UK retailers are under a great deal of stress and are increasingly turning to leaders who are more experienced with budgets and strategy, rather than merchandising or branding, to succeed.
Those are the findings from the latest Korn Ferry UK Retail Tracker. The study, in its fifth year, analyzes CEO appointments across more than 300 public and private British retailers. There were 41 CEO changes in UK retail in 2016, below 2015’s rate (45) and below the five-year average (44). But it isn’t the total number that is as interesting as the backgrounds of the new leaders. More than 20% of the new hires have backgrounds in finance, while several more are one-time strategy consultants. Those types of appointments are evidence of a sector under stress, says Sarah Lim, head of Korn Ferry’s UK consumer practice and author of the study.
Indeed, UK retail is facing challenges similar to other retailers around the world, which are struggling to balance e-commerce with physical stores along with the different ways consumers now shop. Then there are challenges specific to the UK, such as an increase to the National Living Wage and the significantly weaker value of the British pound. All of those are squeezing retail margins. To survive, the boards of UK retailers are increasingly turning to CEOs who can apply some financial discipline or, if necessary, envision and execute big transformations, Lim says.
While the challenges are daunting, UK retailers are becoming increasingly confident that they have the people to navigate them already working at the firm. In 2016, 47% of organizations chose an internal successor for their new CEO rather than hiring from the outside. That’s a radical change from five years ago, when only 7% of CEO hires were insiders. “People are recognizing that succession planning is much more important. It’s less risky to hire from within if you have the talent pool than going outside,” Lim says. Along with an increase in internal hires, there’s been a renewed focus on hiring first-time CEOs. There was an unprecedented number of promotional hires in 2016, both internally and externally, with more than half of new CEOs taking on the top spot for the first time.
Eight of the new CEOs are women, or 19.5% of the total number of new leaders. That’s an increase from 15% in 2015 but not as high as the 25% of hires in 2014. Many retailers aren’t as focused on hiring a woman in the top job as they are filling their pipeline with more female executives across the business, Lim says.