Target CEO Resigns: Will This Be a Catalyst for Renewed Employee Engagement?

Target announced the resignation of the Chairman, President and CEO, Gregg Steinhafel yesterday following the data breach that compromised the credit and debit card information of over 110 million customers last December. Target’s attempt to win back the confidence of their customers has been referred to as a “clean slate” strategy to regaining customer’s trust. But I argue that this move wasn’t as good for customers as it was for Target’s employee engagement.

Since the breach, Target has been struggling. Fourth quarter sales were down in the period just after the breach, which is the biggest quarter for most retailers. In addition the stock price is down. Needless to day, Steinhafel has been under increasing pressure over the past few months.

But Steinhafel is the latest of the senior management of the US’s third largest retailer to step down. Earlier this year, Chief Information Officer Beth Jacob resigned. Steinhafel was quoted in the LA Times from a letter to the Associated Press:

“The last several months have tested Target in unprecedented ways. From the beginning, I have been committed to ensuring the Target emerges from the data breach a better company, more focused than ever on delivering for our guests.”

In my second book, I talk about how people in an organization will follow what the leader does. This applies for both good and bad behaviors. So sometimes the leader truly values his employees and what they contribute, like Julian Richer, Founder of Richer Sounds, who put his company in a trust that turns over to his employees after he dies. Then there are other who don’t really understand or value the customer experience, like the CEO Michael O’Leary of Ryanair, and as a result the customer experience at the airline is, in a word, wretched.

My impression of Stenhafel is that he was focused on presenting Target’s customers the best experience possible. Cnet.com reported that he felt he was personally accountable for the data breach and that his top priority was to fix the problem. In the past five months, the company has been working to improve the trust issued that Target shoppers have with the organization, which includes being the first major retailer to implement the chip technology next year that would prevent the type of data breach they experienced last December.

I have been following this story closely since it broke in December. My first post speculated that Target would suffer a hit to their loyalty since customers were feeling neglected and disappointed, two emotions that the breach evoked and also two emotions that destroy value for an organization. My second post argued that the efforts following the breach were draining Target’s emotional bank account, which is another way of describing the emotional engagement and loyalty that you have with your customers based on the customer experience you provide.

So my question here with this post is will this “clean slate” strategy with Steinhafel’s resignation be what Target needs to put this experience behind them? Will the changing of the guard at the top be what the organization needs to regain the trust of the average shopper? Honestly, I don’t think so, but it does send the right message to the Target team, which can be great for employee engagement.

One thing I haven’t really discussed in any of my posts so far is the effect this data breach may have had on employees. When you work at a company when something big like this goes wrong, it hurts morale. Employees that may be unhappy before are likely to only get worse and those on the fence morale-wise to move to the dark side. This kind of trend is terrible to an organization and as a result to the customer experience. If happy employees make happy customers, you can certainly ascertain what kind of customers disgruntled employees make!

But Steinhafel’s resignation shows Target employees that the leadership expects every member of the team including themselves to do whatever they can to promote an environment where customers are “guests” and can trust that their transactions are safe at the check out. And if they are in charge when that situation is compromised, you do what you can to set up the solution and then step down so that the rest of the team can fix it.

Trust is tricky. It takes a long time to build and just one data breach of millions of customers’ personal information to destroy. Target knows this. They have made several good moves to show customers that they know it. Yet, the stock price is down 3.45% at the time I am writing this (and still dropping) and sales recovery has still been slow since December.

As it pertains to corporate culture, however, Steinhafel was wise to step down. So was Jacob. This tells the others in the organization that rather than blaming others for the problem, leadership takes responsibility.  Responsibility is critical to good leadership and speaks to the quality of the organization they lead. It tells employees that the “buck stops here” with senior management and they expect the same kind of responsibility from their team.