The recent resignation of Target CEO Gregg Steinhafel illustrates the importance of succession planning.
Pressure apparently was on the board to respond to consumer dissatisfaction over last year’s credit card breach. The breach exposed personal information of some 110 million customers late last year.
There has been criticism, too, that the board waited too long to take steps in response to the breach. The company saw sales decline about 2.5 percent during Q4, which was related, at least in part, to the breach.
It may be difficult for Target to find a permanent replacement for Steinhafel. He is chairman of the Retail Industry Leaders Association, and was respected by his peers.
“Target does not seem to have any immediate successor to Mr. Steinhafel,” according to a report from Forbes.
CFO John Mulligan was named interim CEO and board member Roxanna Austin was named interim chair. Korn Ferry will help the company find permanent replacements, and Steinhafel will remain in an “advisory capacity” during the transition.
This compares to Macy’s, where Jeff Gennette was appointed quickly as president.
Generally, it is now hard to find CEOs for retail operations. “There is a dearth of trained people who can take over a major retail corporation and inject vision, dynamic drive, better earnings, tight control, and engender enthusiasm from both associates and customers,” Forbes said. “The new CEO will have to be extraordinary in his or her ability to define a new strategy for growth, without alienating existing customers, and lead Target into a new era of retailing, while training tomorrow’s retail executives.”
In addition, The Washington Post reported the next permanent CEO at Target will also have to address problems related to the expansion in Canada and improve the company’s image after the data breach.
There are two internal candidates reported as possible CEOs: Tina Schiel and Kathryn Tesija. Still, the board could select an outsider as a permanent CEO at Target to provide the company with some fresh ideas, The Post said.
Overall, selecting the chief financial officer as an interim replacement for the outgoing CEO makes sense for a retail company that was under pressure to act, according to InsideCounsel.
In a statement released by the Target board, Steinhafel – who had spent 35 years at the company, serving as CEO since 2008 – “held himself personally accountable” for the breach. And his departure came after “extensive discussions” between the board and Steinhafel, according to InsideCounsel.
“Now is the right time for new leadership at Target,” the board’s statement said.