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Is there too much change at the top of fashion retail?

Is the seemingly rapid turnover of senior retail bosses a knee-jerk reaction or the right approach in today’s tough trading environment? Drapers analyses leadership strategy decisions

The rate at which UK companies replace their leaders is speeding up. The average time UK CEOs – or CEOs of large UK firms to be precise – spend in post almost halved from 8.3 years to 4.8 years between 2010 and 2017, a study by PWC’s Strategy& team has shown.

Churn is also evident in the retail sector. So far this year Jigsaw announced its CEO Chris Stephenson is stepping down after six months in the role, and Debenhams chairman Sir Ian Cheshire, who took on the position less than three years ago, is leaving after two of the retailer’s major shareholders voted against his re-election to the board.

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Chief executive Sergio Bucher was also voted off the board, but remains in situ, as it was decided it was in the “best interests of Debenhams that the executive team remains fully focused on delivery of the [turnaround] plan”. 

Among change at the top last year, Mark Newton-Jones was reappointed CEO of Mothercare five weeks after he left, and Gareth Jones spent just eight months at the helm of Missguided.

There is such a state of crisis in the industry that there is not enough time and money invested in leadership change

Sarah Lim, EMEA managing director at Korn Ferry

In its annual Retail CEO Tracker, recruitment firm Korn Ferry found that 50 retail chiefs left their posts in 2017, compared with 41 in the previous year – the highest level in five years. Figures due to be released later this month are likely to show the trend continued in 2018. 

On the surface, the departure of senior leaders after relatively short tenures appears to stem from rash business decisions. Industry insiders tell Drapers that there have been some knee-jerk reactions. In other cases, exits were simply the result of hiring the wrong person for the job or expecting experience gained elsewhere to translate well in retail.

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“There is such a state of crisis in the industry that there is not enough time and money invested in leadership change. Businesses under stress are where CEO churn is most noticeable,” says Sarah Lim, EMEA managing director at Korn Ferry and author of the tracker.

There are a range of reasons why businesses need leadership change, from retirement through to collective agreement between the board and the CEO that they have done as much as they can, or the next phase of change required is not their skillset. 

“If you need to make a change, you do it,” says Debbie Hewitt, non-executive chairman of Moss Bros. “You can’t set the level of change up front.”

When you’re in the trenches, you have to bring in the right people: seasoned executives who know how to trade through hard times

Fran Minogue, managing partner at Clarity

Recruiting for the moment is the consensus within the industry, whatever that might be.

“A dose of reality is sometimes needed,” says Fran Minogue, managing partner at headhunter Clarity. “Some businesses are not facing up to the truth soon enough regarding their situation. Sadly, for many fashion retailers, at the moment it’s about survival, rather than online growth or international expansion and, if that’s the case, they need leaders who understand the balance sheet and cashflow.

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“When you’re in the trenches, you have to bring in the right people: seasoned executives who know how to trade through hard times. Usually that means those who have been there before.” New Look’s decision to bring back executive chairman Alistair McGeorge in the autumn of 2017 as a safe pair of hands to sort out its immediate issues is widely cited as a positive example of leadership change for crisis management.

The right decision for leadership may come from a financial stakeholder perspective. 

“In some cases, CEOs are answering to a private equity partner, a board or a complex investment structure with multiple stakeholders. For those leaders, there’s no wiggle room,” says Tom Holt, CEO of consumer strategy consultancy Pragma. “Some legacy retail businesses are being presided over by people capable of making the change but without the timeline to do it.” 

“In fashion retail, the focus has to be on the customer no matter what is going on,” says Victoria Nightingale, director of high-level headhunter Barracuda Search. She names Joules and Gymshark as businesses that know how to interact with their customers. 

Stability no longer exists in retail

Morgan Holt, chief strategy officer at Fitch

“Engagement is what is setting these businesses apart, and leaders need to be engaging too. Teams stay happier when they have those types of leaders above them.”

Morgan Holt, chief strategy officer at design and branding consultancy Fitch, agrees: “Retail is at the mercy of what customers are looking for in the moment, so the aim should be to make agile the new normal. It needs leadership around different engagement methods, and CEOs who understand the way their customers live their lives and the role their businesses can play in that.

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“Stability no longer exists in retail. The notion that you can build simple, stable structures into business and then think about growth is false.”

Even though retail is not stable, leadership should be, argues Hewitt: “There is such a thing as stability in leadership. It’s the CEO’s role to think about a successor, and the board’s role to make sure the thinking and planning is happening before there’s a burning platform.”

“A chair who is forward-thinking and understands the sector knows when it’s right to promote from within or to bring in from the outside. You have to start with that,” says Moira Benigson, managing partner at headhunter MBS Group.

Korn Ferry’s Lim believes planning for and preparing future leadership is essential: “Our premise is that having a good succession plan is the best thing for an organisation. The risks of otherwise getting it wrong are high. There’s a whole raft of reasons why a high-quality leader in one organisation isn’t the best in another, such as chemistry or not being a good fit with investors.

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“The best-case scenario for an organisation looking at sustained growth is to build its bench strength. Businesses will always want external talent, but that can be brought in at a lower level. That helps to build the bench strength five to 10 years out.” 

The Drapers Verdict

Today’s tough trading environment requires retail businesses to have the right leadership is in place. Unsurprisingly, there is no one best route to take. The right decision depends on truly understanding the reality for the business at that time.

Those battling for survival need experienced leaders to fight on their behalf. Those in a position where the focus is on continued growth need leaders who understand the new rules of engagement. Individuals who are aware of their responsibility to customer and employees, rather than those who want to be seen to be running a business, are always a better fit.

Stability in the current retail landscape is a pipe dream, but taking the time to recruit and succession plan encourages steadiness in a dynamically changing environment. It is more important that the executive team melds together the types of experience needed, rather than focusing these on to one single leader. The leader’s role is to galvanise the senior team, which itself has to have the skills required for the business.

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Readers' comments (2)

  • Often the wrong CEO/MD is brought in, who in turn brings his friends/yes men and they do a bad job. They then get paid off for they incompetence. Said people then get employed at another company and the process happens again...

    If the people down the lower end of the food chain where listened too and taken seriously a little bit more often, they would end up as CEO's and would not have to be replaced.

    It is not about the frequency of change at the top, it should be about why so many over promoted people end up in positions they are not fit to hold.

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  • I completely agree with the first comment. Its a merry go round of CEO who are (more or less) competent when the business is working but they are not good enough to manage the business when it's struggling.

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