Where are the leaders of the future?

Notwithstanding encouraging sales for November, retailing has been challenging for at least the better part of five years.

There have been a number of casualties, including most recently Laura Ashley, Roger David, Metalicus and Toys ‘R’ Us, and some significant contraction of store networks. And 2019 is expected to continue the challenging trend.

It is worth remembering that retail is a rough and tumble industry that has seen major chains like Brashs, Venture, Retravision, Topshop, Waltons, the Australian Discount Retail group, Mothercare and Dick Smith collapse, along with specialty chains.

Added to the collapsed retailers, there are those that were rescued from the hands of administrators by other retailers and those that simply exited the market, like Daimaru, Esprit and, in the past month, Crabtree & Evelyn.

There are obvious challenges from online retailers and international brands that have entered the Australian retail landscape in recent years, as well as economic challenges. However, the malaise in the retail industry begs the question: Does Australia have a leadership crisis?

On-the-job training

Going back to the 1960s and 1970s, Myer, Coles and Woolworths were on-the-job training academies for retail managers, with strong internal succession lines and the capacity to export surplus talent to management roles with other retailers.

Today, Myer, Woolworths, Coles, David Jones and Metcash have all appointed retail executives from not just outside their businesses but from outside the Australian retail industry.

In fact, Myer’s management rollcall of recent years includes South African, US and British retailers, while Coles has hired CEOs from the US and the UK. Woolworths Big W, Masters Home Improvement, David Jones and Target have also looked overseas to fill leadership positions in their businesses.

There have, of course, been some strong and successful Australian retail executives such as John Gillam at Bunnings Warehouse, Guy Russo at Kmart, Gerry Harvey and Katie Page at Harvey Norman, Richard Murray at JB HiFi and Mark McInnes at Premier Retail.

It could be argued that Gillam and Murray both benefited from accomplished predecessors, but each of them has successfully expanded their respective retail businesses and markedly increased sales, earnings and shareholder value.

In contrast, Russo, who retired from his role as CEO for the Kmart and Target discount department store chains at Wesfarmers last November, inherited a struggling business in 2008.

He had been a star performer at McDonald’s, and was appointed MD of Kmart at a time when Wesfarmers was thinking about divesting the struggling chain. Sticking to a clear and consistent strategy, he rebuilt Kmart while creating pain for rivals such as Target, Big W, Harris Scarfe and Myer.

Solomon Lew took a chance on McInnes after a controversial exit from David Jones, and the gamble has paid off with the international expansion of Smiggle – albeit with less spectacular results in Premier Retail’s portfolio of fashion brands.

Harvey and Page have built one of Australia’s largest retail chains, along with stores in overseas markets, using a hybrid franchise business model, and they have certainly been industry leaders.

While there are success stories, including overseas-born but now Australian-credentialed executives like Brad Banducci at Woolworths and Peter Birtles at Supercheap Retail, the leadership ranks seem to be thinner than they should be in the Australian retail industry.

Leaving a talent gap

Without judging their successors, the retirements of Gillam and Russo and, shortly, Birtles and perhaps Naomi Milgrom from the Sussan Group have been felt keenly.

It seems rather odd and somewhat alarming that the investment in retail education courses has apparently not provided the industry with many new skilled, innovative, entrepreneurial leaders.

Maybe old-school retailers are blocking the path of younger executives, maybe the industry is not enticing talented young people, maybe the industry is being throttled by data and robbed of imagination.

The interesting thing is that many of the retail executives recruited from overseas in the past decade or more have been spectacularly unsuccessful and have done little to boost the capability of the management and staff in their charge.

At a time when there are significant challenges for the retail industry, there is an urgent need to re-evaluate retail education and the pathways to leadership positions within the industry.

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