Retailers are still figuring out how to tie AI goals to executive compensation 

Ralph Lauren appears to be ahead of the curve in tying AI usage to executive incentive plans. As Reuters reported, “about 12% of companies in the S&P 500 index disclosed AI-related goals in their executive incentive plans this year, up from 5% of companies in 2024.” But many of the companies that have done so are tech companies like Salesforce or IBM. 

In the retail industry, specifically, it’s still a mostly unheard-of practice. And even recruiters say they are seeing few signs of companies tying AI to offers of increased compensation. 

It all points to the fact that, while more brands and retailers are adopting AI in a number of ways, many of them are still in the experimentation phase. They still aren’t quite sure how to connect the technology to various long-term goals, beyond cutting costs. And that makes it more difficult for brands and retailers to tie increased AI usage to increased compensation. 

“Even though we’re definitely in an AI boom, it’s still early days on how companies are actually utilizing it and seeing massive returns, and I think there’s just a push and pull,” said Anish Shah, CEO of executive recruiting firm Ruckus. 

Generally speaking, the retail industry’s adoption of AI has exploded in the past several years. Major retailers like Walmart, Target and Kroger have now rolled out their own AI shopping assistants over the past 1-2 years. Some retail platforms with greater tech chops, like ThredUp, have developed AI search tools specific to their websites and apps.

On the backend, engineers are using AI to write code. Marketing teams across both small and large brands are now expected to use AI for creative ideation, even if some aren’t yet comfortable with running AI-generated ads. And nearly every piece of technology a brand or retailer may use, like inventory management software or an email marketing platform, now has AI baked into it. 

One way retail companies could signal they are getting more serious about AI performance is by incorporating it into incentive plan designs, like Ralph Lauren is doing. Incentive plans give executives increased bonuses depending on what goals they hit. These plans set the tone for “what is important to the company for this year,” said Cory Morrow, a senior client partner at management consulting firm Korn Ferry, who focuses on executive pay and governance.

Historically, executive payout plans have been centered around traditional financial metrics, like sales performance. “But we’ve seen in the last five or six years that companies want to provide some balance to the financial metrics by incentivizing performance on key strategic objectives that are important for companies in that specific year,” Morrow said. This could include retail metrics that signal a company’s positive upward trajectory, like an increased Net Promoter score or increased e-commerce growth. Mentions of diversity, equity and inclusion started to make their way into more incentive plans six years ago, Morrow added. 

Ultimately, “incentive design will always be primarily driven by company financial performance,” Morrow said.

There are also few signs that AI objectives are influencing compensation at the hiring stage, especially for smaller brands or retailers. Shah said that in every C-suite or VP-level interview now, candidates are asked how they have previously incorporated AI into their workflow and how they may get a team to better incorporate it into their workflows. 

But, Shah said, a lot of the conversation around AI centers on cost-cutting. In turn, he said, he’s seeing more companies make more junior hires than they may have previously — for example, hiring a VP of marketing rather than a chief marketing officer. He said he’s also seeing more new hires come in with a mandate to manage a smaller team than in the past — which, in turn, makes tying AI usage to increased compensation more challenging. 

“Let’s say, maybe years ago, a CMO might come in and need to have a team of 10. The idea is now, well, maybe you have a team of three or four, and AI can fill in some of those gaps,” Shah said.

Overall, Shah said that when he speaks to retail executives, many of their AI plans — or even the AI competency they want to see in job candidates — are still light on details. But, generally speaking, they want to know that a candidate is “doing more than just using ChatGPT or Claude as a search engine.” 

“The terms that we hear more regularly [from executives that are looking to hire] are ‘agents running autonomously’ or ‘workflows running autonomously,’” Shah said. 

But there’s also a growing concern, Shah said, about employees using AI to produce “slop” or more sub-par work. Shopify CEO Tobias Lütke called out the idea of AI “slop grenades” on a podcast earlier this year, acknowledging that some employees are using AI to produce more work — but not always high-quality work — that other employees have to then go and fix. 

The challenge right now, Shah said, is that across many brands and retailers, it’s difficult to see where AI is driving significant gains in revenue. It may be helping a retailer cut costs or generating ad creative at a significantly lower CAC. But the story of how AI is driving significant revenue gains isn’t clearly mapped out yet for many brands or retailers — and that’s what it would take to more clearly tie increased AI usage to increased compensation.

“Cost cutting can be helpful for a business, but I think everyone’s goal is revenue growth,” Shah said.