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[18 comments]

Steinhafel out as CEO at Target

May 5, 2014

It appears as though Target's data breach has claimed another victim. This morning, the retailer's board announced that Gregg Steinhafel had resigned, effectively immediately, as the company's chairman, chief executive and president.

John Mulligan, current chief financial officer, will replace Mr. Steinhafel as president and CEO on an interim basis while the company conducts a search for a permanent replacement. Roxanne Austin, a member of the Target board, has been appointed non-executive chair, also on an interim basis.

Mr. Steinhafel's resignation follows the announcement last week that Target had hired Bob DeRodes, a technology industry veteran, as its new chief information officer. What made Mr. DeRodes' hiring unusual is that Target went outside the organization to fill the position. In the past, Target has been known for promoting from within, but the scope of the data breach was seen as an organizational failure, making an internal hire all but impossible. The retailer continues to look outside the company for people to fill the positions of chief information security officer and chief compliance officer.

While no specific reason was given for Mr. Steinhafel's resignation (he will remain on as a consultant to the company), it seems clear that the company's data breach played a role.

"The last several months have tested Target in unprecedented ways. From the beginning, I have been committed to ensuring Target emerges from the data breach a better company, more focused than ever on delivering for our guests," wrote Mr. Steinhafel in his letter of resignation. "We have already begun taking a number of steps to further enhance data security, putting the right people, processes and systems in place. With several key milestones behind us. Now is the right time for new leadership at Target."

FINANCIALS:     [NYSE:TGT] [ ]

Discussion Questions:

What type of chief executive should Target's board be looking for to lead the company through its next stage? Should the company look outside or hire from within?

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Instant Poll:

Would Target benefit more from looking outside the company or hiring from within for its new CEO?

Comments:

Never good when the top executive is gone without notice; it can appear to the rest of the employees that you cut your own nose off to spite your face. Employees and customers already were nervous about the damage done to the brand. I would hope a replacement takes days, not months or the whole stability of the organization could be seen as faltering.

Which, I hope, it isn't.

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Bob Phibbs, President/CEO, The Retail Doctor

Well, this is a tricky one, isn't it? There aren't a lot of people capable of running a company that large in anything other than a mechanized way.

I would say most importantly, the company needs a merchandising maven. I've observed many times that the company seems to have lost its way...and focused less on what made it so shoppable (cool stuff cheap) and more on commodities which are....commodities. It's the "We're not Walmart" company now.

Does the tech infrastructure need an overhaul? Definitely. And the company has to do way better at merging its various selling channels. But let's be realistic: will replacing the CEO bring even one lapsed customer back into the store? I think we all know the answer to that.

So wherever it can find that innovative merchant, it should find him. And find ways to excite its customers (beyond doorbuster sales). Someone asked me about Mulally this morning (Ford). I had to say no. This really cries out for a retailer.

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Paula Rosenblum, Managing Partner, RSR Research

Target should look for a CEO with vision and a proven ability to impact a large organization. The company has been drifting sideways, moving from one misstep to another, without articulating a strong core story for its brand. This might best be accomplished by looking outside the organization for a CEO. It may be tougher for an outsider to impact Target, but the company needs a new set of eyes, with a new strategic vision.

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Max Goldberg, President, Max Goldberg & Associates

Given the recent hire of a strong security type for CIO, the next CEO now needs to be either a best-in-class merchandiser, or in fashion. Target needs to get off the security issues and back to good business. I would also think that the board and their shoppers would expect that person from outside the company. All the right steps are in place for shopper protection, now they need to win back their guests with good product at great prices.

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Frank Riso, Principal, Frank Riso Associates, LLC

First, I really don't relish "told ya so" moments, but looking back at the 12/23/13 RetailWire discussion "Would You Accept Target's Apology?" someone with my initials touched upon both pieces of this.

This was an internal failure from Steinhafel's team. To keep the reorganization in house would be to deny that fact. For its own sake operationally and for the good of its customers, Target needs to rebuild its management from carefully selected outsiders that can not only resolve the issues from the breach, but foresee and act preemptively towards other operational risks. Not an easy task, but there are huge stakes here.

BTW - I'm not convinced that the board should be above scrutiny and possible reconfiguration.

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Ken Lonyai, Digital Innovation Strategist, co-founder, ScreenPlay InterActive

Target has always been all about the merchandise.

To thrive, Target needs to create a passion about compelling merchandise that creates a halo around the Target brand. Chief merchants from top retailers should expect a telephone call....

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Cathy Hotka, Principal, Cathy Hotka & Associates

For Target it is more about what to look for than where. A quick look at what they had is all they will need to know about what does not work.

There is is a matter of what candidates know about the company, the market and of course e-commerce and electronic transactions. Without any of these minimum qualities Target will only hope for success at a time when it must be assured for the immediate future of the company's viability as well as the future. Adding to these minimum requirements would be someone with a track record at being successful in the current world economy which is now all but dead.

A look at the post Boomer generations might be a good place to start a prepared search for qualities and capabilities, not just individuals with a good marketer in front of a ton of 20th century war stories.

'gjarnoldjr'

As sad as it is to see someone go, this could be the best thing for Target. I have many friends who work in Target and I see them every week. The common theme is that Target needs a shake up and a new CEO from the outside just might do this. Target has great potential, it just needs some fire added back in.

Edward Chenard, Innovation Lab Leader, Target

While hiring and promoting from within has always been part of the Target tradition, the company may need an outsider who is not a part of its insular culture. ("Guest," anyone?) As several other panelists point out, the company's performance has stagnated for several years -- long before the data breach -- and the focus on merchandising needs to be strengthened.

Additionally, the Canada results didn't help, either.

Target's "brand" is as much about the product as any retailer in the business, and it would be fun to see what a "merchant prince" like Mickey Drexler could do with the company.

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Dick Seesel, Principal, Retailing In Focus LLC

My first reaction is that I find the timing a bit strange, given they have not selected a replacement for Mr. Steinhafel. Leaving a void at the top is never good for company morale or progress. If I were on the selection committee, I would search for someone that understands grocery as I still do not believe that Target really understands that side of the business.

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Mark Heckman, Principal, Mark Heckman Consulting

Based on Target's press release, it appears that they are looking outside. They certainly didn't have to disclose that they have already retained a top executive recruiting firm. Too bad that Apple got Angela Ahrendts and Saks scored Marigay McKee, but both would serve as excellent templates for Target's next leader.

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Carol Spieckerman, President, newmarketbuilders

I'm afraid that this move is several months too late. Unfortunately, Target did not take this breach and their customers' wellbeing seriously enough from the very get go and customers noticed. Their internal polling of customer attitudes and sales results at this point must be horrific to have him "resign" without a replacement.

The new leader has to be a world class merchant, but first and foremost he/she must be capable of convincing shoppers that Target is a safe place to use their credit cards again.

'Liatt'

I believe I would look at Target's strengths and weaknesses and hire to shore up weaknesses. What was the problem? In my opinion it was the inability to understand the rapidly changing world of retailing and its entanglement with electronic transactions and the web.

A new CEO who understands e-commerce and can implement a plan to fully utilize the benefits of e-commerce while insuring consumer and supplier security might be in order. Ron Johnson might be a perfect candidate for this job. Penney wasn't a good fit, but Target might be right in his wheel house. The guy knows e-commerce, merchandising, and service. Might be the best fit available.

Ed Dennis, Sales, Dennis Enterprises

In retail, it is a merchant or today, a marketing person. The CEO must be always looking at the customer. Those reporting to the CEO need to be strong in their area. Over the last decades, those companies with merchant CEOs excelled. Examples include Sam Walton, Sidney Rabbi and David Jenkins. A company like Target knows there will be data breaches. They must catch them quickly (i.e. daily), not let them run for a long period of time.

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W. Frank Dell II, CMC, President, Dellmart & Company

It's a fascinating challenge to think about who might make the short list. There are only a few retailers where someone other than the top person could walk into Target with credibility (Walmart, Costco, HomeDepot, Best Buy). It's hard to imagine that Target would bring in a CXO from any of those to be their next CEO, so I think we're looking at someone with CEO experience at a smaller retailer.

Could Target entice ex-Saks CEO Steve Sadove back into an operational role? Would they try to steal Hubert Joly from cross-town retailer Best Buy? An interesting question is if they would give Ron Johnson any serious consideration. He was very successful at Target and obviously Apple; his JCP strategy probably would have been a better fit for Target in the first place.

Do they feel like they have their security and corporate governance covered with their new CIO, or will they they look to double down? Could they get former REI CEO and current Secretary of the Interior Sally Jewell to come back to the private sector?

The reality is that the next CEO at Target will lead through a transition in which 100% of Targets sales will be digitally influenced. They need a strong leader that can help them complete the digital transformation.

Could that mean a top Amazon or eBay exec? Henrique De Castro former COO of Yahoo is already on the BOD.

Whoever they choose, it's an amazing opportunity to take over a top-tier retailer that doesn't require a true turn-around, but it's going to come with a lot of scrutiny and probably not a very long runway.

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Jason Goldberg, VP Commerce Strategy, Razorfish

Target built a powerhouse brand as a mass merchant versus Walmart, but has been hurt by tougher competition from Amazon and others. It's faced with a myriad of challenges, not the least of which was the data breach. Its new leader is going to have to put a vision in place to regain customer trust and leadership across multiple categories. Target's tradition of promoting from within created a culture of complacency and a new leader from the outside can effectively disrupt that and make it stronger for the future.

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Phil Rubin, CEO, rDialogue

They need a leader from outside with energy, confidence, innovation, and strong merchandising experience. However, that is only half the answer. The new leader must build internal bridges immediately, to establish his council of advisors, to not only support a new vision, but also to address internal rifts that certainly exist as a result of the recent turmoil.

For some insightful analysis of the situation, see Paula Rosenblum's commentary at Forbes.com.

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Verlin Youd, Principal, VPY LLC

See my comment on March 10th in response to Target's Canadian folly. The board has opted for a new leader. The leader must be consumer centric and not from Walmart.

The company had long been bureaucratized by a former leader with a strong sense of direction and an innate understanding of consumer desire. (Think Steve Jobs style.) With strong and accurate direction, the organization became process driven rather than consumer driven.

New leadership has inherited the process, but not the innate sense of consumer desire. Although the love song might still be sung, the consumer honeymoon has ended.

This process will work as long as things run smoothly and there is no change. When a crisis occurs like the credit card breach, the process is to manage it. Consumers were not alerted to the full and fastest extent because they were not first of mind. When things change, the existing process can't handle it without strong accurate direction from the top. One would assume that the same processes used for US growth were used for Canada. They could not or did not change.

Target has been stumbling. Either the company needs a new leader or a reorganization before it falls down.

'DrCellmor'

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