different to a retailer trying to harvest off dying business units to save the core. Whilst both have technically performed, is that performance really comparable? Secondly, given the number of critical facets of a retailer — especially in the composition and culture of their workforce, how alike can the DNA of two different retailers possibly be?
Numbers person Vs People Person
Throughout the ages, a battle has waged between the “Analyst” and the “Commander”, the Introvert Vs the Extrovert, the Thinker Vs the Feeler — and which of these personality types makes better leaders. Companies LOVE pointing out that their newly minted boss is one or the other of these, readily conferring this questionable badge of honour.
What does it all mean?
Whilst all of these points of comparison appeal to our need for simple wisdom and convenient explanations, the game has shifted markedly over the last twenty years in retail. No longer is it acceptable to simply be a shed where people pay for and collect goods — the complexities in technology, supply chain (such as wholesale bypass), labour market conditions, marketing and many more have evolved at an exponential rate, requiring a vastly different skill set than was once par.
Thus, I would argue that the criteria and planes on which we look at retail CEOs must also move on from pointless comparisons, whose data points are purely indicative of the average (half the time you’re right, half the time you’re wrong). We are looking for outliers — by definition, the CEO is and outlier. They are 1 employee in a thousand, a hundred thousand, even a million. So how do we stop fixating on the vestiges of a bygone era and move into the now?
The main thing all of these decision criteria have in common is that they are all equally useless predictors of performance — for every successful example demonstrating one of the above traits, when we looked, there were an equal number of successful examples with the opposite set of traits.
I would argue we need a new set of first principles for discovering great retail CEOs — what are the quantifiable facts about what creates a great retail business today, that are within the grasp of a CEO? Instead of trying to mesh together a disparate set of antiquated, unreliable indicators into a mosaic that resembles the “frankenstein’s monster” of selection criteria, we should be focussing on the minutiae, the pieces where we can see both correlation and causation between the application of a CEO directive and the outcome.
I am certainly not the authority on what elements we need, but what is clear, is the need. Retail is going through its greatest cultural and structural shift since currency replaced the barter system — and strong leaders are needed to squire retailers through these turbulent times. So what do these leaders look like? how do we identify them? and how do we determine the heroes from the zeroes?
What do you think should be in the “New World Order” of retail CEO selection? Please leave your comments below as in Part 2. we’re going to be looking at suggestions for identifiers that should be included in our Black Book for Retail Revolutionaries