What a new CEO at Target will face

Dan Bobkoff May 5, 2014
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What a new CEO at Target will face

Dan Bobkoff May 5, 2014
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It’s not just the data breach that sealed Target CEO’s Gregg Steinhafel’s fate. He resigned Monday, effective immediately – and Target is facing existential questions in his wake . 

“What is Target’s real value proposition in today’s retail environment?” says Rajiv Lal, retailing professor at Harvard Business School. 

Since Steinhafel became CEO in 2008, Target’s sales have struggled. Online competition is fierce. It spent a lot of money trying to get a toehold in Canada. And, Target misfired trying to be more like a supermarket.  

“You can’t really have a cachet in terms of design and in terms of fashion, and at the same time sell food,” Lal says.  

Many other retailers now sell designer wares at Walmart prices. But since that data breach, sales have tumbled at Target even faster.   

Finding a better leader isn’t always so easy, though.  

“It’s costly to fire a CEO,” says Luke Taylor, assistant professor of finance at the Wharton School at the University of Pennsylvania.  

And, according to his research, over the last 20 years top CEO’s are getting fired more often: about 2 percent each year.  

But for companies like Target, it’s expensive and unpleasant to search for someone new. And, new ideas might not be an improvement.  

“Bringing on someone with a new vision is risky,” Taylor says. “Sometimes the risks pay off. Sometimes they don’t.”

And many CEOs don’t stay on the job long. Most just last about five years, according to a new report. 

“They can’t come up with eight year plans when you’re talking more like five year turnover,” says Gary Neilson, who co-wrote the report at the consultancy Strategy&, formerly known as Booz & Company. 

Target now has to find someone who can both restore customer confidence after the data breach, and survive in the retail climate more generally. 

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