Rejuvenating the Retail Executive: From Merchant to Customer Activist

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Has Amazon killed the retail star?

The global retail industry is in a state of flux. Once iconic brands are struggling with too many stores, too high a cost base and too little differentiation.

Customer is King, Queen and Emperor

Amazon did more than just introduce an easier way to shop; it changed the balance of power. Consumers now comparison shop, read reviews, order anywhere, return purchases, and manage subscriptions from their smartphones.

Unprecedented levels of transparency have lifted the lid on companies’ sourcing and production practices. This forces retailers to consider the customer in what used to be back-office activity.

Amazon’s model of putting customers at the heart of the purchasing journey has also triggered a revolution in expectations. Whereas customers were once just a link in the value chain – just one of many stakeholders – they are now everything.

Retailers are responding, but is it enough?

Retailers must align their operations – not just their products or platforms – with their customers’ evolving preferences and behaviors. A systemic customer re-orientation is what is required for success in retail, and organization-wide transformation is the only way to get there.

This has created a new breed of retail leaders: customer activists, not merchants.

An executive for a new era

It takes a unique leader to successfully lead a transformation. A look into their backgrounds and personality profiles helped Russell Reynolds Associates paint a picture of today’s retail leaders.

Using proprietary data around retail executives and a wider database of psychometrics, we set out to answer the following questions:

ɳ Who are the retail leaders of today? ɳ How are retail executives different from other

executives? ɳ Are retail leaders disruptive enough? ɳ How will the customer activist arise? ɳ How can retail executives prepare for the future? ɳ How will retail leaders change? ɳ How will the organization change?

Between 2010 and 2014, e-commerce grew by an average of $30 billion annually. Over the past three years average annual growth has increased to $40 billion. “That is the tipping point, right there,” said Barbara Denham, a senior economist at Reis, a real estate data and analytics firm. “It’s like the Doppler effect. The change is coming at you so fast, it feels like it is accelerating.” This transformation is hollowing out suburban shopping malls, bankrupting longtime brands and leading to staggering job losses.

Michael Corkery, New York Times, April 15, 2017

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Who are the retail leaders of today?

Where is the customer?

Despite a retail landscape that is dynamic and constantly changing, retail leaders remain homogenous and insular.

Russell Reynolds analyzed over 300 retail executives globally. Of those, 84% were men, the average age was 54, and over two-thirds had been internally promoted – the majority of whom spent an average of 15 years with the company before taking their current position. Even those who were external appointments typically had retail experience.

While lengthy in-industry tenure brings deep understanding of traditional retail, it limits the learning gained from exposure to other, more innovative, sectors.

As the relationship with the customer changes and moves from transactional to conversational, retail leaders can no longer solely rely on simply being a great merchant. They need to actively advocate for and reflect the diversity of an increasingly complex customer base.

Note: RRA analyzed 338 retail executives globally.

84%are men

78%of executives are citizens ofthe company’s HQ country

65%of executives have been intheir current role for lessthan 4 years

68%of executives are

internal appointments

54 yearsis the average age of

C-suite retail executive

89%had previous retail

experience, with 45%having worked only

in retail during their career

83%of executives with previous retail

experience have only worked in oneretail segment (e.g., department stores/

grocery/specialty)

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How are retail executives different from other executives?

Leveraging the merchant in a customer world

Using our proprietary psychometric database, we compared 256 retail executives at the C-suite and vice president levels against the executive population in our database. The analysis showed that retail leaders are

socially bold, persuasive, and assertive with a desire to win. They stay the course, drive for results, and trust others to execute. At the same time, they have a tendency towards doing things as they have always done, which restricts their toolbox and, thus, limits their ability to fully engage with the customer.

RETAIL EXECUTIVES VS OTHER EXECUTIVESAverage of Differences in Psychometric Scores

Note: Analysis involved the proprietary psychometric data for 256 retail executives at the C-suite and vice president levels compared against an average executive profile calculated from more than 8,000 data points.

TRAITS THAT MAY HINDER TRAITS THAT MAY HELP

In comparison to other executives, retail leaders

show a bold, assertive style; they enjoy sharing a vision

and aligning others in a persuasive manner

Retail executives are drivenand action-oriented; they

move forward in a confidentmanner yet are more withdrawn than peer

executives

Although forward-thinking, can resort to

tried and tested ways

Socially bold15%

Takes the lead8%

Enjoys selling8%

Unaware of organizational politics14%

Overly optimistic13%

Prefers traditional approaches6%

A�entive to details7%

Withdrawn16%

Trusting of others13%

Perceives others as reliable4%

Anticipates the future12%

Leverages data8%

Achievement-oriented8%

Self-assured7%

Competitive6%

Bias for action6%

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Are retail leaders disruptive enough?

Far from disruptive

We have compared the psychometric profile of retail executives to the profile of those executives who have been involved in disrupting industries – we call this group Productive Disruptors*. Productive Disruptors are bold in their strategic and leadership approach. They prefer innovation to tradition and push limits.

While retail executives possess some of the competencies of Productive Disruptors such as their optimism and achievement orientation, overall they score lower across all “disruptor” traits.

Retailers score especially low on competencies such as ability to think outside the box, being open to new things, and going against the grain. Retail executives also show less agility and empathy, which may hinder their ability to truly advocate on behalf of the customer.

*Comparing the psychometric profile of 28 digital transformation leaders to the database of other C-suite executives, Russell Reynolds has developed a competency model for these individuals termed Productive Disruptors profile. The study defines digital transformation leaders as senior executives charged with leading large-scale digital transformation efforts within an established, complex organization (Russell Reynolds Associates, Productive Disruptors: Five Characteristics that Differentiate Transformational Leaders, 2015).** Relative to the Productive Disruptor profile.

PRODUCTIVE DISRUPTORSCompetencies Relatively weaker** Within range**

RETAIL EXECUTIVES

Innovative Thinking “outside the-box”Open to new things

Disruptive Cut through bureaucracyGo against the grain

Willing to take calculated risks

Abstract thinking style

SociallyAdept

Adapt to different audiencesAim to understand people andthe reasons for their behaviors

Socially confident

BoldLeadership Decisive

Take initiative and test limitsIdentify limitationsLead from the front

Determined Achievement-orientedOptimistic

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How will the customer activist arise?

Delivering a systemic customer re-orientation of the business

Retailers have made only incremental changes to their business models to meet customers’ needs. These changes involved responding to customer demand by adding new sales channels, such as e-commerce, offering more flexible delivery methods, enhancing and digitizing back-end operations and CRM systems.

However, nimble and innovative players have already been orienting around and anticipating the desires of the customer. The customer-driven organization-wide transformation will require retail leaders to change their organizational structure, their culture, and their ways of working. Only then will they be able to act as the true activist for their customers.

THE CUSTOMER ACTIVIST

Focus on the individual customer in order to tailor

interactions

Embrace digital technology as it

empowers and enables unique interactions,

whether in-store or online

Anchor decision making in facts through use of data

and analytics

Continuously engage customers to build a

deep understanding of who they are and what

they need

Remove barriers such as hierarchical structures, silos or operational expediency from

dictating what or how the customer shops

Organize around the customer journey rather than in channels in order

to facilitate seamless process

Put the customer at the core of the business and develop a

culture focused on optimal customer experience

“Let’s figure this out,” should be the response

to any customer problem, not “I am not

sure if we can”

INSTITUTE NEW WAYS OF WORKING

PIVOT CULTUREALIG

N ORGANIZ

ATION

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How can retail executives prepare for the future?

Cultivating critical competencies among retail executives 

Retail organizations need leaders with a rejuvenated leadership profile to help them through this time of transformation and position them, and their businesses, for growth. The good news for retail executives is that what makes for success in a massively disrupted industry are competencies that can be cultivated – not traits that are inherent to their personalities.  

Our Leadership SpanTM framework – shown here and derived from analysis of over 5.5 million leadership cases – posits that a retail executive’s ability to thrive

through constant change hinges on the ability to act in ways that on the surface seem at odds with each other.  

Looking, for example, at the area of strategy setting, the effective retail leader can flex between a highly pragmatic and highly disruptive decision-making style. The embodiment of these competing competencies in a single leader represents their “leadership span” – the higher an individual scores in both “competing” traits the bigger the span for that competency. This ability to span and flex across apparently contradictory leadership styles is the key for retail executives to survive and ultimately thrive.

LEADERSHIP SPAN MODEL

Core LeadershipSkills

C-suiteDifferentiators

SETTINGSTRATEGY

EXECUTINGFOR RESULTS

LEADINGTEAMS

RELATIONSHIPSAND INFLUENCE

PRAGMATIC RELUCTANT VULNERABLE CONNECTING

DISRUPTIVE RISK TAKING HEROIC GALVANIZING

LEADERSHIP SPAN FOR THE RETAIL EXECUTIVEIncrease executive's span through cultivating competing competencies*

SETTING STRATEGY EXECUTING FOR RESULTS

LEADING TEAMS RELATIONSHIPS AND INFLUENCE

PRAGMATIC

VULNERABLE

RELUCTANT

CONNECTING

DISRUPTIVE

HEROIC

RISK TAKING

GALVANIZING

While retail executives can be bold in driving innovation, they o�en prefer traditional methods. Strengthening disruptive leadership capability will drive more innovation and faster adoption of

new technologies.

Historically, aggressive risk taking may have uncovered unconventional revenue streams. However a be�er balance of analysis with

measured risk taking would create more sustainable results in a volatile market.

While retail executives are renowned for their heroism, they will also need to be more vulnerable

in the future. That is to admit their mistakes and shortcomings, learn from others, ask for help when

needed, and look for a fresh perspective.

While charismatic leadership in retail has inspired great results, it is as important to connect to build

true networks and communities. Breaking down traditional silos will foster more agility across the

organization.

*The visual representation of current retail executive’s competency span is illustrative only and does not correlate to exact SPAN scores which the model uses.

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How will retail leaders change?

RETAIL EXECUTIVES TODAYFROM MERCHANT…

RETAIL EXECUTIVES OF TOMORROW… TO CUSTOMER ACTIVIST

Equipped with powerful traits for addressing disruption such associal boldness,willingness to takerisks while leadingfrom the front

Overly reliant onthe traditionalways of doingthings, o�enresulting incomplacency whenit comes to adaptingto change

Tend not to be “out ofthe box” thinkers

Middle-aged men, with deep retail expertise

Innovative and ready to challenge the status quo or redefine the customer proposition, while being

pragmatic in delivering plans

Encourage dialogueand seek learning

opportunities

Skilled in connecting instead of just relying on

bold, assertive leadership. This enables diverse teams to collaborate and yield full

potential

Build partnerships with suppliers and/or entirely new businesses who can

engage customers in different ways

Will we see more diversity?

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How will the organization change?

Augment the team

Identify and promote creative talent from within,

while bringing in non-industry, disruptive

perspectives from outside and ensuring their

contributions are embraced by the organization

Restructure theorganization

Dispense with old hierarchies and rigid boundaries and build

cross-functional, customer-oriented

structures

Evolve the culture

Weave the customer into the organization's fabric,

encourage innovation, and celebrate the

customer-company relationship

Enabling retail transformation

Retail executives should explore ways they might broaden their competency span and develop their leadership. In addition to examining their own approaches, leaders can develop the capacity of their organizations to thrive in three distinct ways:

TEAM ORGANIZATION CULTURE

FROM

TO

Homogenous

Narrow industryexperience

Gut instinct

Diverse

Disruptive

Data driven

Cross-functional

Mapped alongcustomer journey

Agile and nimble

Hierarchical

Siloed

Touch pointoriented structure

Traditional

Product-focused

Execution oriented

Efficiency driven

Innovative

Customer-centric

Encourage experimentationand risk taking

Performance/entertainment

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Sample and methodology

In April 2017, Russell Reynolds Associates conducted a detailed review of the profiles and career paths of global retail leaders.

ɳ We identified the 64 largest retailers by revenue globally*. We chose retailers aligned to 6 retail segments and within each segment we represented three global regions.

ɳ In total, our analysis included 338 individuals who were part of the leadership teams at the identified companies.

ɳ In addition, we analyzed proprietary psychometric data for 256 retail executives at the C-suite and vice president levels and compared that against an average executive profile calculated from more than 8,000 data points

*Global Powers of Retailing 2017, Deloitte.

REGIONAL REPRESENTATION OFRETAILERS

FUNCTIONAL ROLES OF INDIVIDUALS ANALYZED

SpecialityRetail

2

6

6

ApparelRetail

2

4

4

Online

2

2

2

DepartmentStore

2

4

4

Luxury

1

6

2

Grocery andGeneral

Merchandise

3

6

6

COO6%

Supply Chain8%

Marketing9%

CIO/CTO14%

CFO18%

Retail Operations8%

Trading/Merchandising11%

Digitial/E-commerce7%

CEO19%

Asia and Africa Europe Americas

(percentage indicates size of the group in the analysis)

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Russell Reynolds Associates is a global search and leadership advisory firm. Our 400+ consultants in 47 offices work with public, private and nonprofit organizations across all industries and regions. We help our clients build teams of transformational leaders who can meet today’s challenges and anticipate the digital, economic and political trends that are reshaping the global business environment. From helping boards with their structure, culture and effectiveness to identifying, assessing and defining the best leadership for organizations, our teams bring their decades of experience to help clients solve their most complex leadership issues. Find out more at www.russellreynolds.com. Follow us on Twitter: @RRAonLeadership

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© Copyright 2017, Russell Reynolds Associates. All rights reserved.

AUTHORS

ANTHONY ARMSTRONG is a member of the global Consumer Sector advising clients within the retail and consumer goods environment on succession planning, leadership assessment and recruitment of outstanding leaders. He is the country manager for Australia.

CLAUS FISCHER co-leads the firm’s Global Retail and Luxury Practice and is a member of the Consumer Sector. He focuses on senior executive searches and leadership assessment for clients across Europe. He is based in Hamburg.

RIC ROI leads the firm’s Leadership & Succession Practice for Asia Pacific. He provides advisory services to a wide range of corporate clients and executives across the region. He is based in Singapore.

KRISTYNA JANSOVA is the knowledge lead for the Retail Practice and a member of the Diversity and Inclusion Practice. She is based in London.

MALLORY SAMSON is the Global Knowledge Leader for the Consumer sector. She is based in Chicago.

RussellReynolds.com