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The New “C” In the C-Suite: How the Customer Is Disrupting the Organization

What’s working for retail brands and why?

During the first half of this decade we have witnessed major shifts in the retail industry. Following the most recent economic recession, customers are more discerning than ever with their purchases and are demanding more from their retail experiences. With a string of notable retail bankruptcies in the last few years, the obstacles to staying relevant and profitable are mounting.

One of the most discussed and debated tactics for combatting these challenges is a reorientation of company strategy around customer experience. Forward-thinking companies are putting the customer at the center of the organization by aligning roles and decision making rights in the C-suite in order to foster efficiency and effectiveness. Experience, personalization, accessibility, relevance and responsiveness have become some of the most important differentiators for retailers. Thus as customer experience becomes a dominant force, the traditionally marketing-driven organization is evolving into an all-encompassing “omni-channel” function that aligns all aspects of the enterprise.

The balance between merchandising and operations that ruled the retail organization chart in decades past has shifted, and the “healthy tension” of these two factions is no longer considered critical for stability and profitability. CEOs have long employed “span-breaking” in order to streamline their organization, which traditionally meant rolling up functions under the Chief Merchant or Operator, reflecting the organizational philosophy of the time: product versus stores.The new span-breakers in the retail organization are now differentiated based on their relationship to the customer. In order to prioritize the consumer, functions that directly touch the customer and influence their experience are migrating to a single pillar, such that merchandising, marketing and e-commerce may all report into one Chief Customer, Chief Experience, or Chief Omni-Channel Officer. Furthermore, the role of Chief Operating Officer is evolving as a direct result of this customer-centric focus.

A central tension in these new, omni-channel structures is between CEOs’ desires to align and simplify decision-making through span-breaking and the symbolic importance of reporting structure – as it is interpreted by executives and potential candidates as an indicator of status within an organization independent of scope, scale, or compensation. Reporting to the CEO is not only symbolically important to functional leaders as they consider opportunities, but also practically important as these leaders want to have the ear of the Chief Executive in order to directly advocate for strategies and initiatives.

Two of the most critical issues surrounding talent in these new structures are:• Where are the “next gen” CEOs coming from as the Chief Customer Officer and newly defined Chief Operating Officer roles would be the typical choice for CEO succession?• With this new focus on marketing and customer experience, where are the “next gen” merchant and marketing leaders coming from?

The above organizational shifts have been the topic of much discussion among retailers in recent years. In our executive search practice, we have seen a great deal of interest from clients in Chief Customer Officer talent and integrated organization structures. However, only a handful of major players have thus far taken action with only 10% of Fortune 500 companies having adopted the role[1] . Many senior leaders understand that this new structure is a logical and compelling move for their organization, however reorganizations are often constrained by attachment to traditional structures and a tendency to overvalue historical hierarchies. As the retail landscape continues to be challenged, progressive organizations will differentiate themselves on the adaptation of the integrated organization structure and the ability to cultivate talent that is centered on customer experience.

[1] CCO Counsel, Annual Chief Customer Officer Study, http://www.ccocouncil.org/site/cco-study.aspx

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