Retailers Face Radical Change … And So Should Their Boards of Directors, Part 2
This is the second part of a two-part series. You can read part one here.
Though the job of a corporate board member has never been easy, show special sympathy for anyone serving as a retailing director over the past few years. The traditional board concerns of retail and measures of success — profit margins, inventory turnover, sales per square foot, traffic, conversions — are under attack by e-commerce. Doing all the traditional things well can leave you in the same position as Kmart, Sears or The Limited.
These are massive, disruptive, dynamic trends for retailing, but an effective board of directors can help in mastering them. The first question: Who belongs on the ideal retailing board of directors? Most current retail board members made their bones at traditional brick-and-mortar retail companies. They’re smart and experienced, but do they have the experience your stores need now? I've found that traditional retail board members are resistant to (and a bit scared of) all the disruptive changes noted in part one of this series. For the turbulent world of modern retail, your boardroom talent pool needs to reach beyond the usual suspects to seek candidates who are masters of change.
Add directors with experience in successful, digitally native businesses, with strong knowledge of brand marketing through social media and curating online content that draws buyer loyalty. With customer experience so central to retailing now, adding board knowledge on how consumers interact and make value judgments can prove invaluable. This applies even if the board prospect comes from entertainment, hospitality, technology or other nonretail fields.
This technology portfolio can offer rich rewards on your board. Artificial intelligence, big data, virtual reality, cybersecurity, drone delivery, marketing automation, the Internet of Things … all of these technologies are shifting, intersecting and liberating retail in unforeseen ways, and directors with vitae in these fields can spark your board.
All the macro changes dictate a different digitally savvy board which understands rapid innovation cycles and embraces change. The legacy retail model directors who presided at Sears, Kmart, Circuit City are not the right “digital” directors to future-proof your company. Board refreshment is tied to success in today’s retail reality.
The traditional board role (and talent lineup) focused on a forensic, backward-looking approach, reviewing the past quarter’s financials, sales per square foot, and so on. Directors today need to be forward-looking. Where is our consumer and market headed? What new deliverables measure success? What do we need to demolish and rebuild before a competitor does? As an added benefit, recruiting such board talents will shake up board age and diversity concerns.
Such fresh eyes in the boardroom will introduce new languages and concepts of success that retail today must add to its vocabulary. What is your brand’s Klout influencer score? Its social sentiment score? How do you measure your company's engagement with its highest-value customers (20 percent of these deliver 80 percent of revenues)? How do you rank in various search engines and retail review sites, and how effectively do you measure online placements and SEO results? It takes boardroom digital IQ just to know which questions to ask.
Next, get your board members (and top managers) out of the office as secret shoppers on the web and in stores. Any retailer that doesn’t expect its leadership team to regularly “eat its own dog food” is aiming toward failure. It amazes me how many CEOs never call their own company’s call center, or try to use their own online ordering system. Assurances that your customers can move seamlessly between PC, tablet and mobile platforms mean nothing unless you personally try it. If the shopping and order function is clumsy, demands too much time and effort, asks too many questions and then kicks you off at the checkout stage, most top execs and board members will never know.
This is another area where adding board talent with omnichannel retailing skill is so valuable. Your marketing people had better not tell the board how terrific your online presence is if there's a seasoned tech person in the boardroom who’s tried it and knows it’s clunky. Engaged board members should be supportive of the leadership team in making this new reality happen. They bring an unconflicted “inside/outside” perspective that’s worth its weight in objective gold. When the board speaks, everyone has to listen.
Bringing board talent to your retail evolution is vital today given the stakes involved. Retail bankruptcies are surging, with 20 major chains (including The Limited and Toys"R"Us) on the rocks this year alone. In the early 1990s, business guru Jim Collins wrote that approximately 40 percent of the top companies would be gone in 20 years. Now, I’d say at least half will be gone in 10 years or less.
Your retail company can make the cut, but it may have to completely rethink its locations, brand, market segments, price points, product lines, even its very physical presence. But that’s just the sort of top-level, scary strategic discussion a good board of directors should deliver. Directors need to lean in and embrace change, understand, support and, when appropriate, invest in management proposals to forward innovate. The biggest part of board oversight is to protect your shareholders value. The risk retailers face is staying contemporary and relevant. Directors must help management to future-proof their companies.
Betsy Atkins is a serial entrepreneur, three-time CEO, corporate governance and growth expert, and on the boards of directors for Volvo, Cognizant, SL Green Realty Corp, and HD Supply. She is the founder and CEO of Baja Corporation.