Leadership in the Consumer Sector

Businesses in the consumer sector are facing a formidable set of challenges today. Some of these are relatively new, such as the steady rise of digital commerce, the growing influence of mobile and social media and a general decline in brand loyalty. Others include the familiar challenges of globalisation, intensified by growth market opportunities, activist shareholders pressing for short-term results, a continuing lack of consumer confidence in many mature markets and talent shortages. To confront these challenges successfully, CEOs of consumer businesses need to have had certain experiences and possess traits and attitudes that are less likely to be found in their counterparts from other industries, where investment horizons are often much longer and the customer feedback loop is far less intense.

This report explores what it takes to run a consumer business effectively. It combines the knowledge we have gained from thousands of assessments of senior consumer executives with firsthand testimony from a select group of five CEOs, each of whom has had a highly successful career running at least one consumer-oriented business in the consumer packaged goods, retail, and hospitality and leisure sectors. Each of these scored highly in Spencer Stuart’s proprietary Executive Intelligence (ExI^®) assessment.

Formative experiences

A list of experiences that have shaped the careers of CEOs would be extensive, but here we pick out two which we believe have been particularly important in helping prepare the present generation of consumer leaders.

Developing a consumer disposition

CEOs of consumer-facing companies have more often than not spent the majority of their careers working in one or more consumer sectors. Whatever route they have taken to the top, they have almost certainly devoted a significant portion of their careers to observing, analysing and understanding consumer behaviour. They have cultivated an open mind, a commitment to continuous learning and an unerring belief in the primacy of the consumer.

These characteristics are evident in each of the CEOs we interviewed for the purposes of this study. For Andy Cosslett, CEO of Fitness First and former CEO of InterContinental Hotels Group, exposure to the front line came early in his career during a stint in sales at Unilever. “I remember being in a part of Liverpool where there was no glass in the windows, nobody had any money and I was trying to sell all this stuff under pressure from a head office which had no understanding of the environment I was working in. I still carry my first business card for Wall’s Ice Cream. I carry it with me because it’s a constant reminder that head offices usually get it completely wrong in a number of ways. They become detached, they don’t really understand what’s going on out there.”

Cosslett values the opportunity that a sales role gave him to encounter people with very different backgrounds to his, to take an interest in who they were and how they thought. He emphasizes the dangers for executives of spending their careers cossetted in a head office environment, supported by a big infrastructure. “You need to have been put into places of intense stress, places where you feel uncomfortable. This teaches you self-sufficiency, an ability to roll your sleeves up and remember what it was like. Head offices don’t get the importance of that. They have a language and a didactic nature, which is the complete opposite of what people actually selling their stuff are like and what they need to do with their customers. One of the greatest things I ever did was to get brutalized in a sales job for seven or eight months.”

Hubert Patricot, European president of Coca-Cola Enterprises, found that, when earlier in his career he moved to a sales role, he got a very different view of the business. “It was a very important experience for me. I learned the advice I still give to my guys: First listen, second, listen and third listen to your customer.” This thirst for knowledge and insight into consumer behavior served him well when, as a marketing director, he started to brief advertising companies, talk about the business to the media and explain the value of the brand to external partners.

Stretch assignments

The greater the exposure that CEOs have had to different aspects of the business, the more comfortable they are when they assume control of the entire organization. The CEOs we spoke to emphasised the value of gaining experience in different functions beyond sales and marketing, especially finance and operations. It’s not uncommon for consumer executives to progress to senior roles having spent much of their careers in a relatively narrow, specialized area of the business; this can work against them when making a move into general management.

Graham Allan, CEO of Dairy Farm, has felt challenged at every point in his career, having worked for KFC, Pepsico and Yum! in a variety of international roles. “You always feel stretched when you step into the unfamiliar. Some of us relish it that way, the opportunity to learn by taking on different challenges. That has been the pattern of my career; moving industries, countries and companies. My first operating GM role was in a country that was relatively new to me even if I knew the industry. My first portfolio GM role was also in completely new geography and both were great learning experiences. You need to be willing to tackle issues from first principles, to develop a deep understanding of the challenges and the context. And, of course, you need to evolve your management style to fit the circumstances and the culture. Even in this job, it’s a new company, a new industry, my first time based in Asia — there are plenty of new things every day to make me uncomfortable.”

This willingness to take risks and seek out unusual challenges is a common trait among leaders today. Indeed, experience working in a foreign market is an almost essential part of the CEO’s armoury, especially if you are running a global consumer business. During the course of our extensive search work around the world, the most rounded consumer executives we have come across have worked in multiple functions, have cross-cultural experience (usually gained through an international posting), and possess a propensity for critical thinking (particularly evident among executives who have worked in high-growth or emerging markets).

These executives are often forced by circumstance to find ways to navigate through challenging problems they would not encounter in a mature market. This helps develop their entrepreneurial instincts, which might otherwise be underutilised or even squeezed out inside a centralised, corporate environment. Since not every executive is going to thrive in an overseas setting, it is important to use assessment to reduce the risk of a bad appointment and predict who will benefit from international exposure.

What makes an effective consumer CEO?

When asked what qualities and skills they believe to be most important in the leader of a consumer business, the CEOs wanted to talk first about consumer focus. It is interesting that despite all the other issues they have to think about when running a business, none of the CEOs seem content to leave this concern to others. Curiosity about how consumers think and behave had become a way of life long before they reached the top job; if anything, it has only intensified over time.

“As I look back, I guess I always had a close interest in understanding consumers, probing how they evaluate different options and how brands fit into their repertoire of choices,” says Allan. “The best people I have seen running consumer businesses are relentless in their quest for deeper understanding; they are always willing to challenge their own assumptions about consumers, always wanting to understand the core reasons for today’s behaviour and anticipating the behaviour of tomorrow. They realise that consumer choices are contextual: they are curious to appreciate the way the context might change and to assess the impact of any change on consumer preferences. They usually love talking to people, especially young people who tend to shape change in most consumer categories. Understanding consumers is everyone’s job in a retail or consumer-based company, not just the marketing people. I try to push everyone in our business to offer consumer insights and to use them to rethink the paradigm that we work within. As I see it, people who are less successful tend to get stuck in one paradigm and seem unwilling to challenge it.” This drive to seek out information and learn from it, adjusting one’s own behaviour when the learning is in conflict with personal preferences, is one of the key indicators of potential that are uncovered in the ExI interview.

John Miller, CEO of Denny’s, shares Allan’s commitment, but knows the danger of taking what consumers say at face value. “Consumers never behave like they say they will. Having consumer insight is critical, but this often means you have to know them so well that you can look beyond what they say. The restaurant business is currently behind other consumer sectors in terms of developing consumer insight, so I am constantly asking customers ‘What would get you to come more often?’ and then I make a point of checking to see what is not being eaten!”

Getting to the truth about the consumer takes time, requires you to keep your feet on the ground, listen intently and exercise sound judgment — for example, discerning what consumers mean, regardless of what they may actually say.

Seeking answers and insight from any and every source takes humility, the confidence to admit to what you don’t know and an innate natural drive to learn new things — essential in the rapidly changing world of consumer-facing business. To Patricot, this curiosity lies at the heart of innovation. “What did you learn today from a supplier or a customer that you did not know? Our business is not a science, it is pretty relative and so the ability to get exposed to another angle or view is critical. This leads to innovative approaches and an ability to take the right risks.”

There are, of course, other dimensions to being a successful consumer CEO. An analytical mind, for example, combined with strong conceptual thinking is a necessary basis for developing a strategic vision — which then needs to be accompanied by strong communication skills to instill that vision effectively throughout the organization.

According to Hubert Joly, president and CEO of Best Buy, “You need to have the raw skills in terms of intellect and the ability to solve problems and get things done. Integrity is essential, as is passion and energy — not everybody wants to make the kind of investment this job demands.”

Getting the consumer’s voice heard inside the organization

One of the dangers of running a large and sophisticated consumer business is that you can easily become remote from what is driving your revenue line. For Cosslett, the whole enterprise has to be designed around an understanding of the customer need. “I don’t think connecting everyone to the customer proposition is necessary if you’re selling widgets or ball bearings, but it is certainly something that big consumer companies struggle to understand. When you get that right, you definitely see the difference. As the chief executive, it really helps if you’ve got that hunger to understand what makes a difference with the customer — making sure that voice is heard inside your business in terms of the way you design it.”

Miller points out that as CEO you need constantly to calibrate your views with customer views. “Silos kill a business. You have to make it safe for everyone to get into everyone else’s business in a constructive way, to get everyone feeling responsibility for whole brand. When I get the whole team across departments to feel the whole brand — when I create the rules of engagement and hold them accountable — things become extraordinary.”

The ability to build collaborative and productive relationships and networks inside and outside the organization, and motivating others to do the same, is a highly desirable quality in a consumer CEO, especially when the result of this collaboration is to multiply consumer insight. While many are strong in this area, others are not. The CEO of a consumer company may well have executives in the organisation who have a silo mentality which hampers strategic thinking and works against truly consumer-centric outcomes. This is borne out by the fact that, as a group, consumer executives beneath CEO level score below their peers from other sectors in their ExI interviews when it comes to building collaborative and productive relationships. This emphasises how important it is for CEOs to encourage effective cooperation between teams and across cultural boundaries to foster a diversity of ideas — two aspects of influencing and collaboration that we measure during the course of our ExI and capability assessments.

Being a CEO — the reality

Setting priorities

Despite the short-term pressures besetting most consumer companies, several CEOs talked about the need for patience early on in their tenure. Stakeholder engagement is critical. Building a long-term, sustainable performance advantage takes time, particularly in businesses where you have to take a lot people with you and they are dispersed across different continents. “The amount of time you have to invest in the development of ideas and to build consensus around ideas and direction before you actually execute was something that was a surprise to me,” says Cosslett. “If you don’t do that but try and shoot from the hip in a public company, that’s not going to work. You have to be a consensus builder, a team player and a great communicator. As for the board, it can be frustrating dealing with non-executives who have only a superficial knowledge of the business. Over the years I have learned a lot of patience and tolerance I didn’t have before.”

For Miller, strategy comes near the top of his priorities, “but it is not everything. For a start, it is easy to plan but harder to execute. You have to test your strategy to see its effect on consumers, ensuring that you execute sufficiently well that the test is valid. Failing faster is the key — and using robust and effective metrics.” The concept of “failing faster” may not be acceptable in sectors such as heavy industry or financial services, but in the consumer sector where rapid change to products and services is the norm, constant iteration is an effective strategy for determining the right course of action. New digital technologies and social media are also contributing to this process.

When the board of Best Buy appointed Hubert Joly as CEO, they were not principally looking for a retailer. They were looking for a fresh set of eyes on the situation: somebody to shape the strategy, but also to take over operational leadership. Joly’s career has been defined by a series of turnaround and transformation situations, experiences which helped him determine his priorities at Best Buy. “It started when I was a consultant working with several CEOs who were leading turnarounds and transformations at clients such as AT&T, Groupe Bull, CGG-Veritas, EDS [where he became its president in France], France Telecom, and Siemens. I went on to work for Vivendi Universal being part of the team that led the restructuring of the company after a liquidity crisis and continued with Carlson Wagonlit Travel and Carlson, which was less of a turnaround, but more a revitalization. It’s been a series of case studies or training grounds for the Best Buy role.”

Joly has what he calls his “turnaround manual”, which contains three insights which would serve any new consumer CEO well. “The number-one thing is the team. There is nothing more important than this. Assembling a world-class team is paramount. The second insight is that you focus on operational performance and effectiveness before you focus on the strategy. That’s not necessarily what people think about, but strategy comes after 18 months, not before. To quote one of my board members at Carlson, ‘operational progress creates strategic freedom’. The third thing is to really focus on what I call direct levers, which are cutting costs, increasing prices or volume, and only then working your way to the indirect levers, such as incentive systems, organizational structure, how decisions get made, how leaders spend their time, and finally contextual levers like culture and values.”

Making decisions with incomplete data

Most consumer businesses these days are awash with more data than they can deal with. Often available in real time, this data is incredibly useful but is still only one part of the evidence base on which decisions have to be made. One of the key challenges for a CEO, says Patricot, is being comfortable making decisions with less than complete information. “It’s almost a cliché but in today’s environment the speed of change in the way the consumer operates is key — you have to be able to go for an option even if you are only 80 to 90 percent sure.”

In the ExI evaluation, standout consumer CEOs demonstrate the critical thinking and conceptual skills that enable them to frame complex and ambiguous situations for rapid analysis. They focus quickly on the root cause or key decision factors, understand the value of available data, discard low-value or irrelevant information and determine what more needs to be known to render a sound, timely decision.

Allan believes that you don’t necessarily pay a high price for making a wrong decision. “Exercise your best judgment, but be prepared to be wrong and adjust course if that is what is necessary, or the facts steer you in that direction,” he says. “If you are in a capital-intensive business, it’s important to spend a lot of time upfront getting those investment decisions right. You can understand being more deliberate and thorough in the way you appraise things. In consumer businesses, it’s a bit different; it makes sense to evaluate the options as carefully as you can, but it’s much more important to take action than it is to dot every ‘i’ or cross every ‘t’ before every decision. You can usually change course if your initial assessment turns out to be wrong.”

Working through others

Whereas consumer executives tend to be good at leading from the front, the evidence from our assessment results suggests that they are less effective than their counterparts in other industries at working through others. As hierarchical corporate structures gradually give way to more fluid collaborative environments, the ability to exercise influence across functions and disciplines, as well as within departmental teams, becomes increasingly critical.

When Allan moved into an international role at head office, he was highly aware that consumers think and behave very differently across the world. “You can’t be an expert on every country and every category. So you rely more on other people and you try to develop people who are appropriately curious, i.e., people who really get to the heart of consumer behaviour, who understand consumer choices and how your brand fits into the lives of consumers. It was a question of getting other people to do it. Thankfully, I found many who were able to do it much better than me!”

For Cosslett, this goes to the heart of what it means to lead an organization. “There’s a misperception that leaders are all-powerful, but power to me is being able to just make decisions on your own, be unaccountable and do things that you want to do. What I say to people about their expectations is that the higher you go, the less power you have. The higher up you go, the more influence you have, but power in the strict sense you have less of. That was a surprise to me. As a leader I don’t do it on my own; I do it with groups of people. We go on a mission together as a team. You have a tremendous amount of influence, you have all this sort of apparent power but everything you do has to be checked, consulted over. With all the stakeholders that you’re managing you actually become more of a diplomat and a salesman. I was always very thankful that I’d spent a long time in sales.”

Building the best team

The ability of consumer companies to develop their future leaders hinges on a clear understanding of their capabilities and their potential. It is essential for any CEO to know exactly where the leadership talent lies in the organization, what the development areas are for high potentials and what kind of experiences they should be exposed to.

All the CEOs we spoke to acknowledged the critical importance of getting the right team in place as soon as possible. Patricot advises his own leaders “if you have people issues, don’t wait too long before you fix them.” Joly agrees: “The consistent mistake we all make is waiting for too long to replace somebody who will not make it.” This is also a retention issue, since it is well-documented that talented people go elsewhere when they see that such decisions not being made.

“The talented team won’t survive if they don’t respect their leader,” says Allan, who has a very simple philosophy that good people generally want to work for good people. “The further up you go the more important it is to hire talented people underneath you. If you don’t promote good people into senior positions it is going to be very hard to get good people into other positions. If you promote mediocre people you end up with a mediocre organization.” Perhaps not surprisingly, top consumer CEOs are not only smart and insightful, but also open-minded and objective. In the ExI evaluation they demonstrate the ability to listen to, quickly comprehend and utilize differing points of view to expand and elevate their perspective. This leads them to better judgments, truly empowers those around them, and encourages others to assert divergent views. This is a critically important skill for CEOs who, on account of their position in the organization, may not find it easy to encourage constructive debate.

“What I look for is people who are good at getting results through others, especially those with very different profiles — you don’t just want like-minded people. You get people at a junior level who are able to get fantastic results by force of personality or an incredible work ethic and they pull other people along with them. The more senior you get in the organization, though, the harder that is to do. Your basic philosophy must be that you are not threatened by talented people (which mediocre people often are). I look at how leaders work with others and motivate others. Do they communicate clearly? Are they sufficiently positive that people are going to like working for them?”

Allan says that surrounding yourself with people of good judgment is critical when you are running a business, more so a global one. As a CEO you can’t supervise people running countries on a day-to-day basis so you need to have confidence that when they are presented with a set of facts and circumstances they will make the right decisions eight times out of 10. If their judgment is erratic, by the time you find out about it in the corporate center it may be too late because they have lost their credibility with the local team and they have done damage to the organization — which becomes a major problem for you as CEO. “Those kind of people can survive where there are checks and balances around them, but not when they are on their own,” he says.

Cosslett looks for an “inner resilience” among the people he hires onto his leadership team. “If I’m looking at very senior people, I want to hear about when they’ve been deeply stressed and emotionally upset and I’m not really interested in their CV. If you’re in this room it’s because you’ve achieved things, so now I need to understand you as a person. Are you going to be standing shoulder to shoulder with me or hiding from trouble? That’s really what I’m looking for when building things; that’s my primary measure. I can put up with a lot of deficiencies elsewhere if I’ve got that. If you want to be a credible leader and authentic with your people, you have to have that ability to manage and to lead and protect them — you have to have an inner strength that people can recognize.”

The CEOs we spoke to spend a lot of their time thinking about the skills and capabilities they want to see in executives two or three layers down that identifies them as potential stars. Natural aptitude is important of course, but so is the ability to reinvent yourself — through a process we call “self-evaluation and adjustment”. More than ever, maintaining success throughout a career will mean finding ways to improve yourself and being prepared to adapt to a fast-changing world. It is ultimately the CEO’s responsibility to provide the next generation of leaders with multiple experiences which will help them grow, whether it be with different functions, types of businesses or brands. “I love to see the people who are really going to go places work on more than one brand and demonstrate that they have versatile skills and can work successfully across brands and categories,” says Allan.

Setting the right culture

A large part of the CEO’s responsibility is to shape the company’s culture and this is especially important in a consumer business. Cosslett refers to the “magic alchemy” that occurs where there is a culture of inclusive leadership and a shared sense of purpose and values running through the organization. “If you can create that while having clarity about your customer proposition, then it all comes together in a very good way so that everything you do connects and you can deliver the brand promise on the front line.”

Miller believes that persistently reiterating a clear message is vital for creating shared purpose in the organization, since alignment doesn’t just happen because you ask for it. “Don’t try to build consensus, build commitment instead. I call out key points and then hammer the same principles and rules of engagement again and again.”

Cosslett speaks of the need to treat everybody at all levels entirely as equals as “one of my great lessons in life. It’s not a question of making a show. You have to believe it. You have to actually think that way. You understand what the phrase ‘people are the most important asset’ means when you’re the boss and you rely on your teammates to look after you. Then you understand the complete non-importance of where individuals are from, how they’re educated and how much they get paid. If they perform as a team, it doesn’t matter. It’s about trust and each doing their job. I believe in the indivisible link between the engagement of staff and the ultimate performance of the customer-facing business. You can’t be a great service business if you don’t have a great internal culture.”

Conclusion

While successful CEOs from all industries share many common strengths, the CEOs running consumer businesses share several particular characteristics. These include an inexhaustible curiosity about, and close affinity with, the consumer; an ability to build collaborative and productive relationships and networks; a desire to listen to multiple points of view; an eagerness to acquire and assimilate new information and the flexibility to revise decisions accordingly. The pace of change in consumer businesses outstrips nearly every other industry sector. A relentless focus on the consumer is essential, but this means the CEO has to take more risks, be prepared to “fail fast” and empower teams to replace silo-based thinking with consumer insight drawn from the broadest possible base. The ExI assessment methodology not only offers a unique insight into the extent that these critical characteristics are present in individuals, but also has a strong track record in predicting how likely it is that they will succeed in a top leadership role.