What Stops Financial Directors From Getting The Top Retail Positions?
When it comes to the top spot in retail businesses FDs are often passed over, but is the ‘numbers man’ stereotype unfair?
Last month Halfords finance director Nick Wharton was a surprise appointment as chief executive of Dunelm. His appointment went against the norm, because in retail very few finance directors manage to make the leap from finance director to chief executive in their own companies, let alone in another retailer.
It is a trend that seems peculiar to retail. “In many other sectors, the CFO is seen as the number two to the chief executive. However, in retail, the success levers are often centred on brand, product, innovation and people - qualities that are developed in commercial and operational roles, and are not typically associated with the finance function,” says Sally Elliott, senior client partner and head of retail at headhunters Korn Ferry Whitehead Mann.
The trend has led to the retail sector lose some high-profile names. Earlier this month Ian Dyson - who since 2005 had been Marks & Spencer’s group finance director and then group finance and operations director since joining the retailer in 2005 - began his new role as chief executive at Punch Taverns.
It came after his resignation in May within days of boss Marc Bolland’s appointment at M&S, a move seen by many as a reaction to missing out on the top job himself.
Morrisons’ own FD Richard Pennycook was eager to replace Bolland when he moved to M&S but lost out to Dalton Philips. Equally at Tesco many also thought that the retailer’s former FD Andy Higginson may finally throw off his finance shackles and land the chief executive role, replacing Sir Terry Leahy, but the role instead went to international chief Phil Clarke.
Moving the money men
So why does it happen? Some point to the failures of FDs moving to chief executive roles at retailers - think David Sainsbury at Sainsbury’s and Colin Smith at Safeway - both of whom were previously FDs at the chains.
Some believe it can be down to boardrooms being reluctant to give up a good FD who, after all, is at the heart of the financial dynamics of the business and retailers can be wary of losing that person.
“Sometimes the chief executive doesn’t let them out into the daylight and others will broaden people deliberately,” says Fran Minogue, managing partner of the global retail practise at Heidrick & Struggles.
And sometimes boards are reluctant to break up a successful team. “So many successful retail leadership teams are based on CEO/CFO partnerships where the CEO leads the brand and has a creative, optimistic outlook, while the CFO provides the balance through being commercial, process-driven, controls-focused and realistic about growth prospects” says Elliott.
The two roles are very different and so the alternative skillset needed to be a chief executive can be a huge challenge for FDs trying to move up. “The success levers in retail often depend on brand, product and innovation, and those qualities are not necessarily what make a good finance director,” she says.
Minogue agrees. “Usually in retail it’s the merchants that end up running the business because they understand the customer and the market, and more often than not it’s the buying and merchandising guys that win over the operations people,” she says.
Others believe it boils down simply to personality clashing with the differences between the two roles and the lack of visibility of some FDs within a business. “There is a world of difference in being a finance director and being a chief executive and leader of an organisation. Not all are suited to it. You have got to be outgoing, to have personality and be able to converse with everyone,” says Peter Williams, former finance director and chief executive of Selfridges and a retailer that did make the move - although his tenure as chief executive was a short one.
“You have got to look after thousands of people and you need those people skills for it to work - you can’t be a shrinking violet,” he says.
Indeed, the chief executive needs to be the face of the brand both to the public, customers and the media - a daunting task for a director whose main role was number crunching previously. “Many retail chief executives project big personalities and have an ambassadorial role that is disproportionate to the size of the business. FTSE 100 chief executives from other sectors do not attract the level of media interest as Sir Terry Leahy, Justin King or Sir Stuart Rose,” says Elliott.
As such that personality needs to be big enough to bring staff with them. “The most important part of a bigger chief executive role is the ability to paint a vision, engage people behind that vision and drive that forward. That makes a successful chief executive in any business,” says Minogue.
And though it may be a stereotype the image of a finance director as solely a numbers man can be hard to shift.
“A lot of FDs are interested in numbers and property and end up running the back of house but rarely get a feel for the product, which is critical,” says Minogue. “Retail is a direct consumer business and that’s why it’s much more important that the chief executive gets the customer and the market,” she says.
Simon Bentley worked as an accountant for 10 years before joining Blacks Leisure Group as corporate development director in 1987, taking the role of chief executive two years later and the combined role of chairman and chief executive in 1990 - a position he held for 12 years.
However, he says his case was an unusual one - taking a position that was effectively controlling a number of retail managing directors rather than having direct responsibility for trading. In a similar way, Roger Taylor at Carphone Warehouse has also made the move from FD to chief executive but in more of a holding company position than general trading.
Bentley believes that because of the huge differences between the two roles good finance directors rarely become successful chief executives. “A person who is a good FD will never be a good COO or CEO because they love those disciplines of control and judgement that are the perfect balance of the more creative side of a CEO. The reality is it’s the exception when that type of person moves on to become a good chief executive,” he says.
A different skillset
Elliott believes some FDs are better suited to skip the chief executive role entirely and become chairman. “The attributes that make for a great finance director overlap more naturally with the role of retail sector chairman than chief executive: low ego, a considered approach, excellent influencing skills, and strong understanding of shareholders’ agenda,” she says.
Sometimes the problem can be that a FD decides late on in their career they want a chief executive role - perhaps envying the position of their chief executive who they will often have worked alongside, or perhaps pressured by peers and even the media who assume it is a natural progression for them.
But making such a move then can be too late. “If a CFO or FD is committed to the chief executive route, he or she needs to demonstrate career breadth beyond the finance function. Taking on operational responsibilities outside finance provides the opportunity to develop the broad leadership capability required,” says Elliott.
Will Kernan was appointed chief operating officer at New Look earlier this month and is a former FD at the chain. “I never set out to be a financial director, I set out to be a retailer and I did finance to make me a better retailer and get a more rounded view understanding all the elements of the business,” he says.
“The whole early part of my career was in the Burton Group in commercial finance and I got qualified in finance as a means to an end. I spent about 10 years of my career in finance but I always had the aspiration to become more involved in general trading and management,” he says.
At Sainsbury’s, CFO Darren Shapland is, like Kernan, seemingly being groomed as an heir apparent and has taken on additional operational responsibilities to develop his skills. This is vital according to Elliott who says a retailer’s 30s are the critical time to develop experience. “Roles in retail operations develop outstanding people skills. At a senior level the ability to really connect with staff on a single store visit requires communication skills that are second to none,” says Elliott.
Kernan says that aspiring chief executives should make their ambitions known early to ensure they get the backing required. “You need backers and you need to make it clear what it is that you want. There is a business risk in moving a FD and when you move them from managing a P&L to leading people you have got to want to do it and have the people that will back you,” he says.
Those that do move later have to have operational experience first. Although many say he was promoted to the role of chief executive solely to concentrate on selling the business, Williams says he knew a year before he took on the role that he would rise to the chief executive role and was upskilled to help with the move.
“I got sent to Harvard and had an external coach and took on other responsibilities in the business so that when I took the big step - and it is a big step - it wasn’t so much of a surprise,” he says.
And Williams says it works better for retailers that can make that step up within their own businesses. “It’s difficult going from the finance director of a company to being a chief executive unless you have had some operational experience. It’s also better to have had it within the business or people always think of you as a finance guy,” he says.
For some chief executive roles a candidate with an FD background can be perfect. “If we were recruiting a chief executive for a retailer that required restructuring, or needed to drive profit through removing cost, in that situation a CFO background would be a better fit than a commercial or operations skillset,” says Elliott.
Although it may be unusual for chief executives to have a finance director background, the skills learnt can be invaluable according to Kernan.
“I do think my time in finance and the skills I learnt there are a very important backbone of any organisation,” he says.