Why are strong CEOs so hard to find?
In May 2014, Kohl’s began an external search for a new chief merchant who had the potential to eventually become its next CEO. Last week, the department store chain added a few more steps to its mission.
Michelle Gass, formerly Kohl’s chief customer officer, was appointed to a new principal officer position of chief merchandising and customer officer. She assumes oversight of merchandising, planning and allocation, and product development functions while retaining marketing, public relations and social media oversight. Joining Kohl’s in 2013 after 16 years at Starbucks, she now becomes a candidate to replace CEO Kevin Mansell, 62, upon his eventual retirement.
But Kohl’s also announced an external search for a COO, another new principal officer position that will have direct responsibility over: store operations; logistics and supply chain network; information and digital technology; e-commerce; and store construction and design. The COO will also be a CEO candidate.
The succession issues at Target and J.C. Penney had led to several reports of similar hurdles faced by many larger retailers. Some touched on the lack of candidates with skillsets to manage a behemoth national chain, often created through decades of consolidation.
Kohl’s Michelle Gass and current CEO, Kevin Mansell
Wrote Walter Loeb, a veteran retail consultant, for Forbes following Gregg Steinhafel’s exit from Target, "There is a dearth of trained people who can take over a major retail corporation and inject vision, dynamic drive, better earnings, tight control, and engender enthusiasm from both associates and customers."
Others explored the changing CEO role as technology becomes a bigger part of the shopping experience. Ron Johnson, Apple’s former SVP of retail, was initially hailed as a strong choice to guide Penney into the 21st century.
At Walmart’s media day on June 5, the company’s newish CEO, Doug McMillon, discussed how the "rapidly" changing consumer had created a need for more forward-thinking leadership.
"We have history all the way back to Sam Walton of changing, mixing things up and reinventing store formats," said Mr. McMillon, according to The City Wire. "Today it’s not just store formats, it’s not just the physical aspects of our business but it’s also the digital aspects and how they come together."
- Kohl’s Announces Senior Leadership Appointments – Kohl’s
- Kohl’s Makes CEO Succession Plans Clearer – The Wall Street Journal (sub. required)
- Kohl’s CEO Planning Management Shuffle – The Wall Street Journal (sub. required)
- Wal-Mart’s McMillon talks succession, wages, ‘influence with suppliers’ – The City Wire
- Target Could Be The Next Victim Of A Leadership Void In Retailing – Forbes
Discussion Questions
Do you agree that succession issues are particularly challenging for large retailers? What skills have become requisite for CEOs? Are some more or less important today than they have been traditionally?
Poll
BrainTrust
Warren Thayer
Editor Emeritus & Co-Founder, Frozen & Refrigerated Buyer
The biggest problem I see is that large retailers have become REALLY large. And there just aren’t that many of them. So while in days gone by, a CEO candidate could work his or her way through progressively larger chains, now there’s a really huge gap between the large and the small.
The “training grounds” are just gone. When a retailer is doing well, succession plans are easier. Someone is groomed by the existing management. But when the business is struggling, that’s when the dearth becomes apparent. The odds of someone who is currently running a chain like Bealls (for example purposes) being able to step into the CEO shoes at Kohl’s are just too long. Mass brings its own problems.
I don’t see any easy way to solve the situation either. Retailers have to hope that CEO choices from adjacent industries (like Hubert Joly at Best Buy or Brian Cornell at Target) are quick studies enough to figure it out.
Sometimes it works, as in the case of the two men I mentioned above, and sometimes it doesn’t (anyone remember Bob Nardelli or Larry Johnson?).
This is going to be a problem for generations to come.
Kohl’s has had only three CEOs in the past 35 years, and all of them have been promoted from within. (Full disclosure: I worked for Kohl’s for 24 years, until 2006.) So it’s important for the company’s board to be thoughtful about the most important decision it can make, and to weigh the merits of store operations vs. merchandising backgrounds, among other things.
The broader question facing huge national retailers (and not just those who are publicly traded) is how to identify the right forward-looking skill set for an effective CEO. Is it simply the traditional retail background of “merchant” or “store?” Or do more intangible skills like leadership, brand building and change management in an omnichannel world matter more today?
Among recent examples, JCPenney went for the more conventional choice of a CEO with a strong background in store operations. Target, on the other hand, opted for a CEO from the CPG industry with less grounding in a traditional retail career path. The next few years will be interesting to watch at both companies, but the early read is that Brian Cornell is acting like the change agent Target needed.
Oh, please. Prerequisites often seem to be (in no particular order): serious gravitas, Ivy League MBA, proper pronunciation of “at the end of the day,” experience as CEO elsewhere regardless of results, suspenders, history of extremely high personal income, “BS Bingo” champion, ability to intimidate a board of directors and clean socks.
I think the large retailers aren’t investing time and resources into grooming senior and mid-level executives to take these roles on. I also believe they’re more worried about Wall Street than finding a strong operator. This is probably even more so after the recent high-profile poor hires.
A little more emphasis on people becoming CEOs that actually worked in a store at one point in their career should be added to the mix. The industry has been taken over by MBAs and finance people, or CMOs that have never put a can of anything on the shelf, or had to deal with the customer in the store. Our future CEOs need to come from today’s assistant managers.
If succession is part of the career path strategy of any retailer, then the size really shouldn’t matter. The issue I am seeing right now is that many struggling or under performing retailers are blaming it on the new face and toys of the consumer. Hence, they think they need to go outside, but to what?
Come on, does the consumer really have all that new of a face? The tools and approaches to shopping have been emerging yet apparent for the last 15 years! Retailers just have a tendency to “wait and see” for too long and then oops, they slip and fall down.
Great shifts are happening inside retail today with new job titles like Chief Customer Officer, more emphasis and onus on the marketing folks, and tearing down silos. Any executive who has been playing in the retail space for the past 15 years should already be talking and doing something about these things. If they aren’t, then you might have bigger problems than just finding a new CEO and talking them into taking on such big problems.
Just my 2 cents.
“Particularly” as opposed to what…non-retailers? Large retailers in the past? Smaller companies? I would say the answers are no, a little bit, and not necessarily (though the stakes are, of course, much higher).
A lengthy search period might be a sign of a board simply doing a thorough job, or a board that isn’t all of one mind on what they want. The skills they they SHOULD have depend on the company—some are large, mature firms that need an engineering mind, while others are rapidly changing and need “that vision thing”—but what they usually end up with, as Warren noted, is a series of market-approved clichés.
Great CEOs are not hard to find. But the boards of directors are not committed to hiring true innovative leaders. Instead they resort to hiring “resumes” with prestigious backgrounds, similar past-histories, and people who are corporate politicians that look the part. It’s the truth. Few boards of directors would have ever hired Steve Jobs, Sam Walton, or Howard Schultz.
Many retailers are so large, it’s hard for a CEO to get his head around it. If a CEO has not been to all the stores, cannot tell you where all the stores are, cannot tell you something unique market, and cannot name the store manager, I think the CEO is over his head. There is nothing more annoying than being a mid level to upper level executive and the CEO comes by to say hello, but must look at your name plate first. You are in charge of millions of dollars and he still doesn’t know your name. The skill that is a requisite for a CEO is to get out from behind the desk and know your company.