Wesfarmers will soon have a new chief executive on deck, and while there are challenges for the retail giant on the horizon, retail analysts and leadership experts say there’s a lot to like about the company’s succession strategy.
The company announced on Tuesday that Rob Scott, who has been running Wesfarmers’ industrial division since 2015, will be made deputy chief executive as he embarks on a handover period before replacing current chief Richard Goyder, who will step down at the end of 2017.
Goyder, who has been at the helm since July 2005 and oversaw Wesfarmers’ purchase of the Coles Group, has said that while the decision to step down wasn’t easy, he is looking forward to the handover period with Scott.
“I continue to enjoy the challenges of leading this outstanding and diverse company and appreciate the opportunities it has given me,” he said.
Read more: Wesfarmers beats out Woolworths to become Australia’s largest company
Stability has been an important part of the Wesfarmers business over the past century—the company has had eight chief executives in 103 years—and picking its next leader internally is being seen as a move that will ensure a smooth transition.
Here are three key lessons for your business from this leadership approach.
Wesfarmers has traditionally drawn on talents from within its own ranks, and the most recent transition should remind businesses of the power of cultivating the leadership talents of your staff while they work their way up in the business, according to Peter Gahan, director of the Centre for Workplace Leadership at Melbourne University.
“The evidence tells us that particularly large organisations need to be cultivating a pipeline of leadership talent. If they don’t, they’re at risk of not being able to make the transition very successful,” Gahan says.
Scott has been able to show his knowledge and leadership capabilities within the Wesfarmers business, starting at the company in 1993, before venturing into investment banking and returning the in 2000s to work in a variety of managing director roles across the business.
Giving staff opportunities to show leadership on projects throughout their time with a business will ensure there are several potential candidates for a succession plan when the time comes, says Gahan. This can help prevent a business from having to scramble and perhaps ending up paying a higher price for good leadership.
“What organisations need to do is to generate a pipeline of leadership capability at different levels to provide different potential candidates for chief executives; [people that] have demonstrated, for example, in a part of the business that is not doing well, the ability to turn around and make it good,” Gahan says.
The Wesfarmers conglomerate contains a number of complex parts, and ensuring that new management have shown themselves to be in line with the strategy of the business is key to making stakeholders feel comfortable, says Gahan.
“Wesfarmers is interesting. Over the last few years in particular, it’s been very successful in executing its strategy,” he says.
“When you have a change at the top, the consequences can be significant.”
The business has highlighted there will now be a solid transition period in the lead up to the year’s end, with outgoing chief executive Goyder to leave at the year’s end.
However, there are a number of unknowns around Scott’s strategy for the business, particularly around Wesfarmers’ coal interests, which Fairfax reports he may considering selling if the price is right.
However, Dr Gary Mortimer, associate professor at Queensland University of Technology Business School, says on the whole, the leadership change will still mean the values of the company stay similar.
“He comes across with an element of ingrained Wesfarmers values and understands the nature of the business. There’s going to be that handover period,” Mortimer says.
Your business doesn’t necessarily have to only look within for talent, but no matter where a new leader or chief executive comes from, you’d better start planning well in advance, says Gahan.
“If any organisation leaves it late to evaluate the talent in the marketplace, they’re less likely to get what they want,” he says.
While the Wesfarmers leadership model has involved a lot of internal hires, smaller operators need to remember to network with other businesses to find their own talent too, Gahan says.
“You have to understand what the talent pool looks like outside. I think that’s a good point for small and medium businesses—to build relationships with other senior management. They might become part of the network that helps you find [talent],” Gahan says.
The risk of not doing so could mean that when the time comes to transition, there are fewer options for finding the right person to keep business strategy on track, Gahan believes.
“The idea is that you need to be scanning the market on a regular basis to understand what’s there,” he says.
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