Fishing for Talent

It’s not the competition that’s keeping retail CEOs awake at night. It’s not the economy, nor is it top-line growth. All that tossing and turning at 2 a.m. is the result of a growing talent crisis. The scarcest, most valuable resource in retailing is no longer financial capital, CEOs say. It’s talent.

Retail companies are facing a shortage of high-quality managers that threatens to alter economic performance and jeopardize top-level succession. A number of major retail chains, including Macy’s, JCPenney, Saks Fifth Avenue and Kohl’s, have spent the past few years overhauling their recruitment strategies and training programs to target, attract, groom – and hopefully retain – promising young talent.

It’s an uphill battle. With nearly every other industry facing the same talent shortfall, retail companies find themselves competing against financial services firms and CPG giants (to name just a few) in their attempts to lure top candidates. Retail HR executives say formulating a talent management strategy is a must, but whether or not training programs will eventually fill the retail pipeline with talent and ease the looming shortage remains to be seen.

“Having a strategy in place for attracting college graduates and developing future managers appears to be a solid investment, but this is a daunting challenge,” says Kathy Mance, vice president of the NRF Foundation, the education and research arm of the National Retail Federation. “We’ve all read umpteen articles on the Boomer exodus, the constraints on corporate spending and the fickleness of Gen Y. These factors have come together to form the perfect talent storm.”

The data bears this out. The Bureau of Labor Statistics estimates that the United States will face a labor shortfall of 10 million workers by 2010, when it could have an unemployment rate of 2 percent. The 500 largest U.S. companies can expect to lose half of their senior managers in the next five years.

“An open head count is a threat to the profitability of any business, and retail is no exception,” says Jason Ferrara, vice president of corporate marketing at CareerBuilder. “We’ve seen a rise in the percentage of companies looking for individuals able to step into middle management positions and there aren’t a lot of candidates. In order to move the needle, more retail companies have to provide formal training programs [and] do a better job of dispelling some of the myths about retail jobs – particularly that there’s little upward mobility. Nothing could be farther from the truth.”

Attracting talented college graduates to step into jobs in retailing – and stick with them for more than a few years – will likely require rethinking and restructuring entry-level jobs: too often, these positions are seen as little more than exercises in mediocrity. For Gen Y – characterized by a “work hard, play hard” ethos and sense of entitlement – that just won’t fly.

Giving them real tasks, tangible rewards, senior-management support and a bit of autonomy may yield convincing results and spur retention. While recruiters might say that view is overly optimistic, consider this: if they trip up, at least you’ve learned their shortcomings sooner rather than later. If they succeed, you know you’ve got diamonds in the rough and can take steps to ensure they stay put. While that’s wildly divergent from the “pay your dues” approach most current executives are familiar with, changing times beget changes in thinking.

Rethinking strategies
Executives at some of the largest retail companies saw the writing on the wall a few years back and began rethinking recruitment, training and retention strategies. Among the most serious when it comes to cultivating their own leaders are Macy’s, JCPenney, Kohl’s, Wal-Mart, Polo Ralph Lauren, Neiman Marcus, Starbucks and Lord & Taylor.

In nearly every case, they’ve created training programs intended to expose incoming talent to a cross-section of what the company has to offer, along with exposing the new hires to senior management. A common thread that weaves through their thinking: find, cultivate and nurture the future stars in their own farm systems before raiding the competition.

Mike Theilmann, executive vice president and chief human resources and administration officer for JCPenney, believes that filling the pipeline with talent takes a multi-pronged approach. Penney maintains visibility on college campuses throughout the nation, runs an active internship program and invests time and money on college recruits.

“Ours is a very structured, project-driven program with senior management involvement,” Theilmann says. “We believe in providing our interns meaningful and challenging opportunities with exposure to the business. … If we recruit someone out of college, we bring them into one of three training programs” for up to seven months.

Theilmann believes in having executive management teams on campuses and insists on seeking out specific talent. “We like to pick the right people, give them the right exposure and the right training and be sure that the boss they’re working for has a vested interest in their development.” Retention rates are high: Since the first program in merchandise training was put in place five years ago, approximately 80 percent of the recruits who go through the program step into jobs at the company.

At Macy’s, the training is comprehensive and considered by some to be the industry vanguard. The programs are broken down into four areas – executive development, store management executive development, buying executive development and planner development – and CEO Terry Lundgren is as hands-on as time permits.