The bloodletting's over and the latest crop of CEOs are about their business, but can the industry cultivate worthy successors? Julian Hunt reports One of the few laughs at the IGD annual congress in October came courtesy of Allan Leighton, who pointed out that virtually every retailer who had spoken at the previous year's shindig had left the industry. But Leighton was not worried about being struck by any convention curse, because the event was his last industry engagement. He had just announced plans to leave Wal-Mart Europe and "go plural". The difference, of course, was that Leighton was leaving of his own volition; his peers had not. And the charismatic Leighton pointed out an obvious irony: "If you perform well you can leave. If you perform badly you leave with a lot of cash. I should have been crap." A tad harsh, but you can see what Leighton meant. Safeway paid Colin Smith £1.16m after its patience with him ran out. Sainsbury gave Dino Adriano £1.24m to help ease his way into retirement. And Somerfield coughed up £531,000 after sacking David Simons. But this unfortunate trio is not alone in having been evicted from grocery's uppermost echelons, because the past 12 months has been pretty brutal for many in food retailing. At chief executive level, Alldays got rid of Colin Glass at the end of 1999. Earlier this year, Sainsbury removed the md of its supermarkets business, David Bremner, and marketing director Kevin McCarten. They received £788,000 and £525,000 respectively for their troubles. And they have both resurfaced ­ Bremner at McCurrach UK and McCarten at Reuters. More recently, Somerfield ousted commercial director Ed Connolly and Kwik Save boss Simon Hughes ­ the latest in a string of middle management changes. And let's not forget all the troubles at Marks and Spencer, which has culminated in the departure of chief executive Peter Salsbury. It's been the bloodiest period anybody can remember. So what's going on? Are all these guys really crap, as Leighton claimed, tongue lodged firmly in cheek? Or are there other forces at play here? Critics argue that some of the recently departed were rightly sacked for incompetence; the more charitable claim they ran out of time to effect the changes necessary to turn around their businesses. And there's no doubt a few, notably David Bremner, were plain unlucky ­ their leaving having more to do with the arrival of a new head honcho than anything they did (or didn't) do. But if nothing else, the events of the past 12 months show that chief executives ­ particularly in retail ­ have become more expendable than ever. Professor Leigh Sparks, of the University of Stirling, says: "The pressure from the City is intense and I think it has shortened life expectancies. In the past, most of these firms would have been insulated from some of this by the family shareholding. This is no longer the case. Adding in problematic market conditions and more intense scrutiny only ratchets up the need to succeed and quickly." Tough market conditions have been exacerbated by overcapacity, low growth prospects and poor returns ­ all of which have made investors very twitchy. The result? As share prices have stagnated, the non executive directors who sit in the boardrooms of retail companies have been as eager as the City to make sure their ceos deliver the goods. Witness Sainsbury, where the non execs, led by chairman Sir George Bull, engineered the coup that led to Sir Peter Davis being lured out of semi retirement to sort out its troubles. Sainsbury is now being rewarded by a surge in its share price as investors buy into the new Stamford Street vision. But even Sir Peter admits that, while he has a three year turnaround plan, he probably has only 18 months in which to generate tangible results for investors. "And he's dead right," says David Stoddart, an analyst with Investec Henderson Crosthwaite. Welcome to the new zeitgeist. The message for ceos is simple: make a difference, and quickly, or you're out. You want proof? Just ask Luc Vandevelde at Marks and Spencer, who is already coming under pressure from some parts of the investment community. And if the experience of the US is anything to go by, this sort of pressure is only going to intensify. American boardrooms are packed with non execs who have no particular loyalty to their chief executives. At the same time, larger institutional investors are even pushier than they are here and far quicker to punish lacklustre performance. That makes life tough for American ceos. As does the fact that most of them are now subjected to an evaluation report every year, where they are measured on everything from how well the company has met its financial and operational targets to whether customer satisfaction has improved over the past 12 months. It all sounds pretty hairy. But influential City analysts reject the short life expectancy hypothesis. Dave McCarthy, of Schroder Salomon Smith Barney, says: "I think ceos have always been expendable if they are failing. We have seen some pretty poor management that has failed to adapt to some pretty tough conditions. Shareholders will not tolerate that indefinitely and it's no surprise there's been all these management changes." Investec's Stoddart is also not convinced that bosses are becoming increasingly expendable."Sure a lot of food retail chief executives have been put against the wall and shot," he says, "but it's a much broader topic than whether ceos have a shorter life expectancy or not. Look at the impact Sir Peter Davis and Carlos Criado-Perez have had. That shows good management can still make a difference." The argument is logical enough: Smith was given plenty of time to deliver; Adriano didn't deliver; Simons was guilty of the Kwik Save blunder; and Glass paid the price for a mess that was not really of his making. But while the experts are split on the question of ceo life expectancies, there is broader agreement that the industry does face a problem when it comes to finding talented individuals capable of stepping into the hot seat. That's why the chains that reshuffled their management this year were forced to look outside for replacements. Sir Peter was ready made for the Sainsbury job because he had something to prove to the Sainsbury family that didn't give him the top job first time round. That makes his appointment very opportunistic. Luckily for Safeway, Criado-Perez was available after quitting Wal-Mart. And Marks and Spencer, that quintessentially British brand, succumbed to the same Arsene Wenger syndrome and persuaded another foreign retailer with a strong track record to come to the UK. Sparks, who agrees with the football analogy, also asks: "The trend in football has been to pay huge money for big names and go foreign ­ is retailing going the same way?" The problem, of course, is that even on the world stage there are not that many retailers who would jump at the chance to come to and run a business in Britain's low growth environment, compared with, say, the opportunities offered in the Far East. And as for recruiting domestically, but from outside the industry, Investec's Stoddart claims this is proving harder to do. Sure, Somerfield did well to persuade Alan Smith to leave the leisure industry. But his appointment may be the exception that proves the rule. As Stoddart says: "Can you get good people to take a job running a food retail business? I don't think so. If you start sacking the incumbents you must believe you can get somebody better. The current crop of Archie Normans would have much better offers on the table at the moment." What's really worrying some industry observers is that there is a paucity of homegrown talent. Clearly the continuing consolidation of retailing will create a pool of individuals from which firms can draw. But for now, all the good guys, like Tesco's Terry Leahy, have either got the jobs they want or, like Stuart Rose and Leighton, can pick and choose what they want to do. At the same time not enough is being done to develop fully the next tier of management to take over. In short: where are the next Leahys and Leightons? Martin Hall, of the British Institute of Retailing, is one of those who believes there is a growing talent gap and says it is the main challenge facing the sector. "Broadly speaking there is a shortage of leaders in the industry as a whole. And the axe mentality is certainly not a good recruitment message to send out to people who are thinking of making retail a destination career," he says. He's not alone in agreeing with the talent gap theory. Sparks identifies a possible reason why it's getting harder to groom people for the top: "The firms are bigger and have bigger issues to confront. The experience of running such organisations is stretched far and wide. So the interesting questions are: can you take risks with emerging people? And how do you train them for this?" Conversely, he also reckons that global players such as Ahold have a big edge over their rivals on the HR front. They are able to move people around the world, he says, broadening their experience and their horizons, and in the process avoiding the "sameness" that some in the UK retail scene are guilty of perpetuating. The arguments are complex. Put simply: today's retail leaders need a whole bags of skills to survive; everything from an ability to manage the City to knowing how to foster the sort of joint ventures that will allow a food business to grow in non traditional areas. One former supermarket director says it is hard to build up that breadth of experience. "Somebody who has come through retail will not necessarily have the skills sets that are required for the future," he says No doubt many ceos will violently disagree with the idea. "A talent gap? In my company? Absolutely not. You're mad to suggest such a thing." But there is still a growing body of evidence ­ okay, much of it anecdotal ­ that the new generation of leaders just isn't there. And this is a significant internal challenge that retailers ­ with the possible exception of Tesco and Waitrose ­ still need to address. Pause for a moment and try this simple exercise. Pick a retail company, any company, and ask yourself this question: if the current boss quit today, is there an obvious successor? It's hard to come up with names, isn't it? While this is all very interesting, and great fun, you can still argue it is a purely academic exercise because there is going to be far less pressure on the boards of the top companies in the months ahead. For starters, the big chains now have ceos who are clearly making a difference to their performance. At the same time there are plenty of observers ­ SSSB's McCarthy among them ­ who believe the food retail sector is headed for the most benign trading environment in years. That means companies should find it slightly easier to perform as the City wants. That in turn explains why share prices are moving up again. And all of that should mean we see less bloodletting at the top in the short term. Such a rosy assessment of the market does not negate the fact that all ceos are under incredible pressure to deliver results and must still feel highly vulnerable. Even if you accept that the market is improving, at some point in the future the competitive climate will change for the worse. That means the current crop of ceos will come under the same sort of pressure as the last lot. But what happens if companies start wielding the axe again? Will they have a new generation of managers ready and willing to step into the firing line? Or will they be able to attract talented leaders from outside? For now, the answer to both questions is a worrying "No". {{COVER FEATURE }}