The role of the modern retail chief executive is changing – fast – and it is contributing to a shift at the top of leading companies, in some cases prompting the departure of leaders whose commercial prowess and acumen could barely be faulted.
- Today’s retail leaders need to be “agents of change”
- Treatment of people is central to how performance is measured
- Retail leaders need to “fully embrace” the “shift towards data-driven decision-making”
While once the top and bottom lines and shareholder returns were often the be-all and end-all, today’s leaders are expected not just to deliver financial success, but to do that in ‘the right way’.
Responsibilities to a wider group of stakeholders, such as employees, and ethical and environmental obligations, have become yardsticks by which leaders are now judged, including increasingly by the City and regulatory bodies such as the Competition and Markets Authority (CMA), which is now just as likely to look at greenwashing claims as it is takeovers.
Former JD Sports boss Peter Cowgill is one prominent casualty of the shift, after a series of governance run-ins – such as the controversial takeover of rival Footasylum – ultimately outweighed the stellar commercial performance and a 60-fold increase in the retailer’s share price he had overseen during his tenure. He left amid the fallout of a clandestine car park meeting with Footasylum’s Barry Bown, which raised questions about transparency and openness, and precipitated a hefty £5m fine from the CMA.
At rival Sports Direct, founder Mike Ashley – frequently embroiled in controversies of his own – has handed over the reins to Michael Murray. While Murray is Ashley’s son-in-law, he has adopted a less confrontational, more open approach in keeping with the times, winning over major brand partners like Nike and Adidas, and several landlords, in the process.
Governance concerns have also hit the new generation of retail leaders. THG founder Matt Moulding built a business worth more than £5bn on flotation two years ago, but has been dogged by rows that have decimated the retailer’s share price and forced him to relinquish his dual role as chief executive and chair.
Factors such as the rise of the ESG agenda, the greater importance being placed on company culture – especially following the Covid-19 pandemic – and societal shifts such as the adoption of social media have all powered the changing perception of what makes a good leader.
The old days of command and control are gone – certainly in public companies – while the value placed on ‘how’ things are done now affects everything from customer and investor sentiment to the ability to attract talent.
It is a testament to how much things have changed that, in his letter to shareholders this year, investment giant Blackrock boss Larry Fink wrote: “In today’s globally interconnected world, a company must create value for and be valued by its full range of stakeholders in order to deliver long-term value for its shareholders.”
Former Sainsbury’s chief executive Mike Coupe, who now chairs New Look and Oak Furniture Land, observes: “Not that long ago, maybe 20 years, most retailers were very top down in the way that they were run and that usually meant there was some kind of iconic figurehead who drove those businesses forward.
“It was a world where many of the things that now are increasingly on the minds of customers – ESG, the cost of living, minimum wage, living wage – if they existed were at a low level of customer shareholder and stakeholder interest.
“Couple that with [the fact that] the main channel for scrutiny was the trade press and national press. We now live in a world where virtually every decision you take that is in the public domain becomes subject to scrutiny through any number of channels, not least social media.”
Ex-Harrods boss Andrew Jennings, who has served as a non-executive director on boards including Ted Baker, echoes such sentiments: “My expectations [of a contemporary leader] would be someone who is open-minded, nimble, fast and team-focused – [this is] very important. It is not about one individual but rather a synergistic approach from the leader.”
As evident from their comments, the treatment of people is, more than ever, central to how the performance of a modern chief executive is measured. The Covid-19 period reinforced how important coalface staff are to retail success, and the impact of the growing cost-of-living crisis has ensured that the people agenda remains front of mind.
Similarly, how employees are treated shapes perception in the outside world – whether that be from consumers or investors.
Coupe says: “What’s risen up the agenda is that there are a whole bunch of other stakeholders that you need to take into account when you are considering your decisions. You are no longer just subject to scrutiny in a legal sense, but in a moral sense where you are judged in the court of public opinion.”
He notes that in the past, for example, while colleague pay might have been a subject of debate and maybe brought up at an AGM via a question from the audience, it would not – as was the case at Sainsbury’s recently – have been the subject of a shareholder vote.
“You are no longer just subject to scrutiny in a legal sense, but in a moral sense where you are judged in the court of public opinion”
Mike Coupe, former Sainsbury’s chief executive
Coupe’s former employer Sainsbury’s perhaps exemplifies the new style of retail leadership. Chief executive Simon Roberts is widely seen as a good people person, Clarity Search founder Fran Minogue points out. Although sometimes he has to make tough decisions, he is pretty universally liked and respected – both internally across stores and head office teams, and externally by shareholders, analysts and the media.
The AGM vote on whether to extend the living wage to Sainsbury’s third-party contractors did not win the backing of the vast majority of investors. That was an eloquent testament to the regard in which the grocer’s leadership is held – most investors would agree it consistently tries to do the right thing. Despite the issue taking off on social media, shareholders backed management and there has been little subsequent controversy over the outcome.
A similar story is playing out at fashion giant Next. Its boss Lord Wolfson has carved out a reputation as a straight-talking, honest and open leader – his trading updates to the City offer a degree of transparency, detail and insight that surpasses many of its UK plc peers.
That reputation as a straight-laced operator has perhaps played a part in shaping the media coverage of an HMRC probe into payroll errors that left hundreds of staff underpaid – a controversy that might have caused a much greater stir were a different retailer and CEO at the heart of it.
The ability to maintain good relationships – with suppliers and partners as well as staff and investors – is also key to being a successful leader today. From supply chain and fulfilment as new channels grow, right through to property, co-operation rather than confrontation is the order of the day in order to succeed. That change in attitude is personified in the ascent of Murray at Sports Direct.
One property source tells Retail Week that while Murray “can be difficult when he wants to be”, he is nevertheless “much more collaborative and less dismissive” of landlords’ interests and ideas than his predecessor.
While Ashley took a “take it or leave it” attitude into many property negotiations, Murray is “a much more diplomatic character”.
The source suggests Murray “seems to genuinely care about building long-term relationships that work for everyone”, a crucial aspect of leadership at a time when so many new and innovative partnerships are being formed across the retail sector.
What makes a good leader?
So with such new demands and scrutiny being placed on retail businesses and their chief executives today, what are the characteristics of those likely to make good leaders not just in the present, but the future?
Jennings says: “The business model has changed and a leader today needs to be an agent of change. Look at what challenges leaders have had to contend with over the latter three years – the pandemic and Brexit, two examples of changes to the way we have had to adjust. The leader today needs to be open-minded, nimble, fast and team-focused.
“A CEO needs to demonstrate to customers, investors and employees that he or she is fully committed, and understands and drives ESG in every retail touchpoint. This is not a fad and should be demonstrated by energy-saving heating and cooling systems, equal pay rates, sustainable merchandise sourcing and responsible sourcing of fabrication used in garments.”
Headhunter Minogue points out: “You’ve got to be a far more inclusive leader these days, you’ve got to be people-focused. A hirer and firer who gets results at any cost will not be top of the list anymore. Leaders who are enablers and facilitators are what people are looking for, who bring the best out of people. Command and control is dead.”
Coupe adds: “The most mature organisations are taking a balanced scorecard of these types of attributes and pulling from a wider range of sources and references to test any potential candidate against a broader list of qualities.
“In my experience, the level of referencing and scrutiny of candidates is significantly different and significantly more sophisticated and objective.”
Fit for the future
While ESG and the treatment of people have risen higher than ever on investors’ agendas, modern chief executives also need to be up to speed with the technological pace of change and the digital environment.
Matt Truman, founder of investment group True, which counts the likes of sustainable childrenswear brand Frugi and payment technology firm Mishipay in its broad portfolio, says increasing attention is being placed on the “future-facing capabilities and mindset of leaders”. That, Truman suggests, spans their “digital knowledge, understanding of the interconnectedness of stores and online, and appreciation of rapidly changing technology and consumer preferences – for example, the emergence of new forms of engagement and marketing channels such as TikTok.”
However, he suggests the characteristics True looks for in a modern leader will vary depending on a company’s development stage.
Truman explains: “As investors – and we have experienced this – it’s important that the leaders have the requisite skills for each phase of a business’ growth trajectory.
“It’s relatively rare that individuals who create the vision also have the skills for managing scale organisations with an increasing focus on execution.”
“The shift towards data-driven decision-making is an ongoing shift that fit-for-the-future retail leaders need to fully embrace”
Matt Truman, True
He adds: “The shift towards data-driven decision-making is an ongoing shift that fit-for-the-future retail leaders need to fully embrace. Retail leaders need to be much better connected to their customers’ attitudes, needs and wants in real-time to stay relevant. This is a cultural point more than anything else, with the obvious example being Amazon with its fixation on the customer.”
Echoing Blackrock boss Fink, Coupe concludes: “In the end, despite everything going on around you, you are paid to make decisions and make choices, and paid to articulate why, in the context of all of the things around you, those choices are the best choices for the organisation, partly through a lens of commercialism and partly through delivering for your shareholders.
“But if you don’t deliver on the other dimensions you’re probably not going to deliver for your shareholders in the medium to long term.”
Minogue adds: “In retail, above all other industries, you succeed through people. If people are engaged and feel valued then you get the best out of them.
“It’s like a football club. A good manager can come along, pick up the same team and get results that a bad manager couldn’t. It comes down to that leadership, vision and engagement.”
To be a good leader, these days it ain’t just what you do, but more than ever the way that you do it, that is defining the contemporary chief executive.
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