What's next for Target?
In a statement made Monday by its board of directors announcing chairman and CEO Gregg Steinhafel's abrupt departure, Target Corporation said that all parties agree that the company is ripe for new leadership. That may be so. But the reasons for Steinhafel’s leave—though certainly precipitated by the massive data theft that left millions of its customer’s financial and personal data vulnerable to thieves—are more numerous and more complicated than the problems associated with that breach alone.
As acknowledged by Target, Steinhafel served the company well for 35 years, starting as a merchandise trainee in 1979. His attention to detail and appreciation of the needs of his customers were often noted.
But retail these days is proving to be a new ballgame, and Steinhafel’s expertise, as vast as it was, may have fallen short—something that could be true of many retail CEOs. Cybersecurity expert Brian Krebs, for one, believes that the missteps that lead to Target’s breach exist nearly everywhere in retail America.
Steinhafel’s high-profile departure, “papers over problems still endemic throughout the American retail industry,” writes Krebs. “An over-reliance on in-store technology rather than cybersecurity experts in the boardroom, and a tendency to underestimate the lengths to which bad guys will go to steal anything that isn't properly nailed down.”
Target was almost on the cutting edge of US cybersecurity
Today, Target is speeding up its adoption of so-called “chip-and-PIN” technology, which will do much to thwart the kind of theft that happened at its stores in November. But ten years ago, when Target invested resources on a proposed collaboration with Visa Inc. that would have made it a leader in point-of-sales security, none other than Steinhafel was among the executives there who helped quash the plan.
Their reasoning then was that the plan was, in a way, actually too cutting edge—that it wasn’t about to be embraced by other retailers, consequently leaving the retailer at a competitive disadvantage, especially considering the project's expense.
It wasn’t just about the breach
Steinhafel’s speedy exit leaves many questions open, the least of which is: Who will be CEO? But investors are shaken by it, and the company's lack of a succession plan. There's worry that the company has even more bad news in store.
The problems that are known are serious enough. Exhibit A is Target’s Canadian expansion under Steinhafel, which has left the company with a staggering $800 million to $900 million loss, and stories of customer complaints about high prices and empty shelves. The retailer has responded with improvements, but some analysts say it will have to close down its north-of-the-border operations if things don’t quickly improve.
More than a decade ago, the company really burst onto the retail scene with the idea of carrying high-profile fashion designers at fast-apparel prices, still one of its biggest draws today. Target has turned to Pinterest with similarly innovative collaborations, on a much smaller scale so far. But that model is now being copied by retailers like QVC and H&M, and some observers would like to see the retailer step up its game in its own arena.
Who will be CEO?
It’s quite intriguing, even worrisome to some, that Steinhafel has left Target, except for a temporary advisory role, without a clear plan of succession. So, who will be CEO?
Chief financial officer John Mulligan is taking on CEO duties for now, but has publicly stated that he doesn’t want the job. Roxanne Austin will serve as interim chairman and will likely be active in the transition.
The retailer has retained Korn/Ferry International for the search and has said that, for the first time ever, it will look for talent for the position from outside the company. That departure from tradition could help shake up what some consider an overly insular corporate culture.
Others mentioned for the job have been retiring Gap Inc. chairman and CEO Glenn Murphy, Wal-Mart Stores Inc.'s U.S. division chief Bill Simon, Tractor Supply Co. CEO Greg Sandfort, and retiring Ford CEO Alan Mulally.
To be sure, Target is searching for a new CEO while it is in a tough spot. So far, only one little guy has publicly approached officials for the position.
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