25 Years Later, The Chickens Come Home to Roost
Aug 14, 2018 – by Kirk Palmer
The Death of Department Store Training Programs
The dynamic of initial talent acquisition and development has permanently changed in our industry. Simply stated, department store training programs historically were the pipeline that provided the majority of executive talent for the broader retail industry, including specialty stores, big box, discount/off-price, category specific formats, Ecommerce and the related wholesale side of the business. The numbers of remaining training programs are a shadow of what they once were and this “Pipeline for Talent” is no longer in existence to supply the management needs of the broader retail and related wholesale industry.
In 1995, an article appeared in Bloomberg Business News, called “Where Will Retailing’s Top Talent Come From?” I was quoted as follows: “Department store training programs have historically provided the talent pool from which most retail executives are drawn. Industry consolidations, downsizing and acquisitions have cut the number of department store companies and thus the number of training programs. In 1985, seven department store holding companies had 87 separate department stores, each with its own college recruiting system and executive training program. In 2005, there were two dominant department store holding companies with 15 department store divisions. These numbers will not come close to filling the needs of non-department store retailers, whose numbers have risen significantly in the past 10 years.”
In 1996, the New York Times ran an article called “Sorry, We’re All Out Of Great Merchants”, which discussed the same issue: “In my mind, this is a huge issue in our industry that none of us are addressing. There is not a pipeline to develop talent anymore, and when companies go looking for a chief merchant, there is no one there to replace them.”
In the 1970s through the 1990s, many (perhaps most) of the people running retail businesses started in the department store sector. Even in 2013, this is still significantly true.
Back in 1985, the 87 department stores in America brought in an average of about 40 trainees per year. That was about 3,500 bright new faces coming into the industry, all with thoughts of becoming senior executives. Let’s say that half wash out over the first five years. That’s still 1,750. Of those, let’s say 20% of the remaining make it to a GMM level. That’s 350. Of those, let’s say 20% make it to a Principal level. That’s 70 people. You can argue the percentages any number of ways, but we felt about 2% of the trainees hired make it to this level.
By 1995, there were fifteen department store divisions. They were bigger but leaner, so on average each hired about 60 trainees. That’s 900 bright new faces. Using the same formula as above, 2% means this group should yield 18 principal level executives versus the 70 from 10 years prior.
By 2005, most of those fifteen stores were gone. In March of 2005, Federated had announced plans to buy May Department Stores and a few years later, there was one major department store chain left standing: Macy’s. Today, department store training programs are no longer the pipeline for talent.
While the number of department store chains has fallen dramatically, the number of retail formats and companies has grown exponentially. There are hundreds of significantly sized retail businesses in the U.S. today. But many of these other retail formats have not yet developed their own internship, college recruiting and training programs. Some have seen and are seeing positive results. But it has not been widespread enough to fill talent voids, which is one reason companies are often forced to seek talent from outside. Some businesses have also developed programs for specific functional areas such as store line, supply chain or finance, and that’s positive. But by sheer numbers, these programs have not replaced the department stores programs that provided the broader general management experience which groomed talent to run entire businesses.
Why They Worked So Well in Producing Senior Executive Talent
Getting selected into a department store training program used to be a big deal. Many companies had well-developed programs with top-flight schools and were highly sought after by students. Once selected, trainees could expect a formal program, which included classroom instruction taught by the senior executives in the business, as well as rotational assignments. These companies were willing to move young executives from one experience to another in order to prepare them for broad general management responsibilities.
Most programs were set up to bring talent into the merchandising function. Early career paths could go from merchandising to stores, and also into other areas of the business. Along the way, some would find their career paths within specific corporate functions or in stores. Many would eventually move back into merchandising, as this was (and still is) the function from which much of the senior and principal level talent is drawn. Within merchandising, department stores were very willing to move people among various product categories. This served to further differentiate top talent, as the “stars” built a track record of success from various categories.
A critical factor was the importance of mentoring. From a company culture standpoint, senior executives knew they were expected to provide mentoring and that they would be rewarded through promotion for their skills in developing talent. Seasoned executives in department stores took enormous pride in their mentorship and development of talent.
While this may sound like the wistful ramblings of a bygone era, there are still mentors in our business. There are still companies hiring directly from college campuses and there are still training programs. It’s just not to the extent it once was. The industry’s main “Pipeline for Talent”—department store training programs—is gone.
Therefore, it has become each company’s responsibility to develop their own internal executive talent. Each company needs their own “Pipeline for Talent” through internship, college recruiting, training programs and career paths that provide timely and compelling opportunity. There will always be a need and good reason to augment by hiring externally. That’s what I do for a living. But the best companies know they need to replace department stores with their own college recruiting and training programs.
If you are not one of those companies but are ready to consider building your own Talent Pipeline, here is what to do:
First, develop relationships with school placement centers. Hiring top students is competitive and you need to be able to show how your company can provide a compelling opportunity to their best students.
Second, select students with the right qualities, attributes and characteristics who will fit into your culture and don’t let anything stop you from recruiting those students.
Third, pay competitively or better to attract the best.
Fourth, structure your programs so you can promise significant responsibility and exposure to various aspects of the business early on. Most students join companies for the ability to have significant responsibility as much as they join for the financials.
Fifth, live up to your commitments and give your internally developed talent the opportunity as they earn it. This will also enhance your reputation and ability to recruit future talent as you point to success stories.
Sixth, make sure your senior management understands that they are expected to be mentors and to develop talent as a core part of their responsibilities. If you are the CEO, show your commitment and leadership by mentoring one or more of your trainees.
As I called around for comment on this article, a number of companies felt they didn’t have “the right level of position” to put trainees into. The logic seemed to be that if they had a specific junior position, it needed to be filled with someone who had specific experience in the particular function. I disagree. I believe that companies who think this way are often hesitant to promote from within and tend to select people more on the basis of specific knowledge and experience, rather than on characteristics appropriate for success on a broader basis. I believe smart and effective companies base hiring decisions more on overall qualities, attributes and characteristics that fit the company and culture, rather than specific knowledge factors as the lead criteria.
Factors such as intellectual capacity, passion, and the personality characteristics that fit the culture of an organization should take precedence over specific knowledge of a function. You can teach a smart person the mechanics and specific knowledge needed in a specific function, especially at an entry level. You can’t teach intellect, passion or personality characteristics that match the culture of your company.
The good news is that as of 2013, more and more companies have taken control of their own entry level hiring and talent development destiny. The few remaining department stores still run quality programs and more and more of the country’s other large retailers are developing management recruitment and training programs.
I believe these companies will see results through a decrease in turnover, an ability to have more talent options, higher morale that comes with internal promotions, and ultimately positive business results.