Retail Succession Planning: Now and Then
Succession planning has always been an important discussion topic for every thoughtful or “planful” retail company. However, with the paradigm shift taking place in the industry, the importance of the process and of making it more than talk has become critical for several reasons. Not only is the current generation of retail leadership retiring in large numbers, the likelihood is that this attrition will continue well into the next two decades. Tie this basic reality to a noticeable lack of prepared talent to fill these critical vacancies, and the current retail business readjustment will continue on its own path with few to influence where that path leads. With the decline in executive training and professional development programs, as well as the changes in leadership profiles (from merchandising to marketing, from marketing to digital), the industry is sure to face continued drift and dislocation.
Once executive leadership in a company understands that a deliberate succession plan is a necessary part of the total strategic planning process, they will next face a process that’s much different from the succession planning processes to date. So what’s so different now?
Today’s retail companies require a dramatically different leadership skill set (more on that later). Succession planning should no longer be focused only on finding a close match to an incumbent, but rather on finding the leader best suited for the particular future of the company. Furthermore, with a new understanding of how a diverse C-suite can improve company performance, succession planning is an opportunity to increase diversity in talent and perspective, as well as to enable new world views to better match an increasingly diverse consumer base and the potential paths of the industry itself.
However, unlike in decades past, a long grooming process will probably not be possible; timelines will need to be truncated. Overall employee mobility is on the rise, so executive teams don’t have the luxury of identifying a future leader and passively monitoring his or her potential over several years. Succession planning must be a more proactive, activist process that’s highly structured yet creative, with an accelerated timeline for skill building and incentives in place to retain high-potential talent. Furthermore, it needs to be a process that has out-of-the-box components, much like successful retail and consumer businesses do today.
Most importantly, succession planning is a different animal today because the skills themselves required for executive leadership have dramatically changed. Based on the current industry landscape, retail leaders today must:
- be experts in all things digital, including social media marketing as well as consumer privacy and cybersecurity issues;
- understand and use the principles of change management through hands-on experience with mergers and acquisitions;
- understand the global economy and how changes in market conditions (e.g., tariff policy, trade treaties) will affect the current retail market and set trends for the future;
- have experience managing larger functional spheres and the diverse skill set and mind-set of an increasingly millennial workforce; and
- demonstrate an increasingly intense understanding of the customer and what the customer wants — i.e., the ability to anticipate customer needs and develop entertainment-type experiences that push the boundaries of traditional retail experiences beyond where they are or have been.
That being said, as a former chief human resources officer (CHRO) at a number of major retail brands and now as an executive recruiter for the retail and consumer sector, I see the same succession planning mistakes being made again and again. If companies want to build a leadership pipeline that can enhance their position within this competitive market, they need to avoid these common succession planning pitfalls:
1. Not enough communication and too much opacity:
Succession planning should be completely transparent to all levels of the organization. An opaque process fuels misunderstanding and causes distrust with both the process and any results. Appropriately “socializing” the succession planning process will not only help to create a culture of trust and credibility, but it will also convey to mid- and junior-level staff that professional development is possible (and expected) and a career path is a clearly stated benefit.
2. Not allowing the CHRO to be a true part of the leadership team:
Too often the actual responsibilities of the succession planning effort are split between the executive team and the HR team with inadequate integration. The CHRO, in concert with the CEO, should be the leader when it comes to aligning the C-suite group, not only managing the specifics but leading the communication process itself. If the CHRO doesn’t have the same “insider knowledge” as the rest of the C-suite, he or she won’t be able to fully leverage their greater human capital expertise.
3. Not aligning succession planning with overall strategic planning:
If the succession plan isn’t in sync with overall strategic planning, companies will end up bringing a leader on board who is capable of managing the company as it is today, yet incapable of taking the company to where it needs to be in the next three years to five years — and then the years following. By aligning succession planning with the specific short- and long-term business objectives the company must achieve in the next phase of growth, the company can ensure that it’s attracting and grooming future-focused leaders who are both smart in their current function as well as flexible and nimble when it comes to cross-functional work. Additionally, succession planning shouldn’t be limited to C-suite positions. While this is the right place to begin, eventually all mission-critical roles should have a succession plan in place.
The work of succession planning is difficult and takes discipline and honesty. However, if you want the organization to be there in three or five or 10 years, you had best begin to people plan in earnest now.