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Pick a winner by growing your own boss

From Marks & Spencer to Primark, many fashion retailers are looking outside their businesses to recruit chief executives. Drapers explores what companies can do to nurture their own future leaders

Supermarket boss Marc Bolland’s recent appointment as chief executive of Marks & Spencer highlights a key problem in the fashion industry: whilst brands and retailers are capable of spotting the latest clothing trends, they seem unable to spot and foster future leaders, preferring to hire in new talent from outside to lead their companies rather than promote internal candidates.

M&S has a serial problem. Bolland follows Rose, hired in from semi-retirement after leaving Arcadia, who followed Roger Holmes a former management consultant.

But it’s not only M&S who suffers from a dearth of internal talent. In recent times Primark (which poached New Look’s Paul Marchant in one of the biggest headhunting coups of last year), Alexon Group, Burberry and House of Fraser have all turned to outsiders.

Of course several publicly listed retailers have outsiders at the top as the result of their board’s attempt to solve ingrained problems. Blacks Leisure, JJB Sports, J Sainsbury, Mothercare, and perhaps even M&S, have all sought saviours with a new outlook.

“Sometimes there is a strategic requirement to bring in new blood when the board, and certainly the shareholders, won’t accept an internal candidate,” says Fran Minogue, managing partner of global retail at headhunter Heidrick & Struggles.

A new arrival can bring additional skills, knowledge and experience to a business that can give it renewed momentum as Bolland successfully proved at Morrisons and Kate Swann did at WH Smith, for example.

Kate Barron, operations director at Success Appointments, explains: “The external appointments of chief executives at organizations such at Primark and M&S show more than ever that the age of simply being an authoritarian chief executive is over. The immense range of skills that chief executives need to lead businesses today means that they have more pressure and more requirements to fulfill the role – it is simply easier to select these qualities from the external market if a business has not taken the time to nurture and develop its own managers.”

Yet it can take time for an incomer to understand a business and its culture, there’s a risk they will never adapt their past experience to the new role and the sweeping changes they may want to implement in order to make their mark as a new boss may prove highly disruptive.

Moira Benigson, managing partner of recruitment firm MBS Group, says: “If you bring in new people all the time it means the strategy is constantly changing. M&S is going to go through another huge change and it’s not so long ago that they went through a huge change. For some people that is exhausting.”

On the other hand, an internal candidate can provide a smooth transition, an in-depth understanding of the business and help ensure that the culture of the company remains intact.

John Lewis, Next, Tesco and New Look all successfully promoted from within, with Simon Wolfson at Next and Terry Leahy at Tesco both working their way up from the shop floor over many years.

As Jamie Zuppinger of Barracuda Search says: “With an internal candidate you get a breath of fresh air and renewed vigour of pace but without breaking the mould.”

Minogue adds that recruiting internally also gives encouragement to ambitious members of staff. “People who were hoping to be considered do leave and you have to weigh that against the rewards of bringing in someone with a track record,” she says.

The problem is that many retailers have few internal management options because of their failure to put proper succession planning in place.

“People are recruiting externally because they don’t develop people internally, they are too tactical and not investing in people,” says Benigson.

Zuppinger agrees: “Retail is not as good at planning for succession as other industries. It doesn’t invest enough in development and a lot of businesses are dominated by particular personalities.”

Many of those big personalities are so busy focusing on building their vision for the company they don’t stop to think about what will happen when they are ready to move on.

As Lucy Harris, partner at The Ashton Partnership, says: “There is no shortage of talent but organisations are not doing what they could to nurture it.”

Head hunters say that M&S might have had more luck in producing an heir to Rose if it had started its planning process many years earlier.

Industry experts agree that developing strong management involves identifying high fliers and giving them as broad an experience as possible by moving them around the business.

Zuppinger says: “Better succession planning is about developing and stretching people and seeing who comes out at the top.” BP, the oil company, for example, had three internal candidates lined up as potential successors by the time of former chief executive Lord Browne’s sudden departure in 2007.

For publicly listed retailers, identifying and fostering a team of potential successors early also means that shareholders are more likely to accept an internal candidate.

As one headhunter argues: “The City doesn’t like surprises. No-one had developed a relationship with any of the potential internal candidates at M&S, for example, and so they didn’t have any faith in them. Everything just seemed knee-jerk.”

With the City in mind, there is an argument that formal training with courses at Harvard or the Cranfield School of Management in Bedford  (?CK) or through a private coach should be part of any succession programme. External education can inspire new thinking within a business and lend credibility to the team. Such training played a part in the development of strong retail management teams at Asda, which developed its own chief executive Andy Bond, as well as the boss of rival J Sainsbury. Suzanne  Harlow at Debenhams, one of three potential future chief executives profile by Drapers (see page xx) backs this up. “I did a course at Cranfield last year around strategy and leadership. It adds to your knowledge and gives a broader prospective.” she says.

But there is no substitute for moving management hopefuls around so that they can get as broad experience as possible:

Jason Oakley, a partner at Green Park, says: “If you have worked in different parts of the business then you can understand where something is not right.”

Minogue adds that people need to move around both geographically and operationally to get a good perspective on a business.

But putting relatively inexperienced staff into challenging new roles requires a depth of management that many retailers simply do not have. Minogue says: “A lot of retailers are privately owned or have entrepreneurs at the helm. It’s human nature that nobody believes that anybody can be as good as they are.”

Even if the will is there, some retailers simply don’t have the opportunities necessary to provide the broad level of experience that a future chief execuitve might need. And, as the CV of another emerging chief executive – John Lewis’ fashion buying director Peter Ruis –shows, ambitious staff are much keener to move around these days.

Sue Shipley a partner at recruitment company Odgers Berndtson says: “The concept of spending an entire career with one company, which often led to the appointment of a chief execuitve from within an organisation, is less prevalent so today chief execuitves are just as likely to be outsiders rather than home grown.”

The current environment is only likely to add to the problem as retailers baulk at the risk of moving key staff around and cut investment in people.

Minogue says: “When the economy is bad, the idea of saviours comes to the fore. People look for a miracle driven by restructuring rather than looking at the flaws in their strategy and business model.”

Equally, having a strong management development plan in place can save money. Bringing in a heavy hitter can be a very costly experience involving compensation for loss of bonuses and other costs which could all be avoided with an internal candidate.

What’s more, a failure to invest in future leaders will affect not just individual retailers. With good retail leaders hard to find retailers must do more to develop talent to protect not just their own business but the future of the industry as a whole.

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