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Description automatically generated with medium confidenceWhat qualifications does the chief executive officer (CEO) of a retail firm need? Well to start, they have to be available—a basic standard that appears increasingly unlikely. About 10 percent of the retailers included in the Fortune 100 have, in the recent past, operated for extended periods without any CEO or with someone in an interim role. They simply cannot find a qualified candidate to fill the role.

Such a scenario is troubling for several reasons. Without a CEO, the companies struggle to establish a clear strategic plan or identity. Furthermore, leaders in retail firms can set the overall tone and culture of the organization, and when those leaders are temporary or missing, there is a risk that no one working for the firm knows what it stands for or what their long-term goals should be.

The reasons for the dearth of CEO candidates are multiple. A key factor though is the decline of conventional department stores. As famous names like Macy’s and Saks Fifth Avenue have sought increasing efficiency, to avoid being forced to close, like their once competitive but now-defunct peers Lord & Taylor or Marshall Fields, they have eliminated their management training programs. In the 20th century, when department stores were a dominant retail model, these corporations established massive, in-depth training courses. They would recruit promising college graduates to work for them for a year or two, during which the trainees would experience every facet of the business, including merchandising, supply chain operations, customer service, human resources, and so forth.

The graduates of the training programs then entered the corporations as young executives, with the expectation (on both sides) that they would rise through the ranks. This relatively large group of well-qualified, well-trained executives then created a pool of candidates for top executive jobs at various retailers, both the ones that trained them and others that might poach them.

Not only have big department stores shrunk or eliminated their management training programs, but potential trainees also have found appealing alternative options. Many entrepreneurial young retail geniuses initiate their own companies, enabled by digital technology options that mean they can start a business somewhat inexpensively and potentially gain great success all on their own, in the model of Warby Parker or Rent the Runway.

Technology effects also play a part in the lack of CEO candidates, because the requirements for running a retailer now include in-depth familiarity with not only conventional retailing practices but also sophisticated understanding of data analytics, digital commerce, and social media, among other high-tech topics. Furthermore, consumer and societal demands that companies establish ethical practices mean that retail leaders must have strong familiarity with the ethical implications of their strategic choices.

The expansive demands and shallow pool of candidates have led some retailers to get creative in their efforts to find a leader. Pacsun decided to split the tasks, hiring two co-CEOS, one responsible mainly for merchandising and design decisions, while the other handles operations and supply chain issues. Others are hiring executives from other industries, like the former hospitality executive who now runs Under Armour.

Discussion Questions:

  1. This discussion suggests a substantial opportunity for students. How can you prepare yourself most effectively to be the next generation of retail CEOs?
  2. Do you want to be the CEO of a major retailer? Why or why not?
  3. What can retailers do, immediately and in the long term, to increase the pool of potential CEO candidates?

Sources: Jordyn Holman, “The Retail CEO Pipeline Is Running Dry,” The New York Times, February 16, 2023; Matthew Kish and Avery Hartmans, “Retail CEO Crisis: With Recent Shakeups at Kohl’s Adidas, Dollar General, and More, the Industry’s Top Job Is Suddenly the Hardest to Fill,” Business Insider, February 11, 2023

Photo from iStock.com/Liubomyr Vorona