Next year: what a fashion company looks like in 2023

In 2023, fashion leaders will have the opportunity to review their talent rosters and team structures. Despite the many challenges that lie ahead, as inflation dampens consumer sentiment and costs rise for many companies, fashion leaders cannot afford to put off the difficult work of reinventing their organizations.

As fashion companies chase growth in the unpredictable year ahead, talent and organizational structures will become a key factor in performance excellence. It comes on the heels of the industry facing unprecedented challenges — ranging from remote working patterns imposed by the pandemic to supply chain disruptions — and forcing long-established operations to evolve. Challenges likely to continue in 2023 — 84 percent of fashion executives in the BoF-McKinsey State of Fashion 2023 survey expect the industry to get worse in the next year. This will have ramifications for their business; 97 percent expect higher costs of goods sold as well as general and administrative expenses of the sale.

It will be tempting to put investments in talent and operational improvements on hold to focus on weathering 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 CEOs cited the talent crisis as one of the top three areas with the greatest impact on their business in the coming year. Executives must work to align their organizations, from senior management to frontline employees, around the key strategic topics that will drive growth.

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

For other brands, the greater need will be to build on existing functions, such as those supporting omnichannel strategies, and enable them through expanded leadership roles that have increased decision-making responsibility and accountability. HR teams responsible for company talent may be included in role expansions and heights. When Chanel appoints Unilever Human Resources Director Leena Nair as its new CEO in 2021, the fashion brand signaled to teams across the industry that they are strategic operators. “HR is no longer a back department,” Nair said in an interview prior to her appointment. “It is a vital part of running any successful business.”

wavy effect

The talent market is ready to reset. The sharp increase in voluntary attrition since the beginning of the great resignation of 2021 has created a deep rift between companies and their employees — in the United States, for example, resulting in voluntary resignation rates 25 percent higher 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 entered another sector, the highest exit rate of any industry.

Half of fashion professionals believe that the industry has lost its once attractive appeal because other sectors such as technology are outpacing it, in terms of career growth opportunities and wages. An exodus can also be observed in C-suites as top executives leave for roles outside the fashion industry.

The exit of employees is unlikely to fully reverse as economic conditions worsen in the coming year. Retail workers remain difficult to retain, with 50 percent of frontline workers in the United States and 63 percent of retail managers reporting that they are considering leaving their jobs. Many people give up smoking because they are looking for better opportunities for career advancement, greater flexibility in work and life, or higher salaries. Companies will feel more pressure to offer clear progression paths along with prioritizing culture, employee wellness 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 is just getting started when it comes to racial and ethnic diversity. Male candidates made up 76.9 percent of all CEO hires in the fashion industry in 2021, according to retailer Nextail. Less than a third of board positions are held by women at UK-listed fashion retailers, according to an annual survey from Drapers.

New C Suite

As fashion companies prepare for the challenges ahead, some are rethinking the structures of their senior teams, seizing the opportunity to offer new or modified roles in C Suite that focus on increasingly critical areas such as diversity, sustainability or logistics. Among other benefits, these designations send a signal to the rest of the company, shareholders and customers about where the leadership is focused on in the short and long term.

C-suite’s role gaining traction in the industry aims to help address corporate sustainability practices. C-suite teams in almost all of Europe’s 25 largest fashion companies can count on at least one CEO with environmental, social and governance expertise. These leaders design and implement a range of sustainability strategies, from lowering your carbon footprint to reducing waste to improving business relationships. Chief sustainability officers are most successful when they are integrated into the rest of the business. Rather than creating an entirely new role, some companies bring an element of sustainability to an existing role.

For example, UK-based fast-fashion retailer Primark has put Michelle McKittrick, the company’s first chief customer officer, responsible for leading its sustainability strategy. These roles can also open the door to a C-suite job. At Swedish fast-fashion company H&M, for example, Helena Helmerson was named CEO in 2020 after serving as the company’s head of sustainability.

Supply chain roles are also gaining prominence in Group C, largely due to the increasingly complex nature of manufacturing today. Senior Supply Chain Officers are the strategic bridge connecting manufacturing, procurement, sales, operations and planning, while serving as a conduit for robust risk management and mitigation. Their work requires broad vision across departments to respond to crises, enabling their companies to innovate production strategies and to hire specialized logistics talent.

Another C-level bridge building position is the Chief Multi-Channel Officer, a role that integrates offline and online channels under one operating umbrella as brands re-evaluate brick-and-mortar strategies alongside e-commerce and other channels. For example, the Parisian label appointed Isabelle Marant as its new head of omnichannel in September. Meanwhile, new Chief Experience Officers, Chief Brand Officers and Chief Technology Officers are tasked with overseeing and standardizing customer experiences across distribution channels at companies like Under Armour, Moncler and New Look.

Even outside of the C-suite, many fashion companies are investing in digital expertise and data with the goal of becoming omnichannel enterprises and achieving enterprise-wide digitization. In the consumer companies that appear in the Best Places to Work rankings, half of the CEOs in a survey said their business integrates digital teams across functions and geographies. In contrast, only 26% of respondents to companies that fell behind in the ranking could say the same. High-ranking companies were also 1.4 times more likely than their low-ranking counterparts to keep digital teams in-house rather than outsourcing.

Meanwhile, Fashion Directors have an opportunity to support teams responsible for communication strategies at a time when their companies may be expected to take a stand on sensitive topics affecting society at large, such as the war in Ukraine. Corporate communications and liaison roles require specialized knowledge about areas such as climate change, trade policy and data privacy. These roles will be critical in ensuring that brands can make meaningful contributions 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 the head of international corporate affairs.

As the fashion industry criss-crosses government regulations that have a high potential to affect business operations, communications and public relations teams will have a greater role to play.

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

Prepare for change

Even in the midst of these times of tighter cost management, fashion companies will need to prioritize investing in new skills and collaborative structures. A successful talent strategy will require hiring and resharpening, prompting HR teams to identify current and future skill shortages and develop a strategy to address them.

Nearly 90 percent of executives anticipated a skills shortage in their organizations, according to the 2021 survey, yet only a third said staffing plans were robust enough to meet talent challenges. In 2022, fashion executives cite supplier management, artificial intelligence, automation, and omnichannel customer experience as the biggest capability gaps in their organizations.

Top five capacity gaps

Competition will be intense across the industry for the most sought after roles. These compliance professionals include ESGs, including attorneys who focus on international law and can help companies navigate evolving regulations related to environmental conservation and corporate governance. Supply chain and operations leaders are also sought after, as are support roles such as marketing assortment planners as well as logistics and pricing specialists.

There is a lot of scope for reskilling and reskilling, with the dual benefits of serving as a tool for retention and improving the competitiveness of the company. The feasibility study is sound even in uncertain economic times: Education and training typically generate two-and-a-half and three times more return on investment than employment, according to McKinsey Research.

This is not lost on the big companies that are already investing 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-skill jobs where automation eliminates many existing roles. At large retailer Walmart, training support ranges from workshops on basic retail and soft skills for frontline employees to subsidies for permanent employees to study retail management at university.

Enabling resilience at the enterprise level will be critical to building the needed resilience in 2023 and beyond. Speed ​​will be essential, underpinned by cross-functional teamwork that avoids silos, enabling Fashion Directors to allocate their talents to the strategic topics they believe will unlock growth. Top management must be ready for change. Leadership teams should include executives with a diverse set 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 how employees work together to ensure balance and efficiencies around remote or flexible working policies that keep people engaged. Companies identified by strong Diversity and Inclusion leaders that focus on transparency will help attract the best talent and enable the business to evolve and become more agile in the years ahead.

This article first appeared in fashion status 2023An in-depth report on the global fashion industry, co-published by BoF and McKinsey & Company.

Leave a Comment