As promised in my update on the research I’m doing on executive team roles and configurations, here is the first deep dive into an industry. I’ve chosen to start with Retail for a couple of reasons. First – selfishly – I have some ongoing cases that can make use of the data. Second, retail is a nice, simple business to understand. True, many companies make it complex to manage and understand, but relative to many other sectors retail is very easy. You buy products (some or all of which you may have designed), you move them into a market in which there is demand and then you sell them for more than you bought them for. Sure, there are many twists on this (‘total lifetime value’, as an excuse for discounting, for example), but fundamentally, you buy, you ship, you sell for more than your costs.
You would think that with such a well understood model that there would be a consistent ‘best’ configuration for both leadership and the organisation that those people lead, but you would be wrong! Lucky for me. If you were right then this would be a very short post and I would need to go into a corner and have a long hard think about things.
In order to help with the classification of Executive Teams and to enable my understanding, I have chosen to split roles by their most abstract purpose, before delving into the specifics of ‘CMO vs CCO’. I am going to maintain an additional page for the definitions as they will doubtless expand and perhaps shift as I add more industries, but for ease of reading this post I’ll introduce them:
- Strategic Roles, the purpose of which is to define the direction of the organisation beyond the current trading year (and ideally 10 years out – more on that another time) and to construct new structures and capabilities that will enable that direction to be achieved
- Revenue Creation Roles, the purpose of which is to deliver revenue in the current year and thus keep the business afloat
- Platform Operation Roles, the purpose of which is to enable value to be created from revenue by operating the processes that fulfil demand or enable it to be generated or govern in-year performance
- Protection and Mitigation Roles, the purpose of which is to prevent deliberate or accidental malpractice and to limit its impact if it occurs
- Purely Advisory Roles, which exist to provide advice to those executing the above roles
My view is that every business should have a balance of these roles in their leadership. Previous posts will perhaps suggest to you my view that the Executive Team, as the most senior leadership group, should be strongly weighted to the strategic and leave the tactical (i.e. in-year or similar) planning and execution to empowered team leaders. I will leave that view aside for now as the purpose of this exercise is to establish the views of some of the most powerful people in our economy, after all CEOs effectively have carte blanche to select their team and configure their organisation.
With the above framing complete, let’s talk about the data set. I was able to obtain information about ExCo make-up from 24 retail businesses either currently or recently making up the S&P 500 and FTSE 100 indices. These are businesses who make the majority of their income from direct selling. Organisations, for example in fashion, who do have their own outlets but predominantly sell through wholesale channels will feature in a later post. To give you an idea of scale, the smallest of these companies had FY2018 revenues of over $2 billion (Ocado). The largest had revenues of over $500 billion and employs more than 2 million people (Walmart)
Retailers broadly correspond to the average when it comes to the size of the leadership team – falling about 3% under the average (9.6 vs 9.9). I consider this to be within the error bar for the study.
There are some interesting facets if we look in more detail at configuration. The average retailer leadership team looks like this:
As you can see, there is a skew towards operational roles within the average team and a very low intensity of strategic roles (just the CEO, in fact). About 15% of Retailers have a Chief Strategy Officer or equivalent (i.e. an executive-level Head of Strategy) and 25% have a Chief Digital Officer, although the latter should be taken with a strong caveat that the majority of CDO roles in this industry are actually channel or technology-platform related and are really Platform Operation Roles. More on that in a later and more detailed post. I didn’t identify any executive Heads of Innovation or Transformation.
The following chart shows how operational some leadership teams are – the blue bars show that teams with more than half the roles being operational are very common indeed, whereas strategy-dominant and revenue-dominant leadership teams are very uncommon.
I put this down to the reality that to get into a position in which you are amongst the largest businesses in your given economy you have an incumbent’s position. That means that people know you, understand your utility and presumably have a degree of loyalty. The interesting question is whether that also means that being heavily operationally focused at leadership level is the best idea. Retail is a very challenged industry precisely because it is well-understood by the customer and by would-be competitors and substitutes.
So there we are. Please leave a comments you may have on this analysis or ideas about what additional information you’d like to see below – I’d like to make this useful if at all possible!