PARIS, France — Following the death of Karl Lagerfeld, Chanel, his employer of more than 35 years, named the designer's successor: long-time collaborator and studio director Virginie Viard, who will partner with long-time Chanel image director and Lagerfeld confidant Eric Pfrunder. The announcement put to rest, at least for now, speculation that the luxury megabrand might have opted for a big-name designer to succeed Lagerfeld, such as Hedi Slimane (now at Celine), ex-Celine designer Phoebe Philo or former Lanvin star Alber Elbaz.

For close observers, Chanel's choice to promote from within was expected. Despite the grand fashion shows Chanel staged at the Grand Palais each season, the billionaire Wertheimer family, which has been involved with the company since the 1920s and now owns it outright, is not known for shock and awe. Back in 1982, Lagerfeld's appointment to the then-dusty French label was seen as a radical move, but they had waited more than a decade after Gabrielle "Coco" Chanel died to name him as her successor. Elevating Viard allows for continuity and minimises upheaval both internally and externally.

Chanel, after all, has one of the world's strongest consumer brands and a thriving business, generating $9.6 billion in 2017, up 11 percent from a year earlier. Whether Viard is a viable long-term solution, as some have wondered, is a matter for another day. For the moment, the Wertheimers seem to have made the right move. (LVMH's Fendi, by contrast, has yet to name a successor for Lagerfeld, who was the head of womenswear at the Italian furrier for 54 years.)

Illustration by BoF

But what are the considerations that go into such a decision? What if a business isn’t as strong as Chanel? What if the exit is unexpected? The only thing that’s certain is that you have to do something.

“The worst you can do in terms of succession planning is not to have any succession planning,” said Pierre Mallevays, founder and managing director of Savigny Partners. But it’s not easy. “The landscape of possible hires is always moving,” continued Mallevays. “People who are happily committed to a job may be open to a move six months later, and talent who are potentially available now might be working elsewhere the following season.”

Some brands groom executives or creative directors inside the company to replace the current leaders, others seek outside talents to shake things up. Some entrust the brand to one visionary, others appoint a team.

"The most important question is how to create impact, and who is able to create impact," said Floriane de Saint Pierre, a top recruiter known for placing Christopher Bailey at Burberry, Alber Elbaz at Lanvin, Paul Andrew at Ferragamo and Hedi Slimane at Yves Saint Laurent, among other high-profile moves. "It can be one person, but it can also be an organisation with several creative leaders."

Brands looking to keep up the momentum on an already-healthy business, like Chanel, may focus on continuity, while those looking to shake off the dust of a laggard — like Dior before the ascension of John Galliano or Gucci before Alessandro Michele — may seek disruption. Once that fundamental strategic decision is made, it is time to search for a candidate who can deliver. Sometimes the chosen candidate comes from within; sometimes he or she comes from a competitor.

“The very top brands will not look at who is available, they will look at who would be a good fit, irrespective of whether people are open to moving,” Mallevays said. “They will assume — rightly so — that the job’s attractiveness and the uber-generous pay package for the chosen candidate will be enough to bring him or her on board.”

Here, BoF breaks down four basic scenarios with their associated opportunities and pitfalls.

Promoting an Insider to Maintain Continuity

Maintaining continuity is often the favoured approach when a succession is unplanned, as was the case after Alexander McQueen’s suicide in 2010. He was replaced at the brand he founded by long-time right hand and head of womenswear Sarah Burton, who over the past decade has deftly managed to pay homage to her long-time collaborator while delivering fantastical, critically lauded fashion that has driven sales growth. At the time of McQueen’s death, the brand had 11 directly operated stores and less than €100 million in annual sales. Today, there are 64 stores and sales have more than tripled to between €350 million and €400 million (parent company Kering does not break out performance for its smaller brands).

The worst you can do in terms of succession planning is not to have any succession planning.

"Sarah's been helping build the codes of the house almost since day one," current chief executive Emmanuel Gintzburger recently told BoF. "The potential of the house relies mainly on the expression of this vision and our capacity to build communities that want to share these values [and] the essence of the brand." (Kering recently set an ambitious new target for Alexander McQueen — €1 billion in annual revenue — and the industry will be watching to see whether Gintzburger and Burton are able to deliver.)

The promotion of Maria Grazia Chiuri and Pierpaolo Piccioli in 2008 to lead Valentino was another case of continuity delivering positive results — but only after the hiccup of Alessandra Facchinetti's year-long stint in the role following Valentino Garavani's retirement. Luckily, the brand was able to course correct. Facchinetti's fast exit made way for Chiuri and Piccioli, then a duo who had worked for years in Valentino's backrooms. They managed to restore the brand's runway reputation while developing a lucrative accessories offering.

Ralph Lauren and Giorgio Armani, the most famous founding designers still controlling their respective labels, are expected to follow a similar path, promoting team members who can continue to execute their vision. (Ralph Lauren publicly denied having any plans to bring in former Burberry designer Christopher Bailey, as had been speculated.)

In 2017, Armani — who has set up a foundation in his name to "safeguard the governing of its assets," which essentially means that it will be hard for another group to buy his business, of which he is currently the sole shareholder — told BoF that he is considering internal and external candidates for creative succession. "As I have said recently, within the company there are very capable people who have been working with me for several years," he said. "But I am also looking around, not only in Italy but abroad as well, because there are many young designers with fresh and interesting ideas, who would be able to express well a brand's values."

That seems to exclude long-time rumoured successor Stefano Pilati, who has been consider the natural choice by many insiders. Other names that have been tossed about in the past include those of the duos behind Proenza Schouler and The Row, although these are more farfetched.

The very top brands will not look at who is available, they will look at who would be a good fit.

At Ralph Lauren, names that have been circulated include Philo and Bailey. Joseph Altuzarra is a left-field contender. However, it’s more likely that Lauren, who is in good health and still comes to the office four days a week, will use his majority-shareholder power to create a plan that calls for the elevation of internal talents, many of whom are already leading the company’s sub-brands, such as Michael Rider, who runs the Polo Ralph Lauren women’s business, or John Wrazej, who has led the Polo men’s business for more than 30 years.

But promoting from within doesn't always work. See the case of Bill Gaytten, who led womenswear at Dior (after the unceremonious dismissal of long-time designer John Galliano in 2011) for only a short period until LVMH management was able to install Raf Simons. Former Chloé designer Hannah MacGibbon, who began working at the label in 2001 before being promoted to creative director in 2008, was given three years to make her mark. However, Richemont executives grew impatient and installed Clare Waight Keller in 2011. Her commercial sensibility was viewed as a boon to the brand, increasing sales by double-double digits each year until they reached an estimated €450 million when she left for Givenchy in 2017. (Richemont does not break out figures for its fashion brands.)

Promoting an Insider to Create Disruption

Alessandro Michele's success at Gucci proves that self-disruption can be wildly effective. The previous designer, Frida Giannini, had also worked under her predecessor, Tom Ford, creating the continuity the brand thought it needed after his abrupt exit. For a while, it worked. But fast-forward 10 years, and the strategy was stalling, as Giannini's slick style was no longer exciting consumers. At the time, analysts said it was reflective of a consumer move away from megabrands. (In 2013, sales at Gucci were under €3.6 billion, down 2 percent on a reported basis.)

Gucci found itself out of fashion and in 2014, Kering parted with chief executive Patrizio di Marco as well as Giannini. Di Marco was replaced with Marco Bizzarri, who, with Pinault, took the bold move of appointing Michele, a long-time Giannini deputy, at the beginning of 2015 to overhaul the brand's image and make it relevant again.

"We agreed that if we really want to achieve something with Gucci, we needed to change the creative direction in a significant way … to create a rupture," Kering chief executive François-Henri Pinault told BoF in 2018. "The best time for Gucci was when it was a real fashion authority. We had lost a little bit of that. If we wanted to come back strongly, we needed to change our creative direction with a completely new vision."

We agreed that if we really want to achieve something with Gucci, we needed … to create a rupture.

But disruption doesn’t necessarily mean a fundamental break with the past: the new Gucci is still Gucci, just reinterpreted for a new audience.

“Look, Gucci was very strong. It was described as, ‘This is the DNA of Gucci with Tom Ford. Hyper-sexy, empowerment of women, perfect.’ That is the opposite of the world of Gucci today, but it is the same brand, the same consistency, the same sincerity,” added Pinault. “This demonstrates that a brand can evolve radically and still be true to itself. This is very important because some brands are not evolving because of the [false] constraints that are put on them.” In 2018, global sales at Gucci were €8.3 billion, up 144 percent from €3.4 billion in 2014.

Michele’s success has pushed other brands to give insiders a trial run after the departure of a major name. But finding a visionary within an existing staff is an epic task, which is why this approach is rare.

Hiring an Outsider to Create Continuity

Sometimes a formula is working well, but brands unexpectedly lose a creative director and there are no insider candidates to tap, so they turn to outsiders to keep up the momentum while staying true to an established template. Such was the case of Anthony Vaccarello at Saint Laurent, whose sharp-and-short aesthetic fell in line with Slimane's party-girl fashion, which generated €1.2 billion in 2016, up from €353 million in 2011, the year before he joined.

Reported sales growth did slow in 2017 after the arrival of Vaccarello — with comparable sales growth up slightly — which was perhaps inevitable after such explosive growth. In 2018, reported sales were €1.7 billion, up about 16 percent from €1.5 billion a year earlier, and operating income hit €459 million, up 22 percent from €377 million.

However, in December 2018, chief executive Francesca Bellettini told BoF that one of Vaccarello's designs is the best-selling style in the history of the house.

The YSL business is still growing much faster than the overall luxury market, and the business is on target to reach Bellettini’s stated revenue target of €2 billion by 2022, making it the second largest business in the Kering stable after Gucci.

The landscape of possible hires is always moving.

Since replacing Clare Waight Keller at Chloé in 2017, Natacha Ramsay-Levi at the Richemont-owned house has developed her own style without alienating the previous customer. Best-selling bag styles, for instance, have been updated with new colours and treatments, while Ramsay-Levi's own designs, including the 1970s-inspired "C" crossbody, have received a warm reception from the industry, although it's difficult to determine her overall impact given that the numbers behind Chloé are not broken out.

But it can also slow progress. Consider Francisco Costa, who was brought into Calvin Klein in 2002 by the eponymous designer, whom he replaced one year later. While Costa’s collections received a generally favourable reception, they were seen as too much continuation of Klein’s own work, not enough of an evolution. By the time Costa exited in 2016, the collection was viewed as no more than a marketing platform for the high-volume underwear and denim businesses. This, of course, is not uncommon, but the size of Calvin Klein's collection was notably small: sold in just 30 stores, compared to Raf Simons’ first collection for the label, which hit 300 stores in the fall of 2017.

Hiring an Outsider to Create Disruption

It’s risky to put a brand in the hands of a disruptive outsider, but it often reaps the greatest rewards. Kering did this by appointing Hedi Slimane at the helm of Saint Laurent. His tenure there, albeit short, was a blockbuster, doubling its business in just three years. De Saint Pierre underscored that Slimane at Saint Laurent wasn’t necessarily disruption, but instead a revitalisation that she said captured the spirit of the original designer’s vision through a new lens. (It helped that Slimane had the approval of Pierre Bergé, Saint Laurent’s long-time business partner.)

Phoebe Philo’s appointment at Celine in 2008 was similarly effective. (In 10 years, she helped lift Celine's annual sales from €200 million to more than €700 million, according to analysts.) Recently, LVMH installed Slimane at Celine in hopes of once again pushing sales forward.

“Sustainable impact does not necessarily come from just one person,” De Saint Pierre said. “The product is just one part of the creative content; all other parts of the creative leadership are equally important.”

Other examples of disruption include Balenciaga, where Demna Gvasalia's meme couture has captured the attention of showgoers and shoppers alike, or Clare Waight Keller at Givenchy, who has replaced Riccardo Tisci's gothic-street undertones with a dark femininity that has earned her plenty of praise.

Brands that take risks are the ones succeeding.

Sometimes, the results are lackluster or worse. Justin O'Shea's short-lived sixth-month tenure at Kering-owned Brioni, or Olivier Lapidus' chaotic stint at Lanvin, prove that failures happen regularly. Most recently, PVH ended its relationship with Calvin Klein chief creative officer Raf Simons after his approach — which included a drastic overhaul of all imagery associated with the brand, not to mention a revamp of the ready-to-wear that did not relate back at all to the namesake's original vision of smouldering minimalism — failed to deliver the results the company was hoping for. In early March, PVH announced that it would do away with a traditional ready-to-wear collection altogether.

Of course, such a risk comes with a large price tag.

“The big brands have a disproportionate advantage when picking a new designer or executive,” Mallevays said. “Firstly, they can wave the biggest cheque book. Secondly, it always seems a safer choice from the point of view of the talent, and one where the talent can have an impact on a bigger business.” Not only do designer salaries creep well into the millions, but the investment in new retail, marketing and additional hires adds up. Renovating one store alone can cost well into the millions of dollars, while introducing a new image can mean increasing the paid advertising budget by hundreds of thousands.

And yet, "Brands that take risks are the ones succeeding," said John Guy, an analyst at MainFirst Bank, noting that Moncler's "Genius" Project, which features a rotating list of in-demand designers — from Valentino's Pierpaolo Piccioli to Simone Rocha and Craig Green — re-interpreting the luxury outerwear brand's key codes, has resulted in sales success. In 2018, about half of the customers who visited Moncler boutiques to shop the Genius collections were new to the brand.

However, in order to make Moncler Genius work, chief executive Remo Ruffini had to overhaul the company's entire structure, parting ways with designers Thom Browne and Giambattista Valli, who were previously designing ready-to-wear collections for the label. Not only did disruption require capital, but also time.

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