Recent changes in leadership within some of Australia’s largest retail companies bring into focus the question: What does it take to be a successful CEO in retail? Inside Retailing Magazine investigates...
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Just Jeans selected Jason Murray, an internal candidate with a finance and business strategy background, to replace Howard McDonald as CEO of the multi-brand fashion retailer.
Private equity group Newbridge Capital chose Woolworths high flyer Bernie Brookes, who has a strong background in marketing and merchandise, to turn around the struggling Myer business.
Woolworths itself promoted an internal candidate, Michael Luscombe, as its new CEO, replacing the uncompromising Roger Corbett. Luscombe also had marketing and merchandising experience, topped up with credentials in logistics.
Bill Wavish, who was a CFO at Woolworths and is now an executive chairman at Myer, argues that the core work discipline or experience of a candidate is not the crucial factor in selecting a retail CEO.
He believes you need someone who is able to "conduct the orchestra", and that often means having exposure to several areas of business, including the increasingly critical IT and supply chain streams.
Leon L’Huillier and Jonathan Pinshaw, fellow chairmen of the boards of retail heavyweights, agree with Wavish that CEOs need to bring broad experience to the role and, in the modern business world need to be a team builder and team leader rather than a despot.
Di Gillett, an executive search consultant with Talent Partners, told Inside Retailing Magazine senior management in retail will typically have cross-functional experience by the time they come into calculations as CEO candidates.
Gillett says most retail executives have come from the shop floor and made the transition into merchandising and/or marketing.
The other common route to the CEO’s desk is through finance and operations, where the CFO or COO may step up, but Gillett expects the future may see more appointments from the HR stream.
"In many businesses the human resources function is gaining prominence and is accountable for contributing to the company’s success. Today, more robust organisations have the HR function as a direct report to the CEO rather than reporting to finance and administration.
"In support of that, the current CEO of The Limited, one of the largest retailers in the US with 5000 stores across several retail formats, is the former head of HR and development," Gillett says.
The choice between internal and external candidates is dependent on the performance of the business and its culture.
If the business needs a makeover like Myer or Repco, you are more likely to appoint an external candidate like Brookes or Yeomans because they find it easier to wield the axe and effect change.
If the business is traveling well, internal candidates usually top the succession list for a new CEO, as with the Woolworths Luscombe appointment and Just Jeans’ promotion of Murray.
Gillett says retail management is a competitive market where talent is highly contested, and retailers planning to appoint a new CEO need to start by defining the mandate for the role and establishing a clear understanding about corporate objectives.
"Then you proactively seek who is the best-credentialed in the market to lead the organisation. You need to identify skills that are complimentary to those within an organisation.
"While it is not always mandatory, it’s common that the brief for executive search, requires the executive to come from the retail sector, although there have been some exceptions, such as John Fletcher as CEO of Coles Myer.
"What we do know about good leadership is that high learning agility is essential," Gillett observes.
"With the rate of change in the market, the CEO needs to be a ‘quick study’. The US trend is to hire CEOs with experience out of the industry because they need to be a quick start-up."
Gillett says while succession planning for the CEO has merit, internal appointments are not always possible. What is recommended as best practice, regardless of an internal successor, is to benchmark the internal capability with the skills and track record available from the external market.
"Whether the company is publicly listed or privately owned, large or relatively small, shareholders and stakeholders alike need to know the best person possible has been sufficiently screened and assessed for the position.
"Every CEO and board has a responsibility to implement a succession planning strategy but, in reality, this proves to be difficult because of the rate of change and competitive pressure for that talent."
Gillett says there are numerous examples of international appointments at the executive and CEO level in retailing as well as expatriate appointments where international experience is brought back to the domestic market.
Wavish, Pinshaw and L’Huillier are not convinced that overseas experience is a crucial consideration in an Australian retail business, unless the company is itself looking to expand overseas.
Gillett acknowledges that, as with any other industry, there are mixed views around the success of some of the more high profile international appointments.
"The factors that need to be considered and appropriately weighted include; where the most relevant or specific skills and experience can be sourced from, cultural alignment to the organisation, transferable knowledge and availability.
"Whether the appointment is domestic or international, what is more relevant is the degree of rigour applied to the process. Today, Australian retail has a prominent position on the global stage, hence it makes sense that due diligence that underpins any executive search for talent is not limited to just one market."
Neither should it be limited to one gender, according to Gillett, although the retail sector probably has a better track record than most other industries in supporting women in management.
"Women in retail management roles are not uncommon and in more recent years the rise of women to the CEO level has increased. Today, the Sussan Group has women at the helm of the parent company and leading Sussan, Sportsgirl and Suzanne Grae, as does South Pacific Tyres Retail, Wendy’s and Boost Juice.
"Women are also stepping up to board roles within retail organisations such
as Colorado Group, Coles Myer and
Retail Cube."
Gillett’s experience indicates stakeholder management skills are critical whether they be leading discussions with financial institutions, presenting to the board, internal management, staff, suppliers or customers.
"Retail CEOs often have a higher public profile than their counterparts in other industries and their relationships can be more visible.
"The leadership and communication skills of the CEO need to resonate at all levels, again, particularly in retail."
In an industry where interest from venture capital groups is at an all-time high, profitability, operational efficiencies, market share and brand equity are a major focus for retailers looking to appoint a new CEO.
"The emphasis will depend on the current state of play of the organisation.
"For example, the focus may be on organisational turnaround or rationale. Alternatively the measure of good performance may be the achievement of comparable store growth in a market where economic factors are impacting retail spending.
"Typically however, a CEO is unlikely to find a brief around organic growth alone challenging enough," Gillett says.
Wavish says there is no template for appointing a CEO – the process and the candidates will depend on the culture of the organisation and how it is traveling.
Retail companies generally need all-rounders in the top job, people with broad experience across the business and, in many instances, a ‘been there and done that’ person, especially if the business is struggling, he says.
"Most boards would be colour-blind on gender and most other distinguishing characteristics. They just want the best person for the job and, generally speaking, overseas experience is not as important in retail as in other industries.
"Retail management is very much about building depth across the business. Retail is never a one-person show."
Wavish says the skill sets are also changing. An understanding of IT and supply chain was not regarded as essential five years ago, but is now considered quite important.
Communication skills are always in vogue in retail, he says, because there are many people involved working in different locations.
Pinshaw, a South African with a gilt-edge retail resume in Australia, is on the boards of Barbeques Galore, Australian Discount Retail and Super Amart.
As chairman of Just Jeans, Pinshaw had a call on the Jason Murray appointment, and also oversaw the selection of Rebecca Dee Bradbury as CEO at Barbeques Galore and Sarah Paykel as GM of OPSM.
Pinshaw says marketing skills come up strong in retailing executives, with finance often the weakest skill area.
"Leadership is the number one factor in selecting a CEO. The days of the autocrat are gone, you need to be able to build a team and draw out the best in your people.
"A CEO can always surround themselves with specialists in the various disciplines, but he or she needs the leadership and communication skills and a strategic view of where they want to take the business."
Most retailers generally prefer internal appointments, but external candidates are often selected where there is a need to make significant changes in the business, especially cultural change, says Pinshaw.
"It is obviously unlikely that a 2IC will step up in a company that has difficulties. In those circumstances, you need someone to come in from scratch, someone with no baggage."
Pinshaw says the private equity groups now buying into retail chains want someone who can manage change and is very results focused.
In a franchise group, he says, communication becomes even more important, but it is also imperative the CEO believes in the business.
"You need to be a good listener because every franchisee is a business owner and a managing director in his or her own right. If you don’t listen, you will miss some gems, but also you are likely to be headed for turbulence."
Pinshaw expects more women to be appointed to CEO roles in the retail industry in future, but does not expect a surge in overseas appointments.
While Pinshaw is not convinced the current pool of potential CEOs in Australia is as strong as it should be, he believes retailers are starting to show more commitment to succession planning and preparing people for senior executive roles.
L’Huillier recently was involved in the selection of Graeme Yeomans as CEO at Repco. He is also a director of Woolworths and Australian Leisure & Hospitality, and had to cast a vote on Luscombe’s succession to the Corbett throne.
Yeomans quietly and effectively built the Associated Retailers business that includes Mensland, Shoex, Sportspower, Toyworld, Brown Sugar and Meredith in its brand portfolio, but must now restructure and possibly downsize the struggling Repco auto accessories chain.
L’Huillier believes vision is crucial for a CEO, along with a healthy measure of leadership and communication skills. He argues that decisions on internal or external candidates and overseas experience will depend on the culture, trading performance and ambitions of the retail business.
Echoing Wavish and Pinshaw, L’Huillier says the private equity investors want to see retail chains headed by leaders who can deliver on cost cutting and implement new initiatives, structures and even new directions quickly.
The bigger the retailer involved, the more likely the engagement of executive search firms and benchmarking through global searches for candidates, he says. But overseas candidates generate the most debate because the culture of the business and characteristics of the Australian retail market are potential pitfalls for even the best credentialed candidates.
L’Huillier believes the three critical experience areas for a retail CEO today are merchandise and marketing, store operations and logistics.
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