Colleen Wegman, CEO, Wegmans Food Markets – Photo: Wegmans
What makes a successful retail CEO?
Knowledge@Wharton staff
Presented here for discussion is a summary of a current article published with permission from Knowledge@Wharton, the online research and business analysis journal of the Wharton School of the University of Pennsylvania.
People who aspire to reach the c-suite — and perhaps to become CEO — must deliver strong results along the way, show leadership ability and have the emotional intelligence to embrace the softer side of the business, such as relationship-building and employee welfare.
Those are among the attributes that make for successful CEOs, according to Cassandra Frangos, a consultant with executive search firm Spencer Stuart and author of “Crack the C-Suite Code: How Successful Leaders Make It to the Top.”
An often challenging step for an individual is moving from a specialty, such as overseeing a particular product area or running marketing, to putting on the hat of the entire company. The shift often involves putting ego aside and taking a step back to learn from others who have that functional expertise.
These days, executives also often have to embrace a more progressive leadership style focused on collaboration and innovation rather than the traditional emphasis on control.
“So many leaders who grew up in a command-and-control environment, or that was their leadership style, do have to leave that behind because organizations are definitely creating more dynamic organizational structures, with different ways of leading their teams,” Ms. Frangos said. “Many have virtual teams and dotted-line reporting structures, so it’s definitely becoming a lot more dynamic.”
Another required skillset is having the emotional intelligence to grasp how diverse individuals want to be led. Said Ms. Frangos, “That is one [area] where I’ve often seen leaders derail, where they’re not thinking through the hard and the soft side of management.”
Finally, big egos can still sidetrack climbs up the c-suite. Said Ms. Frangos, “I’ve asked many of the executives I interviewed, ‘What took others off-track as you observed them inside your organization?’ Many of them said, ‘Well, there was this person who was on the cusp of making the C-suite, but their ego was too big. And nobody could relate to them or nobody wanted to work with them because everything was about them.’”
Discussion Questions
DISCUSSION QUESTIONS: What makes a great retail CEO? What new leadership skills do today’s retail CEOs need to embrace? Can you name a retail CEO working today who represents a great role model for the position?
Poll
BrainTrust
Lee Peterson
EVP Thought Leadership, Marketing, WD Partners
Anne Howe
Principal, Anne Howe Associates
Today successful retail CEOs need to be visionaries who embrace change, but can also execute. Having a vision without being able to connect it to operational realities and business results is pointless. While there are many excellent retail CEOs, I submit Brian Cornell, CEO of Target. I think Brian’s approach to people, ability to adapt and innovate and deliver solid results represent many of the characteristics I think retail CEOs should posses.
I see two types of CEOs today. The first type is the person who is committed to the success of the company, puts themselves last for the good of the company, is a good listener, confident but is an inclusive leader and, most importantly, from top to bottom makes everyone feel part of the team, valued and appreciated.
The second type of CEO which we see more of today is more about themselves first then the company. Their compensation is the most important, but they have no money to invest in this or that in their business. This type of person looks at the job as a term of “X” amount of years and, as long as the company can sustain moderate growth, they pat themselves on their back for their genius and leadership. How many of these CEOs have put companies in the red, in Chapter 11 or out of business entirely still walking out with their millions and soon landing their next job? This group is the group I see as the most significant problem in retail today.
If you don’t have the genuine desire to do everything right and grow your business as well as letting those in your organization grow, you will not be the leader of tomorrow, and the company you run will never achieve its fullest potential. Family-run businesses like Wegmans where leadership is committed to the success of the company will always outshine public companies that have the CEO who came from here or there, puts in a few years and then goes someplace else.
I find CEOs who successfully transition from industry to industry very intriguing. One who comes to mind ran a national snack foods CPG brand, then an international credit card provider and finally turned around a pure global technology company in peril to keep it intact and make it profitable like never before.
Leaders like this, at their core, need to be the world’s best decision makers. Yes new soft skills may be required today as mentioned in the article, however the most successful CEOs must take both internal and external sources of information and make calculated risks to leapfrog the competition. Balance between being a loose cannon and playing it too safe. That’s so much easier said than done.
The requirements will differ from company to company and will, to a certain extent, depend on that company’s culture. REI, Walmart, Apple and Amazon are all successful, but each is a unique company that requires a particular style of leadership.
That said, there are commonalities. Passion and belief in the brand are foremost among them. The ability to listen, learn and make smart, decisive choices is another. Finally, the ability to lead and encourage others with a view that retail is a team game is critical.
Putting bean counters in charge is generally a mistake. Finance has a very important role. However, numbers are the result of strategy and should never be the starting point for a company nor its be-all and end-all.
The paths and skills outlined by Cassandra Frangos are valid across industries. With retail as a lens, the major hurdles to overcome are the historical twin anchors of product-based business models and the perennial efficiency trap. The former represents the best of the push model of retail and making it work at the store; the latter is a prisoner of high fixed costs and the necessity of efficiently flowing high volumes through the supply chain and store network.
The breakdown of “mass” marketing and rise of a segment of one in combination with advancing technologies (at enterprise and consumer levels) has shifted the equation to one that favors the consumer. Such a wholesale change to the competitive environment and retail’s business model are disrupting the leadership development and selection processes.
A great retail CEO is a bridge builder and is very comfortable with data, technology and a distributed organizational model. She will have spent time in a store, is well versed with merchandising and how her customers use and experience the products and services offered. She takes risks and keeps them small and frequent and ensures the organization learns from these. She hires direct reports that are confident and challenging. She differentiates between the open and at times messy dialogue of informed decision-making and the laser-focus of aligned execution. She is not an expert in every business realm but is capable of asking the right questions and holds her team, and herself, accountable for results. Lastly, she diligently selects a diverse board of directors that can mentor, supplement, challenge and inform her strategy and decisions.
A great retail CEO is firstly a strategist who can enroll contributions by the board, shareholders, staff, suppliers and ultimately customers in fulfilling a new view of the future. Retailers like The Hudson’s Bay Company that have demonstrated continuous success in branding while acquiring and integrating other retailers that are worthy of watching.
That’s a fantastic point, Lyle: great CEOs enroll others in fulfilling a new view of the future. Focusing on purely operations will result in a slightly better version of what the company is already doing. Breakthrough results come from new visions of the future. No CEO can do it alone and their ability to empower others with that vision is what really makes a difference.
To me, it’s the perfect blend of IQ and EQ. Today’s CEO has to make art and science decisions at the same time. Starbucks’ Howard Schultz is the best example of this IMO. The other thing is empathy. This usually comes from someone who has actually worked on the sales floor, who has been in the warehouse, who goes to stores all the time, who talks to customers every day and who gets what the brand really is, not just what s/he may want it to be. There are too many numbers-crunchers currently in charge today — too much IQ, not enough EQ. That balance needs to shift to move to “Retail 2030.”
In these times, leaders must put emotional intelligence into action with as much rigor as every other area of management. That’s because “humanness” at the center of the business model is what drives overall success. Additionally, C-suite leaders must lean in toward being true customer advocates versus merchant-centric. Having the intelligence and guts to move the organization ahead to where the shopper is going will make the difference. Too many retail execs still believe they can “change shopper behavior” to meet old business models!
I do wish we’d drop the “hard” and “soft” metaphor. Just doesn’t make any sense. When the entire stock market can be decimated by a single tweet, it is hardly “hard” and durable. Anyone who has had their heart broken doesn’t describe it as a “soft” experience, it’s usually the hardest thing they’ve gone through.
Two thoughts on what it means to lead. The first is to see two areas of focus: the Ecological and the Economic. The logos and the nomos. Meaning and Money. In American leadership culture the economic rules. You can be the most obnoxious and unlovable person but as long as you build shareholder value all is forgiven … to a point. In many other leadership cultures relationships and shared purpose come first. As many organizations learn, most too late, in tough times it’s the relationships that will sustain the company, keep customers loyal, create innovations, etc. It won’t be the spreadsheets.
The second point is that, ironically, we measure “leadership” by problem-solving capability. The irony is that problem-solving, by definition, is always about mending the past. You can’t lead by looking back at what went wrong yesterday. Leadership is about the future and thus about seeing possibilities and turning them into an exciting and profitable new reality. Very few organizations are led by people who understand how to navigate The World of Possibilities. The organization in which people see its highest possibilities and aligns all its energies toward those possibilities, makes itself unassailable.
Retail CEOs need to have come up from the store level — they need the instincts about consumers that can only be formed by watching people shop, learning from organizing the store for higher sales and a fundamental sense of the relationship between product and retail success.
That said, the skill I find missing most often is a well developed sense of strategy. They need to sort between strategies that lead to success and those that lead to failure. Even more, they need to know how to execute strategy for success.
I point out strategy because most C-suite execs have proven themselves exceptionally skilled at execution — that’s how they get there. Skills for leading the development of smart strategy and execution of strategy haven’t been nurtured.
Great retail CEOs possess both creative vision and a track record of efficient execution. And increasingly they need the ability to look past the blinders of conventional wisdom and institutional learning to see new, technologically-enabled solutions and alternatives. Increasingly they will need the ability to direct decision making without relying on traditional hierarchal mechanisms. It’s a new day and it brings with it a new chance to have a radical rethinking about customers, employees and leadership. Successful CEOs will embrace diversity — not just of race, gender, creed, sexual orientation, age, etc. — but of ideas, creating an environment that nurtures and positively channels dissident opinions and outside-the-box thinking. Diversity extends to organizational and offering models as well. Instead of just looking to match direct competitors, successful CEOs will look to other industries and other disciplines to gain insights into how to guide their own companies.
Well said.
Today’s successful CEO should have situational leadership skills and the ability to understand the importance of having a balanced and diverse workforce. Emotional intelligence has always been a leading indicator of great leaders. The first followers are equally as important as the leaders and creating a band of credible first followers can help leaders execute the vision of the company. Inspirational leaders cultivate a culture of trust and dedication. Lately, great CEOs center every decision around the customer. Great CEOs today are Jane Elfers (Children’s Place), Jeff Bezos (Amazon), Howard Schultz (Starbucks), Eileen Fisher. I would put Terry Lundgren on the list, but he retired!
My definition of a leader is a preacher of vision and a lover of change. However, you can’t be a romantic, namely a visionary with no common sense. I have written extensively on leadership and have identified 8 characteristics of a successful leader: vision, robustness, willingness to take risks, competitiveness, boldness and decisiveness, opportunism, grace under pressure, and innovativeness.
Collaborate, embrace change, take risks, delegate, empower and get out of the away. This is what makes a good CEO a great one. Leadership at retail requires embracing technology, new concepts and managing change in addition to delivering profits to the bottom line. Great CEOs recognize that they need to surround themselves with great teams, empower them to make difficult decisions and then delegate responsibilities to each so that they can maximize their effectiveness in the organization. This needs to be accomplished with an empathetic understanding of the balance necessary to delivering growth and profits to the quarterly EBITDA. Great CEOs have clear visions, understood missions and their teams are empowered to make difficult decisions to manage change with their responsibilities.
I would look for a CEO with turnaround experience or those with deep experiences in internal innovation and incubation. Retail is in such tremendous flux, it’s critical to balance supporting the existing business, while preparing for the organization for the substantive changes in such a dynamic industry. I’d look for someone who knows how to incubate success with a traditional organization and bring in new skillsets to an existing corporate culture and understand the fastest speed at which transformation is tolerable, if uncomfortable.