How to stop the retail executive exodus

Compared with most other industries, retail companies face shorter time horizons and tighter metrics. The pressure to perform is great, which perhaps explains why many retail firms are having trouble holding onto their top executives.

For example, one major U.S. retailer recently suffered the departures of a senior marketing executive, a division president and another executive VP, all within the space of a few months. One of those executives had lasted only five months, while another had a tenure of less than two years.

This high turnover problem goes right to the top of the retail executive ranks. A recent study (2011 Russell Reynolds Associates U.S. Retail CEO Study, “A Perfect Storm: CEO Succession Challenges in Retail”) of more than 80 major U.S. retailers with more than $1 billion in annual revenues found that retail CEOs were 80% more likely than their Fortune 1000 CEO peers to leave within two years of being hired.

How can the retail industry find a way to reduce executive turnover and improve retention? Here are five suggestions:

1. Make hiring decisions based on where the company is headed, not where it has been.

Operational excellence should be an important consideration in CEO succession, but it should not be the determining factor. Rapid technological change is pushing companies to reinvent their business models and rethink the way they reach customers. In this environment, it is crucial to have executives at the top who are willing to take risks, make mistakes and focus on top-line growth, even if such actions fly in the face of conventional operational excellence beliefs.

2. Realign the culture to embrace innovation.

Your best executives can have excellent alignment with your strategic goals as a retailer, but they will still end up exhausted and thinking about jumping ship if they have to fight constant battles with the corporate culture. Hiring an executive for his or her capabilities as a strategic thinker does not make sense if the overall organization continues to worship at the altar of operational excellence.

3. Build bridges; break down silos.

Retail companies want their leaders to be innovative, but most innovation requires the interplay of opinions, perspectives and ideas. When a work force is segregated into silos, there is little room or opportunity for innovation to take place.

One way to start breaking down silos is to make sure that leadership development tracks give executives a chance to experience both the functional and commercial side of the business. As long as silos are allowed to persist, they will impede innovation, causing frustration among creative senior leaders and ultimately making it harder to retain the sort of forward-thinking executives that companies need most.

4. Don’t ask an individual to move a mountain.

Individual leaders may be talented, strategic and creative, but they do not operate in a vacuum. Asking an executive to lead change in a static and entrenched organizational culture is like asking a single person to move a mountain northward when thousands of others are being paid to push the mountain in the other direction.

Yes, it is important for companies to have innovative executives in key positions, but it is equally important to develop governance structures, systems and processes to support these executives, foster a culture of debate, and encourage calculated and strategic risk-taking.

5. Make sure HR has a seat at the table. 

Beyond showing that the CEO understands human capital is a strategic concern, having an HR representative on the top leadership team gives companies an opportunity to map out the organization’s talent demands several years into the future. This talent map gives companies the ability to build, develop and recruit leaders whose skills, temperament and vision match the company’s own culture, strategy and objectives.

Christine Rivers is a VP and leader of Hay Group’s Leadership and Talent practice for the Retail sector. Hay Group is a global management-consulting firm. 

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