Russell Reynolds Associates: Succession Challenges in Retail

The 2011 Russell Reynolds Associates’ U.S. Retail CEO Study examined turnover and hiring trends between January 2006 and April 2011 at 81 multi-channel retail companies based in the United States with annual revenues of $1 billion or more.

Russell Reynolds found that 59% experienced a change in leadership in the past five years. Of those 48 companies, 27% left their position after having served three years or less. More striking, 9% did not make it past the first year. This shows that the retail industry is carrying the burden of significant “performance risk”.

The CEO shortage should be understood in relation to the changes brought about by the internet. Today a social media campaign is a critical component to an organization’s marketing efforts. A decade ago, retailers were just starting to use the web to showcase their goods. Bloggers, once viewed insignificant, now command access to products that were once only handed out to editors of top magazines. 

Boards looking for candidates look for someone who has experience, understands the new retail trends, and can meet an array of changes. Board members quickly find that candidates with this skillset are scarce. In other industries boards cast wide nets when looking for a CEO. For example, a board of a clean tech company could look for leaders in both the technology and energy sector. Many retail firms do not believe they have the option to search across sectors. Of the companies surveyed, almost 90% of the CEOs recruited were from the same subsector of the retail industry. These challenges can be overcome, however, if boards adopt a broader view toward the succession process, incorporate cultural fit into that process and strategically manage board composition to support the CEO.

The full report is published on Russell Reynold’s website. Read the full report.