Succession: A Brief History

Succession at the top of a company is a fraught process, often with very poor probabilities of success. Here’s a brief, selective reminder.

• At Sears Roebuck, Arthur Martinez was succeeded by internal candidate Alan Lacy, who arguably had little idea how to run Sears. And then there was “Fast” Eddie Lampert (total outsider) who finished off the American icon.
• The succession at Macy’s went from Alan Questrom to James Zimmerman to Terry Lundgren and to Jeff Gennette; all internal executives, some of whom contributed to the brand’s descent into mediocrity.
• The succession at Kohl’s was Larry Montgomery to Kevin Mansell (outsider) to Michelle Gass (outsider) to Tom Kingsbury (outsider). Mansell coasted onto Montgomery’s efforts, and Gass was ineffective. Kingsbury, despite his success at Burlington, made some classic mistakes at Kohl’s, which was a very different business and was in poor shape when he took over. More on Kohl’s later.
• On the flip side, Michael Gould successfully replaced Marvin Traub, then mentored Tony Spring, who eventually successfully replaced him at Bloomingdale’s and now (as an insider) is trying to rescue Macy’s. Jeff Bezos’ choice of insider Andy Jassy as his successor seems to be paying off. 
• More recently, we’ll have to see what happens at Apple. Steve Jobs brilliantly anointed insider Tim Cook, who positioned the company for the incredible success they’ve achieved. Cook’s successor looks likely to be another insider.

Inside or Outside? 

In the latest wave of chief executive activities throughout the retail spectrum, the choices made in promoting from within versus going to an outsider have never been more apparent…and fraught with more risk. You have to ask, “Is the devil you know better than the one you really don’t?”

The good folks at Google’s AI tool Gemini report that so far this year, about two-thirds, 67 percent, of all CEO appointments across the S&P 500 came from inside. Still, that’s down from 74 percent in 2023 and 82 percent in 2022. But do the reverse math, and the percentage of outsiders getting the top job nearly doubled over the past three years, which it said was the result of “periods of market disruption or company distress.” No argument there.

My TRR colleague Mark Cohen says the right way to work on succession is long before it needs to happen. The last thing a company wants is to be caught in the lurch when a company is headed for trouble or when a successful CEO is going to retire. He adds, “I think the odds of success should be better when an internal, better-known candidate is selected. But this requires real due diligence on the part of the board, something that doesn’t always take place.”

Gemini states the obvious: “Large public companies, like those in the S&P 500 and Fortune 500, generally favor internal promotions as they provide deep company knowledge, cultural alignment and are often seen as less disruptive. External candidates,” it said, “are more likely to be brought in when a company is facing poor performance or needs a significant strategic or cultural shift, as they bring a fresh perspective.” No arguments there either.

A Tale of Two Boxes

The most highly visible hires in the retail world over the past few months have been at Walmart and Target. Both boards chose insiders to take over for CEOs who led each company for more than a decade. Yet the contrast in the reaction within the industry—and perhaps internally too—couldn’t be more different.

In selecting John Furner to take over from Doug McMillon, Walmart chose its number two executive, who is largely viewed as responsible for the discounter’s recent successes. Walmart has a history of choosing insiders; every single one of Sam Walton’s successors has come from within the company, many starting at entry levels within individual stores, as did Furner and McMillon. And while McMillon will stay on the board into next year, he will not have any active role in management. Some have speculated, in fact, that he has a next career chapter planned, possibly in politics or in the federal government.

At Target, the headline was similar, but the back story is very different. In selecting Michael Fiddelke to succeed Brian Cornell next year, Target also went with its number two, but arguably someone who has been at least partially responsible for its recent failures, especially in logistics and sourcing, two areas he oversaw. And Cornell will stay on as executive chairman well into 2026, presenting a difficult situation where your old boss is constantly looking over your shoulder as you try to fix the problems he helped create.

What’s especially ironic is that Cornell was the first outsider to lead Target in its history, and for much of his decade-long run, he was considered a major success keeping Target competitive with the much larger Walmart. It was only in the past two years or so that cracks appeared in the big red bullseye, and Cornell seemed powerless to reverse the decline.

The contrast in outgoing CEOs is clear: “McMillon, most importantly, knew when to get off the stage (on a high) and promote from within a well-groomed associate in John Furner. That’s opposed to the Brian Cornell fiasco, not getting off the stage after a failed strategy and still promoting someone who was a partner in that strategy,” according to our consultant. 

Kohl’s Klash

When it comes to CEO selections, Kohl’s may be in a “klass” all by itself. After decades of uneventful transitions in leadership, the retailer’s more recent changes have been anything but. In 2018, it promoted Michelle Gass to CEO from her position as chief customer officer, a spot she assumed when she joined the company from Starbucks five years before. But four years later, she was gone after a rocky run marked by considerable turmoil from investors and lackluster financial results. Board member Tom Kingsbury took over on an interim basis and was then named permanent CEO. That lasted less than two years when the company announced it was hiring Ashley Buchanan, who had been president of Michael’s. Only a few months later, he was out after alleged serious breaches of conduct regarding how a particular vendor—also his significant other—had been given preferential treatment by the company.

Next, the Kohl’s board, which apparently lacked in any meaningful due diligence in selecting Buchanan during the hiring process, picked one of its own, Michael Bender, as a temporary leader. In a repeat of the Kingsbury scenario, Bender has now been named permanent CEO. That’s four presidents in the past four years, not counting the interim titles. One can reasonably argue that the company’s miserable financial performance reflects poor CEO decision-making.

Are Department Stores Different?

Over on the department store side of the retail picture, things have played out in other ways. Both Dillard’s, public but largely held by the founding family, and Nordstrom, now private and controlled by its founding family, have always put a family member at the top of the pyramid, and that is unlikely to change anytime soon. No outsiders welcome. Macy’s has also largely promoted from within; its most recent CEO Tony Spring is a company veteran. Before Belk was bought out and eventually went private, it too had been run by members of the family. Jim Boscov serves as Chairman & CEO of Boscov’s, the large, independent, family-owned department store chain, founded by Solomon Boscov in 1914.

The Ultimate Outsider

The Ashley Buchanan scandal at Kohl’s is nothing compared to probably the most famous—infamous is more like it—example: Ron Johnson at JCPenney. His story has now become retail legend. Under pressure from Bill Ackman, the notorious hedge fund leader, who thought he knew what was best for his investment at Penney, the retailer brought in Johnson, who was best known for running Apple’s retail stores, and before that, a merchant at Target. Johnson blew up the Penney business model, junking private labels, spending a fortune redoing the stores and bringing in a merchandise mix that had little to do with Penney’s largely Main Street customer base. But the worst move was to make all these changes without grooming his teams and ultimately the customers to understand and accept his radical changes.

The result, to put it mildly, was a disaster. In less than two years, Penney lost a quarter of its sales and even more of its share price. As Ackman licked his wounds, Johnson was fired and replaced by Mike Ullman, his predecessor. It took years for things to stabilize, and some would argue that although current CEO Marc Rosen (an outsider) is stalwartly trying to overcome these challenges, Penney has still not returned to anywhere near where it was before Johnson.

The Board Room

The Penney debacle and now more recently what’s happened at Kohl’s have certainly spooked retail boards that are more cautious about bringing in an unknown. An insider may not always be the best choice, but at least they know what they’re getting. That said, the lack of retail training programs like the legendary one at A&S has created a more limited retail playing field where there are simply fewer talented CEO choices to choose from. This is compounded by the negative optics of retail as a career for next gens, contributing to what can only be called an incestuous climate for picking retail business CEOs.

Inside or outside, they are two sides of the same coin toss.