Target may go against history and look outside company for next CEO

When Gregg Steinhafel announced Monday that after 35 years with Target, he would step down as its chief executive officer, president and chair of the board, Minnesotans immediately focused on who would next run the company.

The person atop Target is one of the most powerful and influential leaders in Minnesota. Between the company's sheer size, extensive workforce, huge presence in downtown Minneapolis, deep cultural and business roots, and ubiquitous stores, Minnesota has a lot at stake in who runs Target.

•Previously: Target CEO is out following credit card breach

As Target searches for a new leader, a key question will be whether the company looks for someone who fits its corporate culture or brings in a different kind of executive, one who embodies change.

Although Target has a history of hiring CEOs from within its ranks, some analysts say now the company needs an outsider's fresh perspective. Among the mentioned executives who might be up to the task are current and former executives from companies ranging from Ford to Victoria's Secret.

Whoever becomes the next chief executive of Target faces a lot of big challenges: cleaning up a botched roll-out into Canada, boosting declining sales and launching a new payment system following a massive data breach last fall.

•Related: What Target's Steinhafel did wrong, and didn't

"Even a few years ago there would've been a very narrow list of traditional, retail, merchant-focused people, or what they call 'merchant princes' that would've been logical choices or the only choices," retail consultant Carol Spieckerman said. She believes the time for such a leader has passed.

With competition from companies like Amazon, Target needs a leader steeped in the digital world who can help boost sales on Target.com as well as in stores, she said.

That could be someone with a Google or Facebook pedigree.

But Spieckerman said that person could even hail from arch-rival Walmart, which is also trying to figure out how to get its brick and mortar and digital operations to play well together -- and beat back Amazon.

"Walmart has very quickly become an incubator for lots of great digital innovation and also a great launching pad for people's careers," she said.

In Spieckerman's view, Walmart has a glut of executive talent.

"Not all those executives can move up into the top position," she said.

Target's chief financial officer, John Mulligan, will serve as interim CEO until the board hires a permanent leader.

Choosing an outsider would fly in the face of Target's history. The company's founders, the Dayton brothers, were committed to mentoring talent within the organization and developing a deep bench of potential leaders.

•Related: Did a little honesty cost Target CEO his job?

Several analysts say that strong pipeline of talent exists at Target today. But there is a question about whether that's what shareholders want in a new CEO.

Brian Yarbrough, a consumer research analyst for the EdwardJones investment firm, doesn't think so.

"If they go internal, I'm not thinking Wall Street is going to welcome that too much," he said.

Companies often promote from within when things are going well, and look outside when the ship is foundering.

Canada may be the biggest albatross around the neck of any internal candidate. The move north of the border has gone poorly and the operations lost nearly $1 billion last year.

Any CEO candidate will need a good plan for improving the retailer's performance up north, said Ken Perkins, an analyst for the investment research firm Morningstar.

"I think they really want someone who can stabilize the results in Canada and come up with a clear strategy for what's going on there," he said. "I think there's too much concern right now -- not only about not only what is going on -- but if it's even reparable and if the strategy in place is even going to work."

Perkins said it's not clear whether an insider or an outsider would be better suited to those tasks.

Spieckerman is less equivocal and thinks Target is sending signals about its plans.

"They certainly didn't have to announce they retained services of a top recruiting firm," she said. "I'd say that's a message they're pulling someone in from outside."

But the announcement that Korn Ferry will advise the board on finding a new CEO also leaves Target's shareholders, suppliers and employees with a fair amount of uncertainty about the company's future direction. The statement gave no time frame for completing a search.