As Retail Sector Pivots, Investment in Talent is New Priority
October 5, 2021 – Retailers are facing major shifts in their businesses that call for “unprecedented responses” by CEOs who can effectively lead through change, intuitively and analytically understand the evolving consumer, and respond to ambiguity, according to search consultants. Developed markets, excess retail capacity, rising prices, the shift to omni-channel retail and the unpredictable pace of change in consumer shopping habits all affect the type of leader that retailers need.
These are revolutionary times for retail with COVID-19 having accelerated some fundamental trends across the sector. This has in turn created a fertile environment for the most able executives to set themselves apart and chart a course for a successful, digitally focused future, according to a new report by Melissa Reed, a consumer and retail partner lead with H.I. Executive Consulting (HIEC). “The past year has certainly rocked the retail boat and the ramifications are being felt widely, including a realization that the crisis has created great opportunities as well as challenges,” she said. “These are right now being grasped by the sector’s most capable leaders and so in order for companies to take full advantage of the new retail landscape they must seek to invest in these sorts of individuals.”
There is no escaping the fact that it has been a tough time for retail, but some CEOs have also highlighted how invigorating it has been. “They have been able to think differently and to push through change at rapid pace,” said Ms. Reed. “They’ve also been able to initiate these changes without necessarily seeking board approval. Such actions have arguably been swept under the COVID-19 carpet.”
All retailers that have survived face challenges. Leaders have to accept that they might well be running an organization that is simply too big, with too many people employed across declining sales channels. “There are question marks over the futures of senior store-based and head-office staff who have been on extended furlough,” said Ms. Reed. “Digital has replaced much of their revenues.”
The New Drivers
The spotlight has instead shined particularly brightly on chief digital officers and the leaders of E-commerce departments. They’ve been important historically, of course, but this past year has elevated them to positions whereby they are now heading up the primary engines of retailers.
This dramatic shift in the focus of channels means some tough decisions have to be made by senior executives. How do they square increasing the headcount in one area while at the same time losing people in other departments?
“There is certainly no playbook for a pandemic,” said Ms. Reed. “COVID-19 has been a great leveler – from the chair to junior team members. We’ve heard from boards and HR leaders about how much they have learned about people, with plenty of surprises on both the positive and negative side. People have fallen back on their intuition, resilience, agility and their ability to pivot business models.”
“Pivoting, as well as dramatically pushing forward pre-COVID-19 plans, has been of great significance this past year and has marked out those progressive firms with bold leaders from the timid, also-rans,” she added. “We’ve seen the emergence of new DTC (direct-to-consumer) and platform/marketplace models.”
Ready to Move On
Against this backdrop of great change and unpredictability, many employees have been reluctant to leave for other possibilities. “But this was very much a feature of 2020 and we expect this to change this year to reflect the pent-up appetite for making a move,” said Ms. Reed.
Many companies will find they do not have the necessary talent internally and will have to go into the open market to secure the relevant skills and the resources to win in today’s new digitally led environment. “Critically, they need to get their timing right,” she added. “Great care has to be taken when investing in people to ensure the right leadership and capability is in place to be able to seize the opportunities that will come with recovery. But this must be balanced with the optics of hiring when furlough, redundancies and closed stores are affecting others in your organization.”
“Despite the harsh backdrop as we entered 2021, there is no doubt that this year represents a period of great possibility,” said the HIEC report. “Fundamental to this will be investment in talent because only those businesses that have bold and forward-thinking senior people in place will be able to maximize this tremendous opportunity.”
Demand for the Right Talent
The demand for the right senior retailing executives has never been greater, but the right ones are fewer and farther between than ever before, according to Rob Andrews, founder and CEO of Allen Austin. “The pandemic notwithstanding, senior retailing executives today must get it in ways that were not required a decade ago. They’ve got to understand on a very deep level, the customer experience, digital transformation, diversity and inclusion, supply chain and culture shaping, just to name a few,” he said. “In many cases, they’ve also got to be able to do more with less. For retail executives who truly understand the roles of digital, culture, cost leadership and employee engagement in delivering a highly differentiated customer experience, the world is an oyster. For those living in the past, it’s a barren wasteland.”
The pandemic has benefitted food, convenience, and ecommerce retailers in unexpected ways, but has presented new challenges. “Now that it appears we’ve survived the worst of COVID, we live in a different world,” Mr. Andrews said. “Retail customers are suffering from PTSD, and as a result, they want it better, faster and friendlier than they did before the pandemic. While we all need a little break and a lot more grace, understanding and compassion is in short supply.”
The pandemic has also made many of us a bit risk adverse, according to Mr. Andrews. “Uncertainty has led many executives to ‘hunker down’ and to be reluctant to travel for interviews, relocate and change jobs,” he said. “While always important, family commitments and friendships seem to have taken on a higher priority. In the food retail sector, the pandemic has presented significant increases in sales and profits which translates to high payouts in incentive compensation. Many executives also feel a responsibility to serve their team and community through this unprecedented time of change.”
How Has Technology/Digitization Influenced or Affected the Sector?
Technology has changed the retail game fundamentally and forever. There has been a material power shift from brands and manufacturers to consumers. The digital E-commerce play is taking growth out of brick and mortar retail. Home delivery and pick up are significantly increasing costs while margins are constrained by complete pricing transparency through mobile devices. Big data has created a revolutionary opportunity in customer insight and supply- chain management, though few retailers have learned to harness this data to create value. Marketing has been reinvented as retailers embrace social media and mobile apps to build digital relationships.
E-commerce will continue to grow. Many brick and mortar stores will close. The successful players will create a fully integrated model that delivers superior in store and digital/mobile customer experiences. The winners will establish excellence in technology application and data management. The winners will also develop strategies and tactics for greatly increasing team member engagement to provide a world class customer experience in store and online.
“The retail and DTC climate is as active as ever and while main street fights its way back from the challenges of the last year, private equity involvement in the sector is at an unprecedented level,” said Brian Meany, consumer and retail practice leader at ZRG. “Digital model experience is a ‘must have’ no matter what the function. We need it in finance and operations and much as we do in marketing and merchandising. Leaders with true digital experiences are in demand and even more coveted are those that have done it at scale with success. There is also great demand for executives that have led a company on the digital transformation journey from an analog base. The talent that ‘checks these boxes’ are expensive, being courted by multiple suitors and less willing to relocate than ever before. They also are earlier in their career than what were considered ‘experienced leaders’ in the past and that often adds dual career and family issues to a physical move.”
Multiple Consumer Touch Points
Retail is no longer a brick and mortar model only. “Its all about multiple consumer touch points and omni-channel was what the contemporary players were called and aspired to be just a few years ago and now it’s the price of entry and survival,” Mr. Meany said. “Digital native models are where new brands are launched and those with traction are increasingly adding brick and mortar assets either organically (Warby Parker) or through acquisition (Amazon/ Whole Foods). Personalization is everything when it comes to customer engagement and social commerce is all about this as is voice commerce which is already here.”
The entire consumer sector hit the pause button spring of 2020 as the world dealt with COVID, which obviously hit consumer facing and touching business models hard, according to Mr. Meany. “But retail, consumer and now DTC business models have been evolving throughout history and the pandemic accelerated that change, pushed investment into digital and probably weeded out five years of fringe players in 12 months,” he said. “This acceleration of change has led to a feeding frenzy for talent and that, coupled with private equity having so much dry powder to deploy, the market for us is robust, to put it mildly.”
“The talent pool has become as tight as we’ve ever seen it,” said Bob Gershberg is CEO and managing partner of Wray Executive Search. “Recruiting for functional leadership positions in the demand disciplines such as supply chain, operations, financial and marketing has been particularly challenging. During uncertain times, the most decisive leaders we know become less decisive, even in the segments that weathered the pandemic storm well. Hiring new executives is a major decision, hence we saw many needs postponed. As the economy looks brighter we are seeing substantive increase in demand for our service.”
“Not only are we facing a tight talent pool across disciplines but executive compensation is trending up due to the competitive market,” Mr. Gershberg said. “Demand for executive talent is very brisk with no letup in sight. Top candidates are often being recruited by multiple companies and firms, helping to drive up compensation and benefits. The good news – companies are hiring in big numbers. The bad news – recruiting is more challenging than ever.”
“The talent pool has become as tight as we’ve ever seen it,” said Bob Gershberg is CEO and managing partner of Wray Executive Search. “Recruiting for functional leadership positions in the demand disciplines such as supply chain, operations, financial and marketing has been particularly challenging. During uncertain times, the most decisive leaders we know become less decisive, even in the segments that weathered the pandemic storm well. Hiring new executives is a major decision, hence we saw many needs postponed. As the economy looks brighter we are seeing substantive increase in demand for our service.” “Not only are we facing a tight talent pool across disciplines but executive compensation is trending up due to the competitive market,” Mr. Gershberg said. “Demand for executive talent is very brisk with no letup in sight. Top candidates are often being recruited by multiple companies and firms, helping to drive up compensation and benefits. The good news – companies are hiring in big numbers. The bad news – recruiting is more challenging than ever.”
The future has clearly arrived ahead of schedule, Mr. Gershberg said. “We must adapt and have done so,” he said. “Diversity and inclusion has become mission critical. We have had to become more consultative in all aspects of human capital and its recruitment. These are not new ideas, but the confluence of increased awareness, the availability of talent and geographic flexibility will continue to amplify the importance of investing in the right tools to build more diverse effective teams.”
Investing in the Right Search Partner
With the demand for senior in the retail sector at an all-time high, it has become more important then ever to select the right executive search firm. The traditional marketplace has focused on specialization in an industry, function or market where deep networks to candidates was a major decision-making factor, according to Juan Gaitan, founder and chief experience officer at Talento Human Capital Management. “Finding people is no longer a value proposition. Matching them is. Prescribing to a traditional approach has yielded results for organizations that in many cases were less than favorable. Just like your hire needs to be a fit, so does your partner. What value or innovation is your partner bringing to the table?”
“In this generation of talent, the quality of the acumen of the team executing your search has, in your industry, your market or function should be less important than their ability to show you or provide references of how they have really driven capabilities that enabled customers to perform at new levels,” Mr. Gaitan says. “The search firm needs to have smart businesspeople who can really absorb the context of a business and translate that into the right execution. Value competence over specialization. The right partner will guide you to the right decision.”
At the end of the day, the process, the baseline approach, the type of team that we need has not materially changed. “What’s really changed is the marketplace for the candidates due to the shift in where someone can be employed,” said Mr. Gaitan. “This new era of remote work and access to such a wide array of industries, markets and functions outside of where you live has created scarcity in so many types of roles. The retail candidate market is roaring with so many options at their disposal.”
From the companies perspective, the marketplace shift can be a huge benefit, according to Mr. Gaitan. “Depending on your common overall needs or a more tailored approach depending on department or business unit can really shape the supply chain you have access too,” he says. “If you are in office and require relocation, naturally your supply is much more limited. For those who see a remote work model as a more than temporary approach for talent in the future, the supply is more plentiful. Ultimately each business has its own needs and corresponding policies that make sense for their organizations.”
Mr. Gaitan also notes that depending on your “organizations work location policies and approach, how you develop adequate recruitment messaging to communicate an employer’s brand is critical. This drives interest and flow necessary to compel and engage in a marketplace where so many jobs are abundant,” he says. “The right firm will work closely with the customer to share facts and trends on the market place to provide meaningful inputs to ground the right work location approach.”
