Fresh Retail Executive Talent Strategy Shift: Cross-Industry Recruitment Becoming a Trend

The fresh grocery industry is not short of executives who have risen from the checkout counter to the top management ranks. Kroger CEO Rodney McMullen started as a stock clerk in 1978 while attending the University of Kentucky; Joe Sheridan of Wakefern joined the company's warehouse in Elizabeth, New Jersey in 1976; five years later, Randy Edeker took a part-time job at a Hy-Vee store in Chariton, Iowa, eventually rising to the CEO position.

Beyond the boardroom, senior positions are also often held by long-term employees. Jeff Chamberlain, Publix's senior vice president of real estate and facilities, recently announced his retirement after 47 years of service, having started as a clerk.

Such cases are numerous. The complexity of fresh food handling and marketing has long favored talent cultivated within the industry. However, as digital disruption, rapidly changing consumer preferences, and increasing competition continue to impact the industry's old order, the value of years of service may no longer be what it once was.

Dr. John Stanton, professor of food marketing at Saint Joseph's University, says the way grocers identify, onboard, and train executive leadership needs to adapt to these forces.

"Overall, the current process is quite internalized, with employee promotions often coming from other food retailers and tending to be paternalistic," Stanton told Grocery Dive. "But the most valuable traits in executive leadership are changing, and while we know no one likes change, the supermarket industry may be one of the most resistant to it."

Fresh blood in data and technology

Leslie Sarasin, president and CEO of the Food Marketing Institute, estimates that at least half of current industry executives started in entry-level positions and rose through the ranks. During her 11 years at FMI, she has observed a growing trend of grocery retailers seeking leadership talent from other industries.

Chief among these are grocers' digital divisions. With the widespread adoption of smartphone apps, data analytics, online grocery, and other technological upgrades, companies are increasingly turning to external talent—especially veterans from industries that have dealt with digital disruption for years.

Last year, H-E-B appointed Jag Bath, CEO of its recently acquired on-demand delivery company Favor, to the newly created position of chief digital officer. In 2017, Albertsons appointed Disney veteran Narayan Iyengar to lead digital marketing and e-commerce, while California grocer Raley's recruited Mike Molitor from PetSmart to head e-commerce and loyalty.

Stanton notes that for an industry that until recently was shielded from rapid technological change, judging which innovations are worth adopting and which should be skipped is a challenge. Retailers may not have the time to build internal R&D departments or cultivate more tech-focused leadership from their existing talent pool.

The changes in technology leadership indicate that executives across all business units need to keep pace with the latest innovations. Grocers are also prioritizing leaders who can collect and process valuable customer data.

"Slowly, the employees coming up are not only more analytical in a data sense, but also stronger than ever in looking at the business from a digital perspective," Stanton said. "And in my view, they will get younger and younger because the younger generation is driving the analytical approach."

Stanton says retailers may also gain fresh ideas from non-tech fields. Before being named president and CEO of Walmart U.S. in 2014, Greg Foran spent most of his career at the Australian and New Zealand retail chain Woolworths. His appointment was surprising, especially at a company known for cultivating talent internally, but he is now widely credited with revitalizing Walmart's grocery business by focusing on fresh food and rapid e-commerce expansion.

Foran announced last week he would leave Walmart to become CEO of Air New Zealand. John Furner, former head of Sam's Club, will succeed Foran.

Executive crossovers between the food, grocery, and restaurant industries have been frequent recently. Albertsons appointed PepsiCo veteran Vivek Sankaran as CEO earlier this year, while Starbucks named former Sam's Club CEO Rosalind Brewer as chief operating officer in 2017.

There is currently no research measuring the effectiveness of internally cultivated versus externally recruited executives in the grocery industry. Research from The Conference Board shows that most companies appoint CEOs from within, but the proportion of top companies hiring CEOs externally has nearly tripled over the past 40 years. According to a study of the hospital industry published last year in the Harvard Business Review, CEOs brought in from outside improved overall organizational productivity over the long term.

"We found that any type of leadership change has a short-term negative impact on a company's operational efficiency, but external CEOs have a clear advantage in productivity improvement," HBR wrote in its summary.

The 'nuances' of fresh retail

Despite growing interest in external talent, Sarasin says traditional leadership skills such as strong communication and interpersonal connection remain valuable. Furthermore, the institutional knowledge gained from starting in the grocery business and rising through the ranks is not something new executives from other retail channels can acquire overnight.

"Tech talent will be a hot commodity, but it's not the only skill successful players need," Sarasin said. "The challenge for external talent is ensuring they understand the nuances of fresh retail. When considering new employees, we must ensure we don't get carried away by their technical experience and superior technical capabilities at the expense of the ability to meet customer needs."

External hiring can also pose cultural challenges for retailers, says Jose Tamez, managing partner at executive search firm Austin-Michael.

"Not all retailers share the same culture as the grocery industry. It's a highly institutionalized culture, and much of it is embedded at the operational level of the business," he told Grocery Dive. Tamez says the industry has entrenched traditional processes and customs in management, which can make the transition for external executives tricky.

Corporate history is full of examples of executives failing to transition across industries. Former Apple executive Ron Johnson, who revolutionized its retail stores, took the helm at J.C. Penney in 2011. Just two years later, after attempts to cut discounts and transform stores into a higher-end experience failed, he was ousted.

Tamez says identifying unsuitable candidates can be hard to predict in the initial recruitment phase, when many companies tend to be infatuated with someone's potential. To address subsequent cultural integration issues, he encourages companies to focus less on hiring the "right professional" and more on hiring the "right person."

"People are hired for what they know and what they've done, but they fail or get fired for who they are," he said. "The appeal of a potential new hire is almost like a silver bullet for the company, but it's important to consider who they are. Are they flexible? Can they collaborate across functions? Can they communicate and build relationships that can be leveraged?"

Grocery retailers focused on attracting talent from other fields should also step up their recruiting efforts. Tamez says retail executives outside the grocery industry often view the sector as a less glamorous type of retail.

"The grocery industry needs to do a better job of actually recruiting," Tamez said. "They haven't done it because they've never really had to compete for talent outside their own channel, but when you go out there, you really have to go after talent."

Stanton says large chains are constantly adjusting reporting structures and talent promotion processes. But retailers should also reassess how they measure talent, and opening doors for younger employees with technical and innovative thinking is one step.

Meanwhile, smaller chains and independent grocers face the challenge of competing with larger rivals for top talent. Many companies respond by building strong workplace cultures and internal promotion, but Laura Strange, spokesperson for the National Grocers Association, told Grocery Dive that independent grocers are beginning to embrace external perspectives.

"I think you'll see the independent grocery industry encouraging the acquisition of different types of experience, not necessarily limited to grocery," she said. "Of course, there's also a lot of next-generation talent within the grocery industry itself, and they're passionate, especially in the independent supermarket sector."

Whether selecting from within or seeking fresh talent externally, Tamez says grocers should keep an open mind and proceed with caution.

"At the end of the day, recruiting is a risk management practice," he said. "If you don't have some kind of risk management mechanism in hiring and talent acquisition, you're missing a key element that can impact success."