Ahead of the World Retail Congress, Spencer Stuart’s Sally Elliott assesses the changing demands on retail chief executives and how effective succession planning can best position companies for success

Spare a thought for today’s chief executives.

The relative stability enjoyed by their predecessors is long gone, uprooted by a combination of inflation, the cost-of-living crisis, labour shortages, cybersecurity threats, supply chain pressures, the war in Ukraine, a global pandemic, a new age of AI – to name just a few of the challenges.

One of the most difficult tasks for CEOs today is staying true to a long-term vision in the face of so much uncertainty, complexity and change. Optimising decisions based on imperfect and evolving information is the order of the day.

The new demands on retail CEOs

In the space of a decade or so, we’ve seen retail activity shift from selling products through store chains to tailoring real-time offers to customers via a multitude of channel and fulfilment possibilities based on their unique individual needs.

Good retail leadership used to be about having well-priced products that customers wanted to buy and executing really well in store. Of course that remains important, but it’s now also about keeping up to date with new technologies and translating millions of pieces of customer data into actionable business decisions.

“CEOs need to achieve all of this while projecting a calmness, approachability and authenticity that enables them to engage a diverse range of stakeholders”

Not to mention managing data security, promoting sustainability, building inclusive workplaces, supporting employee wellbeing, forging collaborative partnerships — the list goes on.

CEOs need to achieve all of this while projecting a calmness, approachability and authenticity that enables them to engage a diverse range of stakeholders.

No wonder having the right CEO in place is so critical.

Are boards doing enough?

Appointing the CEO is arguably the board’s most critical responsibility, with the UK Corporate Governance Code spelling out the importance of implementing effective succession plans for key leadership roles.

When companies outline the principal risks and uncertainties they are facing, most will admit that a failure to attract and retain the talent they need could impact their ability to deliver strategic objectives.

But acknowledging the importance of protecting the business against leadership gaps is one thing; actually doing so is quite another. And, according to chief human resources officers (CHROs), boards could be doing more.

“57% of chief human resources officers believe that as much as half the executive committee, including the CEO, will move roles over the next five years”

In preparation for World Retail Congress, we surveyed CHROs from global retailers to understand what is being done to mitigate this particular business risk.

We found that high levels of transition are expected: 57% believe that as much as half the executive committee, including the CEO, will move roles over the next five years.

But only 16% are very confident there will be at least one internal candidate for the CEO role, while 42% feel either somewhat or very uncertain.

Managing CEO succession

It is the board’s duty to manage this risk and to ensure they are well prepared for CEO transition, even if there is no change on the horizon. A key principle of good succession planning is to make it a routine part of the board’s agenda — an ongoing process rather than a one-off event.

Following best practice, the board should always have to hand a CEO profile aligned to future needs and an informed view on who from within the company could be developed to take over.

“The insights gained during a well-run succession process can be translated into coaching support for the new CEO, enabling them to hit the ground running”

They should invest in preparing potential internal successors ahead of time, consciously broadening their experience and giving them exposure to the board in preparation for the top job.

At the same time, they should conduct regular market scans in order to know who the strongest external candidates could be. When the time comes to appoint a new CEO, they will then be able to make an informed choice on who to appoint.

The insights gained during a well-run succession process can then be translated into coaching support for the new CEO, enabling them to hit the ground running.

Those retailers that manage succession planning proactively and invest in the next generation of leaders will be best placed to succeed in the future, whatever it may bring.