The year ahead: What a fashion company will look like in 2023

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In 2023, fashion executives have the opportunity to review their talent rosters and team structures. Despite the many challenges on the horizon, as inflation dampens consumer sentiment and costs jump for many businesses, fashion leaders cannot put off the hard work of reinventing their organizations.

As fashion companies chase growth in the unpredictable year ahead, talent and organizational structures will become key differentiators in performance. This follows an industry facing unprecedented challenges — ranging from pandemic-imposed remote work patterns to supply chain turmoil — and forcing entrenched processes to evolve. Challenges likely to persist in 2023 — 84 percent of fashion executives in the BoF-McKinsey State of Fashion 2023 survey expect the industry to worsen next year. This will have consequences for their business; 97 percent expect an increase in cost of goods sold, as well as selling, general and administrative costs.

It will be tempting to put investment in talent and operational improvements on hold to focus on managing the economic slowdown. But the most successful leaders will balance short-term crises with long-term needs by prioritizing new hires and elevating existing roles to position their companies for growth. In our survey, 55 percent of executives cited talent shortages as one of the top three areas that will have the biggest impact on their business in the coming year. Executives should work to align their organizations, from top management to front-line staff, around key strategic themes that will drive growth.

For some companies, the moment may call for elevating existing roles around critical areas such as sustainability, even creating new C-suite positions that fill expertise gaps within senior leadership.

For other brands, there will be a greater need to build on existing functions, such as those that support multi-channel strategies, and empower them with expanded leadership roles that have increased responsibility and decision-making responsibility. HR teams in charge of the company’s talent can be involved in expansions and increases in roles. When Chanel named Unilever’s chief human resources officer Leena Nair as its new CEO in 2021, the fashion brand signaled to teams of people in the industry that they were strategic operators. “HR is no longer a backroom department,” Nair said in an interview before her appointment. “It’s a vital part of running any successful business.”

Ripple effect

The talent market is ripe for a reset. The surge in voluntary departures since the start of the Great Resignation of 2021 has exposed a deep rift between companies and their employees — in the US, for example, it has led to 25 percent higher voluntary resignation rates than pre-pandemic levels. According to a recent McKinsey survey, 76 percent of people who have left consumer retail jobs since the start of the pandemic have gone to another sector, the highest exit rate of any industry.

Half of fashion professionals believe the industry has lost the appeal it once had as other sectors such as technology overshadow it in terms of career progression and pay. An exodus can also be seen in C-suites as top executives leave for roles outside the fashion industry.

The employee exodus is unlikely to reverse completely as economic conditions worsen in the coming year. Retail workers remain difficult to retain, with 50 percent of U.S. frontline workers and 63 percent of retail managers saying they are considering leaving their jobs. Many people quit their jobs because they are looking for better opportunities for career advancement, more flexibility in their work and private lives, or a higher salary. Companies will feel more pressure to offer clear progression paths along with prioritizing culture, employee wellbeing and flexibility to attract top talent, regardless of role or seniority.

Meanwhile, the industry still needs to address diversity, equity and inclusion, including in senior management positions. DE&I experts suggest that the industry’s work has only just begun when it comes to racial and ethnic diversity. Male candidates accounted for 76.9 percent of all CEO appointments in the fashion industry in 2021, according to retail company Nextail. Less than one-third of board positions are held by women in UK fashion retailers, according to Drapers’ annual survey.

The new C-Suite

As fashion companies prepare for the challenges ahead, some are rethinking their senior team structures, seizing the opportunity to introduce new or adapted C-suite roles that focus on increasingly critical areas such as diversity, sustainability or logistics. Among other benefits, these appointments send a signal to the rest of the company, shareholders and customers about what leadership is focused on in both the short and long term.

One C-suite role gaining traction in the industry aims to help address companies’ sustainability practices. C-suite teams in almost all of Europe’s 25 largest fashion companies can have at least one executive with experience in environmental protection, society and governance. These leaders design and implement a range of sustainability strategies, from reducing carbon footprints to reducing waste to improving labor relations. Sustainability leaders are most successful when they are integrated into the rest of the business. Instead of creating an entirely new role, some companies are introducing a sustainability component into an existing one.

British fast fashion retailer Primark, for example, has put Michelle McEttrick, who is the company’s first chief customer officer, in charge of leading its sustainability strategy. These roles can also open the door to a job at the top of the C-suite. For example, at the Swedish fast fashion company H&M, Helena Helmersson was named CEO in 2020 after serving as the company’s head of sustainability.

Supply chain roles are also gaining importance in the C-suite, largely due to the increasingly complex nature of today’s manufacturing. Supply chain leaders are the strategic bridge that connects manufacturing, procurement and sales, and operations and planning, while serving as a conduit for robust risk management and mitigation. Their work requires a broad view across all departments to respond to crises, enable their companies to innovate production strategies and recruit specialized logistics talent.

Another C-level bridge-building position is the chief omnichannel officer, a role that consolidates offline and online channels under one operational umbrella as brands rethink physical strategies alongside e-commerce and other channels. For example, Parisian record label Isabel Marant appointed a new general manager for all channels in September. Meanwhile, new chief experience officers, chief brand officers and chief technology officers are tasked with overseeing and unifying customer experiences across distribution channels at companies such as Under Armour, Moncler and New Look.

Even outside the C-suite, many fashion companies are investing in digital and data expertise with the goal of becoming omnichannel organizations and achieving enterprise-wide digitization. At consumer companies that appear on the Best Places to Work rankings, half of the executives surveyed said their businesses are integrating digital teams across functions and geographies. In contrast, only 26 percent of respondents in companies further down the scale could say the same. Companies that ranked highly were also 1.4 times more likely to maintain digital teams in-house rather than outsource.

Meanwhile, fashion executives have the opportunity to empower teams responsible for communication strategies at a time when their companies may be expected to take a stand on sensitive topics that affect society at large, such as the war in Ukraine. Institutional communications and liaison roles will require specialist knowledge in areas such as climate change, trade policy and data privacy. These roles will be crucial in ensuring that brands can make a meaningful contribution not only to trade organisations, but also to cross-industry forums and policy-making bodies.

LVMH, for example, is an official partner of the World Economic Forum in Davos, while Kering’s chief sustainability officer is also head of international institutional affairs.

As the fashion industry becomes intertwined with government regulations that have the potential to impact business operations, communications and public relations teams will play a greater role.

For consumer-facing communications on complex social issues, these teams will need to understand the changing concerns of diverse audiences and collaborate with other internal teams—such as diversity and inclusion executives, marketing strategists, and sustainability experts—to design campaigns and messages. .

Preparation for changes

Even amid these times of tighter cost management, fashion companies will need to prioritize investing in new skills and collaboration structures. A successful talent strategy will require recruitment and reskilling, encouraging HR teams to identify current and future skills gaps and strategize to address them.

Nearly 90 percent of executives predicted a skills shortage in their organizations, according to a 2021 survey, but only one-third said recruiting plans are robust enough to meet talent challenges. In 2022, fashion executives cited supplier management, artificial intelligence and automation, and omnichannel customer experience as the biggest capability gaps in their organizations.

The five biggest skill gaps

Competition will be fierce across the industry for the most in-demand roles. This includes ESG compliance specialists, including lawyers who focus on international law and can help companies manage evolving ESG regulations. Also in demand are supply chain and operations managers, as well as support roles such as merchandise range planners, as well as logistics and pricing specialists.

There is plenty of room for upskilling and re-skilling, with the dual benefits of serving as a retention tool and improving a company’s competitiveness. The business case even in economically uncertain times is sound: education and training typically generate a return on investment that is between two and a half and three times higher than employment, according to McKinsey research.

This has not gone unnoticed by large companies that already invest heavily in employee education. Amazon, as part of its “Upskilling 2025″ initiative, is investing $1.2 billion to train more than 300,000 employees for higher-skilled jobs as automation eliminates many existing roles. At Walmart, the big-box retailer, training support ranges from workshops on basic retailing and emotional skills for front-line staff to subsidies for permanent employees studying retail management at university.

Enabling agility across the organization will be critical to building the resilience needed in 2023 and beyond. Speed ​​will be essential, underpinned by cross-functional teamwork that avoids silos, allowing fashion executives to focus their talent on strategic themes they believe will unlock growth. Top management must be ready for change. Leadership teams must consist of executives with a diverse range of skills that reflect strategic priorities.

Above all, fashion leaders will need to prioritize talent and rethink organizational evolution as the competitive advantage it has become. HR leaders will need to continue to rethink the way employees work together to ensure balance and efficiency around telecommuting or flexible work policies that keep people engaged. Companies defined by strong leaders in diversity and inclusion and focused on transparency will help attract top talent and enable businesses to grow and become even more resilient in the years to come.

This article first appeared in The state of fashion in 2023a comprehensive report on the global fashion industry, jointly published by BoF and McKinsey & Company.

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