Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research's weekly analysis on emerging issues facing retailers, presented here for discussion.
Where have all the retail CEOs gone? That's the question that has been floating around for months in the wake of the succession challenges facing Target, J.C. Penney and others in the recent past. I recently realized the answer.
The reason there are so few qualified executives to do the job is all about the industry consolidation over the past 20 years. In the beginning, there were chains like Lazarus, Rich's, Gimbels, Broadway, Montgomery-Ward, Hills, Caldor, Alexanders, etc. etc. etc. If you've been around for a while, you know the names. So CEOs could move from job to job, with successively larger companies.
But serious consolidation began about 25-30 years ago, coinciding with the Federated/May consolidations and the rise of Walmart, which drove so many mass merchants out of business. Now those mass merchants and department stores that are left are mostly incomprehensively large. In other words, the number of people who really know how to run them has decreased along with the chains themselves. The remaining CEOs are in their mid-to-late sixties and no one else really knows how to run mammoth retail companies. Could the CEO of Belk run a company like Target? It would be a big shift.
Macy's and Kohl's are among those successfully executing on a succession strategy. But they're also executing a successful retail strategy. The problem comes when the strategy isn't as successful. Companies (or really their boards) prefer to look outside when they're not happy with the business and want to make a change. But there's no real "outside" anymore.
This is not a problem unique to the retail industry. In his keynote address at Sapphire 2014, SAP co-founder Hasso Plattner observed that one major problem with companies today is they've decimated the ranks of middle management, and so they've lost a major source of new management talent. Mr. Plattner was absolutely correct. Today's mammoth enterprises must focus on building talent from within, without the organizational structures in place to make that happen.
A fine mess we've made. I'm happy to have taken the first step: realizing we have a problem. But I haven't the faintest idea how to solve it.
To what degree has consolidation created a greater frequency of succession challenges at major chains?