C-SUITE EVOLUTION

New talent, expanded roles transforming leadership ranks

By Connie Gentry

Much as retail has been disrupted in recent years, the same holds true for the retail C-suite. From the hiring of talent outside the industry to newly created roles, the C-suite is evolving to keep pace with industry and consumer changes as well as those of society at large.

Transitions in the C-suite are starting at the top. The person tapped to lead retail organizations going forward must possess a different skillset and deeper mindset than CEOs of the past, according to industry experts.

Specifically, retail chief executives must bring a proven track record, a penchant for decisive, fast-moving agility and a passion for team-building — and they don’t necessarily have to be industry veterans. Indeed, they may be total newcomers to the retail industry.

Case in point: Stephanie Linnartz will assume the helm of Under Armour on February 27. After serving as president of Marriott International, the world’s largest hospitality company with 30 brands across roughly 8,200 properties, she will bring fresh insights for strategic growth, omnichannel loyalty, talent development and branding partnerships to the retail space.

Pulling a seasoned leader from the hospitality sector was an interesting choice in the eyes of Brenda Malloy, CEO, at Herbert Mines, which conducts about 110 executive search projects annually, roughly 68% focused on the C-suite.

Recruiting from peripheral industries will likely escalate, and Linnartz, like many CEO selections, is both an interesting and an innovative choice.

“CEOs are hired to drive results,” Malloy said, referencing the well-known axiom: “Past behavior is the best predictor of future performance.”

Quantitative results are a resume prerequisite for the retail corner office, but Malloy said CEO searches are now taking a deeper dive as retail organizations face ongoing disruptions from geopolitical uncertainties and economic challenges. They are also challenged by consumers who have become digital-first omnichannel experts and who base buying decisions on cultural alignment with social and sustainability values as well as the fundamental right product, right price requirement.

“I’m seeing boards emphasize character and personal attributes in the specs for C-suite leadership,” Malloy noted. “Strength of character, for instance, as exhibited by experience with adversity and resiliency. Someone with curiosity, who asks questions and is out in front, but who sets a clear vision with authenticity and accountability. And someone who is humble, with a focus on the organization over their own ego, and who can build a strong leadership team.”

Her favorite metaphor likens the CEO to the conductor of a symphony, someone who understands their role is to lead, not star, in the organization’s performance, and who will orchestrate the transformations needed across the retail enterprise.

Imminent Upheaval

The need for strong, transformative leadership in the C-suite is supported by a recent “Disruption Index” from AlixPartners, compiled from data collected in a fourth quarter 2022 survey of global executives, of which 50% were C-level. A staggering 98% said their business model needs to be overhauled within the next three years. A third said they have already started changing their business model and 38% expect to change the model this year.

“Retail is experiencing much greater disruption than other industries,” said David Bassuk, partner, managing director and global leader of the retail practice at AlixPartners. “Changing the business model can mean a lot of things. In our space, it’s a dramatic transformation of literally every part of the business, from product and merchandising to the whole journey of how the customer interacts

2023’s Top 10 C-Suite Titles

The following roles that used to be nice-to-have are now must-have positions for many retailers:

• Chief Development Officer: Real estate meets design and construction plus portfolio-wide facilities management;

• Chief Diversity Officer: Equity and inclusion from the board to frontline staff;

• Chief Experience Officer: Engagement and retention of customers and associates;

• Chief Purpose Officer: What the company stands for and why;

• Chief Restructuring Officer: Historically associated with recovery from financial demise, now aligned with proactive, preventive actions to elevate brand performance;

• Chief Revenue Officer: Enterprise-wide, omnichannel revenue generation;

• Chief Supply Chain Officer: To the “right product, right place” mantra, add “right price” and do so with agility and resiliency in the face of any disruption;

• Chief Sustainability Officer: Impacts and improvements on environmental, social and community issues;

• Chief Wellness Officer: Work / life balance and well-being of stakeholders; and with you. All of that ripples through the supply chain, inventory management, financials and the back office.”

• Chief Transformation Officer: When two or more of the above seats need to be combined into one miracle-working magician.

It’s one thing to drive growth when an enterprise is following a consistent trajectory upward and the environment is more predictable, but given today’s unpredictability, retail C-suites require bold leadership, Bassuk stressed. Contributing to the overwhelming consensus that change is imminent: 80% of CEOs reported being “highly disrupted” within the past 12 months.

“We need leaders who are more creative thinkers, more willing to challenge the status quo but married with strong financial discipline in measuring short- and long-term outcomes,” he explained. “And that’s not the type of person our industry has traditionally rewarded and had in place.” His remarks hearken back to the fact that other industries can be relevant resources for C-level talent.

Stakeholder Expectations

Talent and transformation go hand in hand, but the disruptions and turmoil of recent years have altered stakeholder expectations and elevated the need for retailers to communicate their culture and social commitments.

For Paul Silverglate, partner at Deloitte and leader of the firm’s U.S. executive accelerators in client and market growth, it comes down to the difference between a mission and a purpose.

“A mission is what a company does and a purpose is why they do it,” he said. “Companies need to convey significantly more than profit motive and shareholder value. They have to set forth what the company stands for, what the company’s purpose is, and what their values are.”

Ultimately, the retailer’s purpose and values have to align with those of its stakeholders, including customers, employees and shareholders.

Enter the role of the chief purpose officer, which Silverglate said “helps the organization and the C-suite really understand where their stakeholders’ heads are, where the company is and how to weave those together.”

By creating the roles of chief purpose officer, chief sustainability officer and chief wellness officer, with all reporting to the CEO, the retailer exhibits a visible commitment to issues it deems important.

“In the last few years, we’ve seen companies write open letters about their position on social issues and this is a relatively new phenomenon,” Silverglate said. “The chief purpose officer helps the company put forth what its position is with regard to wellbeing and certain social things going on in the marketplace.”

“What’s important is that companies are communicating thoughtfully about what they stand for and are leading with a purpose,” he added.

Bassuk cited technology and media as industries that have undergone significant transformation and would have learnings applicable to retail. But he also cautions that leaders from other industries don’t always appreciate the nuances of retail.

“It’s a balancing act: the recognition that retail is unique [alongside] the learnings from other industries,” he said. “You can do it at the CEO level, but that has major risks with pros and cons. You can also bring it to the next level down [those reporting to the CEO]; we see it happening with more success in the digital or marketing space.”

As the need for agility and transformation is heightened, retail CEOs are being replaced more frequently, and according to the Disruption Index, 70% of C-level executives fear for their job.

“Because we’ve been through such disruption in recent years, the people in retail businesses are exhausted — they’re tired and overworked,” Bassuk said. “Retail board meetings used to get to the people side of things later in leadership discussions. Now, leading companies have inverted that and the people discussion comes first.”

Without that people focus, he added, transformation of retail business models will be impossible. At its core, retail is a people industry, which is a fundamental differentiator that has even more relevance in the current environment when consumers and employees alike are making values-based judgements.

In the new environment, roles that used to be nice-to-have are now must-have.

“If anything, the chief wellness officer and chief diversity officer should have a bigger seat at the table,” Bassuk said.

Similarly, Natalie Kotlyar, BDO’s national practice leader of retail and consumer products, points to insights gleaned from an annual BDO survey: Within the last two years, Gen Z and millennials responded that the No. 1 decision-making thought that goes into where to purchase, relates to sustainability and inclusion.

“Whether it’s DEI, technology or supply chain, all of the C-level roles are tied together and have to be integrated … for instance, the chief experience officer has to work closely with the chief revenue officer,” Kotlyar said.

Between excess inventories, ongoing frontline labor shortages and inflation, the first half of 2023 poses even more potential disruptions and challenges.

“The first quarter is going to be highly promotional for retailers and that impacts all of the C-level officers,” Kotlyar added.

The most critical aspect for transformation, according to Herbert Mines’ Malloy, is “having the right talent in the leadership team — it’s the combined power of having the right person in each role” across the C-suite.