Summing Up
Should CEO succession processes be certified? Respondents to this month's column agree that CEO succession is badly managed, perhaps accounting in large part for the fact that few "inside outsiders" ever make it into the job, despite their often useful qualifications. There were many theories about why this is the case as well as suggestions for how to fix the process. Some even argued that the idea of planned, orderly CEO succession has inherent flaws that can't be fixed.
Both boards and their CEOs were cited as reasons for the problem. Phil Clark asserted, "Sadly, many corporate boards are not willing to do the work," suggesting that unless this is made grounds for dismissal, directors are not likely to apply themselves to the task. Edward Hare added that "one needs to get to know an individual, their values, and their real, not hyped-up talents. In today's breakneck world, who has the time for such things?"
Several cited the difficulty of selecting a new CEO, particularly from within, given the changing nature of the needs of a modern corporation. As Veronica Serrano put it, "it is easier to get from the outside what the business needs at any particular moment." She also posed the problem of finding insider "CEO material willing to wait in the sidelines." Andrew Campbell commented that "you often have to reassess your succession plan when the time actually comes. This makes Boards reluctant to put a lot of effort into succession …." C.J. Cullinane pointed out that "if the style or background of a capable insider does not mesh with the CEO, (insiders) seldom get to a position where the Board of Directors can evaluate them." Wesley Calvert said that "the strong tendency to hire top-level management from outside is a natural outcome of the belief that almost any of our competitors has better people than we do." And Lowell Kuehn posited that "the outsider is all promise, while the insider is a known property with some established weaknesses."
CEOs came in for their share of the criticism. Patrick Duffy summed up the gist of many other comments by pointing out that "few CEOs want to accept their mortality."
Suggestions for improving the process were varied and quite creative. Michelle Malay Carter suggested that "it is only when organizations institutionalize the idea of regular face time between employees and their managers once-removed (that) high potentials 'suddenly appear' … So in the case of the board, they should be accountable for assessing potential and long term development of the CEO's direct reports." Sakthi Prashanth proposed that "the board could tie the CEO's exit package with the grooming of a successor." B.V. Krishnamurthy said that "the ultimate solution may be … similar to the job rotation concept of the Japanese companies in their heydey. In this scenario, a number of CXOs would fulfill the role of the CEO by rotation." Santhanam Krishnan opened yet another avenue of thinking by asking "… how can one expect formal 'succession planning' in organizations unless it is forced as a part of corporate governance codes?" Ramachandran Iyer took this idea one step further by saying, "Perhaps the existence of a succession plan should be included in every BCP (Business Continuity Planning) assessment that is conducted by an audit firm for publicly-traded companies."
Given the general importance of succession and the degree to which the process is badly managed, on which nearly every respondent agreed, is it appropriate to consider the idea that succession processes should be certified? If so, what should be the dimensions of the certification? What do you think?
Original Article
A high-profile company fails to meet market expectations. The board, with limited knowledge of the inner workings of the firm, fires the CEO but appoints an acting CEO while a talent consultant is hired to begin a search for a replacement. Given the natural bias of the search firm and the board's recent bitter experience, the replacement is often the CEO of another prominent firm, a person with a good track record but an "outsider" with limited knowledge of the business. The cycle is begun again. Sound familiar? It should. It's unfolding in two of the largest financial institutions in the world, Merrill Lynch and Citibank. And it has taken place with increasing frequency in large companies around the world, even including Japan where continuity, consensus, and culture have been honored for so long.
The questions posed in many of these cases include: What did the board know when? How could it have anticipated and helped avoid the situation? While these are interesting questions, Joseph Bower, in a recently-published book, The CEO Within: Why Inside Outsiders Are the Key to Succession Planning, poses other questions that represent equally important challenges to CEOs and their boards of directors. They include: What are the CEO and board doing to acquaint themselves with leadership talent inside the firm? Is the board insuring that the CEO is building a cadre of insiders ready to assume positions of leadership when needed? Has the board encouraged the development of what Bower calls "inside outsiders," those with somewhat detached views of the company's strategy but with intimate knowledge of how to get things done inside the organization?
Bower's analysis of the leadership and performance of S&P 500 companies in the U.S. leads him to conclude that "insiders perform better than outsiders" whether the company was performing well or poorly at the time of their appointment, but "especially when the company had had poor prior performance." But he worries about the "cognitive and emotional baggage" that insiders bring with them as a result of their long employment in the organization. His solution, based on an intensive examination of a number of case studies, is the "inside outsider." This executive avoids, in his view, some of the shortcomings of both insiders and outsiders. He or she has successfully led portions of the business, such as international ventures, which are away from the purview of headquarters. Headquarters has given them full responsibility for performance with little direct oversight, and allowed them to develop a more objective view of the enterprise and its strategies. This enables them to entertain ideas for new directions while leading with the credibility, the understanding of the organization and its culture, and a good knowledge of its talent that "outsiders" have to accumulate over time, often with some difficulty. Exhibit A among "insider outsiders" is Jack Welch at GE, who at the time of his promotion to CEO had been a member of the organization for a number of years and was making his mark running a non-core business, plastics, with a management style that was very different from his predecessor, Reg Jones. His selection culminated a careful process in which Jones nurtured a talent pool of successors and involved the board in identifying finalists for the job.
If "inside outsiders," on balance, provide answers to the need for such things as continuity, intimate knowledge of the organization, and a fresh look at the business, why don't we see more of them? Does their identification and development require complex processes that often don't exist? (The respondents to a poll of 1200 HR managers indicated that 60 percent did not have a CEO succession plan in place.) Are CEOs reluctant to initiate plans that require substantial effort and potentially foster executive competition? Have boards abdicated one of their most important responsibilities, substituting "executive search" for succession planning and development? What, if anything, can CEOs, directors, and shareholders do about this? What do you think?
To Read More:
Joseph L. Bower, The CEO Within: Why Inside Outsiders Are the Key to Succession Planning (Boston: Harvard Business School Press, 2007).
Interview with Joseph L. Bower, Growing CEOs from the Inside
- John B. Baxter
- CEO, Compass Associates, Inc.
I have over 30 years experience at various levels in corporate america - and feel that the prime reason succession is poorly managed is that those same 'managers' aren't 'Leaders'. They keep their heads down, and work for organizations that value following orders, policies, and procedures - rather than be truly creative and innovative.They manage to the next quarterly results.
They hire and promote only people who:
don't challenge or threaten their positions;
won't "show them up";
don't have new ideas, or innovative solutions;
won't ask embarrasing questions;
won't have experience that contradicts their managers;
will always go along.
In other words, hire only people who aren't Change Agents: ones who won't opt for new ways.
And, finally, God forbid hiring someone who challenges their ego and their power !! It is a rare Leader (as opposed to all those managers) who hires the best and the brightest, and helps them to succeed.
- Virginia C. Green, Ph. D.
- CEO, Creativity Unwrapped
An interesting example of an "insider outsider" is Lee Chaden, currently Executive Chairman of Hanesbrands, Inc., formerly the Apparel Brands Division of Sara Lee, which spun off as its own corporate entity in 2006. Chaden joined Sara Lee in 1991, after years as a consultant for Marketing Corporation of America to run Playtex, which Sara Lee had just acquired. He spent some time in Europe and might have been an ideal candidate for CEO of Sara Lee. Instead, the company used him to help them profitably create a new entity from a division that had always been a strategic diversification challenge. Chaden recently announced his retirement from Hanesbrands, Inc. Did Sara Lee lose something by losing Chaden?- Stan Heard
- Consultant, Dale Carnegie
A great example of succession management is the U.S. Military where leader/managers are developed from within over time. This ensures that people are available to take the reins if a leader is lost for whatever reason. You live by the "Dump Truck Principle". Who will take over if I am run over by a dump truck? I prepare the people around me to step in if something happens.Business leaders would do well to take their responsibility to the company and their associates with the same dedication.
- sherpa
The bell tolls for the conventional CEO. A board of managing directors will soon replace this "overpriced human necessity". This trend will prove to redefine the grooming of successors thereby strengthening corporate America for the long haul.- James McConnell
- Pres., James McConnell & Assoc.
Why? Politics, of course.1) The barons always like newbies from the outside...less of a threat, no carryover of old animosities and no loss of power. In the beginning, newbies are always on the defensive and in effect, become employees of the baron group. And if some of the barons are critical to the co. and likely to leap if a competitor is named, a newbie is a safer choice. Same dynamics work with boards, few of whom are actually independent....boards change when CEOs change.
2) The inherent personality attributes of leadership. Change agents get weeded out.
- Dr. Dwayne B. Thomas, Ph.D.
- Executive Director & Chief Learning Officer, AT Davis Foundation
Succession planning like all organizational initiatives is based on perception. It is the perception of inclusion or exclusion of the managerial staff and all staff members that will determine the relative success of a succession plan. The question then becomes, what is the perception of the staff regarding the succession plan? Do they feel that they truly are included in the plan? And if not, then who is included in the succession plan and do or will they represent my interests. Ultimately, we want to think that we are a part of the succession plan or that someone that we see as reflective of us is included in the planning process. For succession planning to succeed there must be the perception of transparency and that the plan, in however remote ways, applies to everyone.Consequently, it is the lack of transparency and the negative perceptions that result in the failure or misguided actions regarding the succession plan. Candidates for succession will not perceive their chances to be as good as they should be and they will remove themselves to a better position or most employees perceive that the plan does not really apply to them. Therefore, they fail to support appropriate candidates and, in support of their own inclusion, fail to take advantage of incentives like tuition reimbursement, advanced training opportunities, or mentoring opportunities, which might move them to the highest levels within the organization.
Time and the immediacy of reward/recognition is another factor in the success or failure of succession planning. In this world of immediate gratification, it is imperative that rewards, recognition, and incentives meet the needs of those whom are talented enough to receive consideration for or perceive themselves to be included in the future leadership of the organization. These rewards are person specific and do not have to match those for others in the organizations. However, the individuals whom are included or intended to be included must have indicators that they are a part of the "insiders." And if their perception is that they are a part of the "insiders," then they will work to hold on this exclusive territory. Therefore, it becomes an executive imperative to clarify who is and is not a part of the succession plan, how much time it is going to take before I am "in the club", and what do I get, right now, to keep myself in this holding position. If I am not a part of the plan, do not perceive the plan to be moving fast enough, or do not perceive myself to be a part of the plan, then is has failed me and those within my group. And, if I can not be a part of the executive solution, then I become a part of the executive's problems.
- Mark Pryor
- CEO, Premier Solutions
It seems today that many CEO's have the same mentality of a member of the House of Representatives; they keep in mind they only have limited time to keep everyone happy or they won't be re-elected. Succession planning is not an option; why train my "replacement" rather than my successor? A good model of succession planning was Henry Paulson grooming Lloyd Blankfein. If more CEO's weren't concerned about pleasing the Board, they would tap the talent they have around them and grow from the inside.- Michael Kimball
- Dir. Outplacemtn Services, Technifind International
Why Is Succession So Badly Managed? Conflicting agendas and the demand for attention over the long run are the culprits.Agendas that compete with the need to refine, clarify, and reinforce the corporate culture is first. And the demand for attention over the long run to identity and grow internal candidates is second.
On the other hand, a very strong and well developed succession plan can be extremely efficient yet still be dysfunctional.
- Michelle Malay Carter
- Vice President, PeopleFit
Succession planning should be a piece of a larger talent management system. A critical key to an effective system is eliminating some of the conflicting interests.Contrary to the current models, two levels of talent development accountability are needed. 1. The manager needs to be accountable for developing employees to maximize their current potential in their current role. 2. Managers-once-removed need to be accountable for long-term career development and mentoring of their direct reports once removed for future assignments.
Making managers accountable for spotting high potentials can lead to talent hoarding, and quite frequently, high potentials clash with their managers because they are nipping at the managers' heels and they threaten their managers. See: http://www.missionmindedmanagement.com/
It is only when organization's institutionalize the idea of regular face time between employees and their managers-once-removed will high potentials "suddenly appear" when they were right there under the nose of the manager all along. See: http://www.missionmindedmanagement.com/
So in the case of the board, they should be accountable for assessing potential and long term development of the CEO's direct reports. So when it's time for succession, they are not starting from scratch.
I'm OK. You're OK. Let's fix the broken system.
- JOSE CARLOS LOPEZ MORENO
- CONSULTANT MGR, E & A CONSULTING
Sometimes the Board of Directors is in more of a hurry to fill the empty position of CEO than think in a rational matter about the profile of the individual (man or woman) to be hired according the market, political and economical environments, corporate culture and the leadership required for success.- Robert F. Sykes (HBS MBA '49)
- Retired CEO, Ran four small companies
The Board should notify the CEO that at a set time in the future he will be leaving the company. The Board then starts to identify potential insiders so that when the CEO leaves they have the knowledge to choose the successor. This does not require the cooperation of the CEO whose game is generally to try to convince the Board that he is indispensable and they will be lost without him.Unfortuntely the public boards I've been on seldom did this.
- Rodrigo o. Rodriguez
- P.E., C3TS Consulting
That's a loaded question and it isn't always the case. People often mistake succession with continuity. They say the former but mean or want the latter. Succession implies an outsider assuming control, whereas continuity reflects an insider merging into the leadership role. The success to succession, pardoning the redundancy of terms, is for it to become continuity. To properly manage succession, start early (well ahead of need), the way you would estate planning. Implement early steps toward the stated goal and allow time to allow fence mending to take place and for the company's culture to continue seamlessly.- Patrick Duffy
- President, American Machine & Gear
I think there are several, related reasons for the small number of insiders promoted to the CEO position.One, they've been seen, whether by the incumbent and/or the board members, as a second banana guy. No original ideas of his own, just carrying out the vision of the incumbent. Couldn't possibly be any good, lacks vision.
Two, if the change in the CEO position is involuntary, why promote someone who may have been part of the problem in the first place?
Three, not invented here syndrome, also known as the grass is always greener on the other side of the fence. Only the beauty of the outside candidate is seen, while everyone knows the strengths AND the weaknesses of the inside candidate.
Four, few CEO's want to accept their mortality or even the inevitability of their retirement. So grooming someone for the future is always down the priority list, a 'nice to do' thing that always ranks below giving speeches, returning phone calls and travelling. If it is done, it almost always is started far too late in the process.
- Scott Carlberg
- Founder, Talking Points - Public Affairs Management
John Baxter, above, nailed key points. My executive relations experience shows me that the companies that have performed the best are those with CEOs who see themselves as people who are charged with bringing out good ideas, making sure that all aspects of an issue are debated in a healthy way and have the self-assuredness to lead without any impact to their sense of self. I'd add that a good manager of any kind knows when to prompt a change in his or her position, knowing that he or she has completed the work and needs to move on to another challenge. There are times when one captain needs to turn over command to someone with a differing set of skills to keep progress on track. Tough call; few can do it.- Dianne Jacobs
- Principal, The Talent Advisors
The over-reliance on performance management systems skews organizational views of 'insider' talent and drives subsequent leadership development interventions - often with a transactional mindset. Predicting long term potential is critical. Potential is often not clearly defined or understood by those executives making talent decisions and they assume high-performance equates with potential. Potential differs from high-performance as the ability to implement one type of strategy may not be the same abilities required for another type of strategy: skill sets, behaviours and experiences that are needed can vary. The realization that only a small number of an organization's current high performers have the potential to succeed in more critical higher-level positions comes too late.Boards do need to question the longer term development of potential, ensuring systemic and integrated talent management approaches that link to the strategic needs of the organization, if they are to create "inside outsiders." An effective talent strategy enables the flexibility to leverage the pipeline for results both today and in an increasingly unknown future.
- Kaiser H. Naseem
- Manager, Pakistan Corporate Governance Project, International Finance Corporation
Succession planning is badly managed in emerging markets mainly due to a lack of understanding. Moreover, the fear of grooming someone to replace one's own self is too much for any CEO to to imagine, especially when they lack vision and foresight needed to run sustainable businesses.- Meenalochani
- Associate Consultant, MindTree Consulting Ltd
Some reasons for badly managed succession plans could be:1. Now vs. Future
? Focus on Short term results vs Long term contingency plans for leaders
? Forgetting the ?What if? scenario for future exits of key members
? An organization basking in the comfort zone of the current CEO?s success
2. Culture
? Mindset that the organization is in equilibrium and failing to see deep that equilibrium is by itself a constant latent change!
? Knowledge power resting in a few key leaders and the resistance from such members to share this with potential and probable leaders
? The organization?s culture that refuses to accept potential leaders? grooming
? Innate Fear of executive competition
"Lets wait until it happens" culture
3. Lack of Systems and Crisis management
? Ritualized Talent Management and absence of sacrosanct internal talent identification and grooming systems methodically
? No follow up activity to ensure that leadership grooming is targeted. High potentials vanish until a crisis appears
? Waking up to people realities only on the verge of a resignation or at ?critical inflection points?
? Failure to realize that ?tacit knowledge? is most powerful at senior levels
? No reviews or follow ups regarding succession plans between the HR and the Management team
- Anonymous
With the key contenders for the CEO's post, very little succession planning exists in Indian firms. In family-owned businesses, the future CEO is from the family itself. That holds good fro Tatas as well as Mittals. In public sector organisations, there is no system of grooming future leaders. As a result we have senior-most people at the fag end of their careers taking over for 2 to 3 years. Such tenures inhibit strategic decision-making and planning.- Ramachandran Iyer
- Consultant
The absence of a succession plan in 60% of the leading firms is clearly a wake-up call. How quickly will organizations choose to wake-up in order to proactively mitigate this risk is the constructive and probing question. In my view, the absence of a formal succession plan implies that striving and achieving GREAT people decisions, both at the top and bottom of the pyramid, is a continuing challenge (or moving target) for several organizations and constrains the achievement of collaborative advantage. Consequently the tide that has gained traction seems overly focused on denominator-based management. The resurgence of private equity favors a lean, mean, buy-to-sell approach with incentives unintentionally skewed away from talent management (includes succession planning). Public companies are also being encouraged to adopt a buy-to-sell mindset while managing their portfolios and overhaul a corporate culture that has a buy-to-keep strategy embedded in it.Key Takeaways:
a) Perhaps the existence of a succession plan should be included in every BCP (Business Continuity Planning) assessment that is conducted by an audit firm for publicly-traded companies.
b) Identifying and grooming future leaders should be a recurring theme for existing organizational leaders as they seek to cultivate the following competencies among their talent: results-orientation, team-centered leadership, strategic thinking, change agent, and ability to respond to deadline pressure.
c) I worry that a combination of impatience (decreasing tenacity) among existing leaders (perhaps stemming from the pressure to perform and show results) and the soundbite economy with minimal attention spans will gain momentum and use broad brush strokes to 'quickly' identify "insider outsiders" among existing talent rather than sow the seeds for orchestrating and achieving great people decisions at all levels of a corporation.
- Leslie
- Manager
Companies needs to adopt a strategy that nurtures and grows its own CEO's. The identification process needs to be transparent, thereby allowing individuals from within the organization to have a say in the eventual appointment of the CEO. The CEO will have a good understanding of the cultural, people and skills capacity of the organization. Motivation from within the organization will be high, knowing that one has the opportunity to eventually rise to the top.- David Matta
- President, Dagpa
Why Is Succession So Badly Managed? Because it is badly anticipated in the first place. Who is supposed to prepare for it? The CEO himself/herself? It is like anticipating your own death and preparing your will. Few would like to do that and even less would properly prepare for it. On the other hand, when the need for a replacement strikes, tensions and emotions are high and there is a sense of urgency. Depending upon the information available at the time to the board, they may tilt for an insider or an outsider. That person can be from the same industry/department or a high flyer from another.So in my view, succession relies on human evaluation of the situation and the subsequent decisions. No amount of succession planning preparation can overshadow the human factor judgment and last minute decisions.
As long-lived loyalty to a company is eroded nowadays, it is not only for CEOs that succession planning is required, but directors and managers, frustrated by the prospects of advancement or other factors in their own companies can not but look for outside opportunities. So as we promote the inside outsiders in some instances, we are bound to welcome the outside insiders some other times.
- APPOLO GOMA
- INVENTORY MANAGER, SCHLUMBERGER COMPLETIONS NGA
There is a strong advantage in building leaders from within because the individual would already understand the organisation it's values and culture as opposed to someone from outside that would spend time adapting to a new environment and whose values might be in conflict with the organisations values.However most organisations have been unable to build leaders because their CEO's have become so political and would only progress individuals that are loyal to them and would not challenge the status quo so a lot of talented leaders are left in the lurch.
Organisations should entrench systems that would ensure that the brightest from within are given oppurtunities to rise to leadership position on the basis of their capabilities and performance not on the basis of who they are loyal to and which camp they belong to.
If your recruitment is done on merit and you attract and retain your best hands, there is no way you would not find leaders from within the organisation that would rise up to the position of CEO.
- Nitin Bartakke
- Manager, ZenSar
Nurturing a leader is equally big challenge for a leader who believes in succession & not pure replacement. A good leader knows when to step down or hand over.The very purpose of being a leader is to not create followers but bring out the best in people who can take a step forward while leading others.
Succession development is a long term planning/strategy/org culture while a routine recruiting can help in just a replacement. I think orgs concentrate on the later to meet targets & move ahead - Qtr by Qtr.
- Sudhanshu Umalkar
- Team Lead, Zensar Technologies, Pune, INDIA
Above views are applicable not only to CEOs but to all managerial and lead positions in the organization. It is unfortunate that companies very often try to fill empty positions with outsiders rather than looking for the insiders who have talent to take up senior positions. A person with core knowledge about company's business, its inner working, available resources, etc. must always be the preferred candidate for higher positions.Also, at times, senior positions are given to people on the basis of their association with the company and not their capability. This often leads to having insecure seniors who take care of not creating their backup or successors. It is necessary for the management to identify inner talent in the organization for the preparation of future senior positions.
- Sethakgi Jack Kgomo
- CEO, Nkhumishe Kgomo Management Services & Investments, Johannesburg, South Africa
Succession is, and will, always be a crucial issue in any organization, given the dynamism of commerce and industry where the "old guard" has to give way to "new blood" to steer the company ship forward. The trouble, however, is that it is poorly managed and planned. Succession is almost always considered as an event that triggers a reactive response when a momment arrives to fill a vacancy at any level of the organization. It is poorly managed and planned for because it is at most regarded as non-strategic issue.Failure of Boards and the Executives to have deliberate processes and policies in place that regulate the reality of people movement into and out of the organization is at the centre of succession troubles. Succession is, to many captains of industry, just an event that must come and go as quickly as possible, without calculating the impact a wrong placement would exert on the organizatin. We need to shift from from reactive to proactive succession management, if we want to becoming winning organizations.
The following factors can be regarded as stifling to succession in an organization:
1. The company culture:
The company culture exerts a tremendous influence on the manner in which recruitment, selection and placement are managed. For one company it would be vital to "promote from within" while for another company the belief could be in leveraging on the "external talent that could add value". The inward-looking organization would often find hiring an "external" a corporate sin as it would be difficult to establish whether such a recruit would fit the culture, and therefore it is an option they would like to avoid. In my opinion, there should be a balance between internal recruitment and external hiring of talent in the interest of the organization. This is important not only to motivate the aspiring employees for promotion, but it also could benefit an organization if in certain critical positions external candidates are employed.
2. Perceived sacrosancy of the old guard.
The so-called "old guard" employees tend to make themselves indispensable for an organization. These employees would build "walls of fame" around them, sending a message that the organization would not survive should they be replaced by someone who is less known or had not "proved" him/herself. This group of persons would normally entrench themselves in the organization by "owning" critical information without which the company would not operate and thefore holding it hostage to their created "walls of fame". Often these employees would have a long track-record of working for the same firm and would always be relied upon for critical information. This is dangerous because should such a person suddenly dissapear (due to tragic demise), it becomes very difficult to fill the vacuum they had left behind due to the company's "over-reliance" on these employees. The solution to this, in my view, is to demolish "walls o
f fame" (where they exist) and to emphasise on team participation in all projects by cultivating a culture of information sharing, mentorship of younger employees.
The message should be that "no person should be indispensable in any organization".
3. Treating HR as "just one of the resources" in the company.
Although statements in almost all companies capture the essence and importance of human resources as one of the "most important resources at our disposal", the actions of executives would tend to negate this objectives. HR strategy (including issues of succession planning) should be a permanent board item, and an executive management's priority issue.
My final parting shot is that organizations should shift focus from succession planning to succession management. This emphasis on succession management should therefore constitute part of an Integrated HR Strategy. One of the elements of Succession Management should be attracting and developing talent (from within and from outside the firm), career management, cultivating a culture of innovation, developing mentorship and coaching programmes linked to talent management, and creating incentives for the "old guard" to share the required experience, information and wisdom to younge generation of employees in all critical areas of the business. If these elements are integrated into Succession Management, there should be "natural" successors when a CEO, CFO, CMO, or any senior executives leave the organization.
A winning organization is a larning organzation that is both inward-looking, outward-focused and forward-looking.
- Wilfred Prakash
- General Manager, Safeshore Solutions
Not all times succession is badly managed.It happens very simply when:
a: people tend to impress upon more of an impressionistic new successor, rather than a more suitable person.
b: we can say organisation do, but eventually it is few individuals who do it. We should see as why these individuals should take a big risk, if it is something as big as a CEO position. A more branded individual (for all that we know about him/her) is still is a convincing person to be shown as suitable than anybody.
C: Internal talents are not always looked upon. The reason being we also know the negative or failure or sliding side of them, which are more prominent than past Success. But they pass the test if they had continuos recent success and offcourse the personal relations. But still the person should be outgoing in character.
- Phil Clark
- Clark & Associates
If a corporate board has not developed the next leader and cannot find a leader within the organization...they should all be fired. They have failed their responsibility to the company they are to protect and make successful. Hiring from the outside only demonstrates that they did not do their job. Sadly, many corporate boards are not willing to do the work. If developing leaders is not their job, then what is it?Sometimes hiring from the outside may be the only way to revive a company. If this occurs the corporate board should once again tender their resignations. Who allowed the company to reach such a position?
I know this may sound harsh and simplistic but I see corporate boards pound the table about wanting pay for performance of their employees then turn around and pay big dollars to a failing CEO. That message is not lost on the company employees. If you want performance... prove it.
- Dr B V Krishnamurthy
- Director and Executive Vice-President, Alliance Business Academy
The most formidable argument in favor of succession from within is the knowledge of the business that the executive is supposed to possess. The counter-argument is the baggage in terms of ideas and pre-dispositions that may stifle innovation.Similarly, those who favor succession from outside believe that an outsider is likely to bring in fresh perspectives and ideas. Those against suggest that the outsider may have little or no knowledge of the business.
If we accept the premise that any organization, to be successful, has to develop and exploit core competencies - capabilities that are valuable, rare, costly to imitate and non-substitutable - the relative failure rate among outsiders is easy to understand. It is unrealistic to expect an outsider to understand the business, identify the competencies required, and to build them. By the time this happens, it may be too late.
The role of the Board is suspect due to multiple interests, a penchant for short-term results, and a reluctance to accept the sweeping changes that may be occuring in the industry / economy, coupled with the comfort zone that the status-quo provides. How many companies can we identify where the Board has the expertise, the far-sightedness and the patience to glean through alternate scenarios and to advice the CEO accordingly?
The solution therefore has to inevitably start within the organization. Among the many challenges of leadership is the ability to groom successors. Also, it is important for possible successors to have an understanding of the business as a whole as opposed to a proven track record in one of the functional domains. Numerous are the examples of great marketers, or fantastic number-crunchers, or ideal people-oriented executives failing to make the cut as CEOs due to what may be called tunnel vision.
In coming to grips with the succession issue, the tenure of the CEO also becomes critical. Too short a tenure and the CEO can neither show results nor groom successors. Too long a tenure and the possible successors may lack the motivation to perform since they see their chances of rising to the top being stifled.
The ultimate solution may be a network structure similar to the job rotation concept of the Japanese companies in their heyday. In this scenario, a number of CXOs would fulfill the role of the CEO by rotation. The CEO would be the first among equals. Major decisions can only be taken by the group of CXOs and not by any individual. This may yet be the best solution to the problems confronting CEO performance today.
Whether we like it or not, the shortage of talent at the top would continue. In the interest of all stakeholders, organizations would do well to come up with a radically different solution such as the one outlined above.
- Shahzad Qalbani
- Associate, BlackRock
Main issue is trying to get the roughly 60% of companies to have a succession plan in place.Current CEO:
Some for insecurity reason would not want to identify or groom the next CEO due to competition. This competition would only come into play when the CEO is struggling such as the case we now see in the financial sector.
The Board:
Should be more active in knowing all the decision makers of the company and not just the CEO. The board meetings should consist of all the heads of the groups and perhaps the boards should meet quarterly after each quarterly earnings meeting instead of annually. This will give the board members more chances to interact with the various decision makers of the company, also the heads of the company constantly change so this will keep the board members in the loop.
Solution:
?Quarterly board meetings
?Include all the heads of the groups in the board meetings
?CEO should tell the board who they think should be the # 2 within the first year of the job (time frame can be flexible)
?The identity of # 2 can be confidential; no one outside of the board needs to know who that person. Not even the other heads of the groups. This information will only be between the board members and the CEO. This should calm the CEOs who are insecure about completion. If the CEO is still paranoid they can just put a letter with the name of the # 2 in a safe and no one needs to know the name.
?The CEO has the option to change the # 2 person at each board meeting if they feel the need.
- Veronica Serrano
- Former VP, Mt. Zion
Let me just say that succession planning is not confined to upper management. Each step in the organizational ladder has its own form of succession requirements.At the level where skills and talents are very specific to certain positions, succession programs can be ably managed. Add to that the fact that there are more in the pool to choose from and those in position have still more room to move up to.
Succession planning becomes more difficult at the senior level where competition becomes very personal. Let us be realistic, those in senior positions fought their way up and will hold on to whatever ground they conquered. The qualities that made them good at what they do and reach wherever they are--ambition, hunger, passion, greed--will work against a succession planning program that will eventually ease them out. Unless, of course, they are given some recompense/reward for doing so.
It strains a person's charity to expect him to groom his successor before he is prepared to move out. There will always be that "competitive" dynamic working in a mentor's relationship to his successor.
Another aspect that should be considered is that succession planning implies that the successor is willing to wait in the sidelines for his turn. Normally, you don't find CEO-material willing to wait in the sidelines. Unless, there are enough challenges and alternative roles the second in line is given, the talent pool for succession will be very shallow.
Yet another consideration is the unpredictability and speed of change in the business world and the probability that it is easier to get from the outside what the business needs at any particular moment.
Having said that, like others who submitted comments, I do believe that is much better for an organization to grow from within for the various reasons presented. So, what then can be done? Maybe include succession planning as a measure in CEO performance and reward system. Maybe institutionalize a mentoring program cross-functionally so that no particular person is pinpointed as direct successor. Or, maybe create executive teams working as "staff"/counsel to senior executives. Or, just put it as a requirement in the contract of the senior executive.
- sakthi prashanth
- infineon technologies
I believe that the problem is primarily due to a lack of incentive for the current CEO to groom a high potential successor. In fact there is a negative incentive if a CEO grooms a high potential while in power as this would undermine his stature. Probably the board could tie the CEO's exit package with the grooming of a successor.Also, many of us believe that anyone involved deep enough in the problem cannot shift perspective (think laterally) to a fresher and higher level to deal with the problem. And from this stems the belief: "We need someone from the outside with a different perspective."
Moreover, I think it is basic human psychology to ignore the obvious and discard it. After all, what board would like to believe that the solution for steering the company out of the woods is already present within the company itself!! The mindset is, "If someone is already part of the problem then they definitely cannot be the solution."
One of the basic steps could be to attach incentives of managers at every level with the grooming of high potential succesors, and make this part of the corporate culture.
- Vikas Parasramka
- Manager
I believe that, first, the idea of succession planning needs to be evaluated at an organizational level, because it has its share of con's associated with it. Those include bringing in undesired competition, grooming the wrong people, creating unrest between employees resulting in lower productivity, etc.In a military kind of environment, it is desirable to have this approach. If an organization thinks this approach is required or preferred, then by all means go for it.
And when I say "go for it", I mean the approach needs to be religiously followed from top to bottom. It needs to be part of the corporate wide culture, wherein employees need to show their mettle to be recognized at the highest level.
- CJ Cullinane
Without a doubt the problem of CEO succession is one that business has to solve. Most "insiders" are a product of the organization and often of the chief executives themselves. If the style or background of a capable insider does not mesh with the CEO they seldom get to a position where the Board of Directors can evaluate them.The Board is often the product of a system that guarantees the promotion of a clone to replace an executive. The board often is made up of appointees from similar companies, with similar backgrounds, even similar schools who will do whatever possible to keep their lucrative positions.
Another problem is that a newly appointed CEO terminates all competitors for their job. They will often clean out the stable of capable replacements and replace it with "yes people" who they know they can control and will not compete with them.
As for grooming a successor to a CEO from within the company, the sitting executive will often groom a mirror image of themselves. Office politics rules in these situations, and if the heir becomes too strong they are terminated (Sandi Weil and Jamie Diamond).
At the present time I feel there is little hope for the situation to change. Incompetence breeds incompetence.
- Carlos Botero
- Vice President of Human Resources, Digital Angel Corporation
A CEO who operates without a strategy or long term plan is either lucky or a failure. So why is a succession plan excluded from that?Maybe it is because nobody asks for it. As an example, the typical quarterly earnings call involves brilliant Wall Street analysts asking senior management insightful questions about the product development pipeline, projected revenues, long-term acquisition strategies and so on. They do so to formulate their opinions on the company's readiness for the future. Yet they never ask about CEO succession planning. They miss one of most critical elements of continuity and success.
I venture to guess that if boards of directors, investment analysts, and investors themselves considered it in their decision making, CEOs would make it a reality.
- Ranganatham
Everything boils downto the passion, vision and focus of the person at the helm of the organisation,
his ability to motivate his organisation to execute continuously to obtain the relevant results of growth, earnings on a sustained basis today as well as tomorrow
and above all his ability to carry the board members with him even when he makes mistakes.
We are in a dynamic situation and it is not possible for the person at the helm to always keep ready all the firepower to face any contingencies.
Then the result is either the person at the helm becomes the scapegoat or he is able to convince the board that somebody else has been made the scapegoat.
Why an insider is preferred but not happening to take over is that the process of entrepreneurial leadership development is not an institutional character but one which is purely individual trait. The person who surfaces in the fluid situation is the one who is able to eliminate the other serious contenders on his own or by default.
While this politicking happens, the individual agendas of the person at the helm, of the Board and the serious contenders varies and the organisation suffers. Since politicking is still an art and has not been studied by management gurus, we are not able to suggest any ready made recommendation to the problem.
It is better to accept this situation as a given situation which is beyond the control of the stakeholders and lessen our expectations of having a smooth transition of succession and of perpetuating a company however mighty it is.
It is in our human nature to having startups companies rising to preeminence and then showing a decline. Whether this happens in a decade or during one's life time is only a matter of conjecture or time.
The company being perpetually growing and meeting all the stakeholders expectations is I am afraid still a myth.
- Anonymous
About why there aren't more insiders with an outside view...It's very difficult to retain an outside view while trying to fit in to the company culture and getting to know all your colleagues, and even more difficult to retain an outside view if you've "grown up through the ranks" - you probably never had an outside view.
Giving a suitable candidate an experience of being entirely responsible for an independent area (division, subsidiary, whatever it might be) with almost no interference from HQ as described above is a good solution, but not necessarily feasible in many of the mid and smaller size companies that make up the majority of the companies of the world.
- Peyman Dayyani
Succession planning system has not worked for many companies. I read here and there by many of HR professionals, scholars and business leaders.If we review the history of 500 global known companies since beginning of 20th century, we easily can find that there are very few companies are still around and kept their name on the list, then the question is, who has succeed them?
The challenge of succession planning kept many of us in leadership and HR busy and since we love one size fit all solutions, then we are constantly looking to find the best solution to buy or benchmark and get moving with implementation. If worked for others and find its way to MBA School then it is proven to work for us.
My view is that succession planning should take into account following factors:
a) industry speed of change, slow static industries are the best place for grow leaders and managers within, while rapid changing industries are only surviving with fresh bloods
b) Paradigms- success creates cultural paradigms and paradigms killing organization and cultures together. Succession planning based on organizational and cultural paradigms destroyed sensitivity of organization and cultures towards new opportunities and make organization and culture blind, Cultural paradigms can be advocating both succession within or from outside which both become hazardous if they are based on organizational paradigms
c) Individual, succession plans needs to take into account individuals expectations, agilities, desires, adaptability and career aspiration and the worst cases are the one organization creating succession planning expectancy culture which traps people into comfort zone succession planning.
In summary:
Organizations with 50 years of turnaround change patterns and anticipation of 25 years to come with the same pattern of change (organization value, culture, customers, and technology), internal succession planning would be most fitted way to go, well design newly graduate programs, leadership potential assessment tools and leadership development programs will help to secure the succession of leaders for future.
Organization with up to 5 years turnaround on products, customers, technologies and anticipating even faster change in coming years then they should not even waste time and money in designing succession planning. They need the best talent retention and acquisitions process and system in industry to stay alive.
- Kumar Kunal Kamal
- Research Fellow, IIM Indore
Traditionally, CEOs have been selected on the basis of their outstanding performances and not on the basis of their team-building capabilities. These CEOs are very good at Rope Climbing activities: they have emerged as winners in situations where there was no use drafting a succession plan or building a team. These CEOs know how to succeed, but they have not learned how to make others succeed.I think we need to change the rules to progression: only those people who are able to create leaders should be given leadership positions. If X is an outstanding performer but not an effective mentor, then X should be kept out of the competition to lead.
Also, there is no hard and fast rule as to whether X should be an insider or outsider. If X is able to understand the needs and complexities of the environment in which he has to lead then heis a suitable candidate--an insider would have a natural advantage in such cases. But in situations where we might get so absorbed in our thinking patterns that we fail to identify the real problems, an outsider will have a natural advantage.
- Anonymous
I am a VP in a new spinoff, reporting to the CEO. Since I spend a lot of time with my internal department, developing succession plans, I found this discussion very interesting, especially since I could very accurately be described as an inside outsider.I believe it is extremely difficult for an inside outsider to rise to the top because the "outsider" portion of the personality puts stress on the organization, and in the case of succession, by the very nature of the personality, creates a stressful environment with the rest of the leadership team.
In our situation, I believe that we will develop a strong succession plan and while I don't think I should be at the top of the list, I will develop a strong relationship with the #1 successor to ensure that I can retain a role as the succession occurs. I would prefer to be the valued advisor than the person at the top who creates non value-added stress.
- Aparna Vishwasrao
- AVP-HR
Inside outsider remains according to my observation an elusive concept- though it is a (so-called) perfect concept. Why so many intelligent people working together are not able to arrive at such a practical decision which will benefit the organization - I think the answer is organizational politics. One of the readers has already mentioned this point. To add a bit of perspective to it .... The inside outsider might just be a bit more forthright, frank, and innovative, and may be an iconoclast - almost like a transformational leader - with varying hues.Though it is not necessary that he/she might be like a revolutiomary leader with a burning agenda.
All this in most circumstances might not be tolerated by the Board and all key decision makers. Sad indeed - but methinks that is how current corporate reality is structured. But the silver lining to the cloud is, in case you are able to identify that inside outsider who has leadership abilities and is able to navigate thru the maze of organizational politics skilfully (read - able to get the buy-in of all the decision makers without ruffling too many feathers), then he/she does stand a strong chance of getting the top position.
- Anonymous
I would have to agree with some of the comments above citing the increasing politicization of corporate leadership, or lack thereof. Corporate leadership behaves more like members of Congress and less like what they are. Less regard for the good of the company as well as any sense of longview destroys both continuity and succession. The ranks of corporate leadership should behave more like the military in its structure and procedure, and less like self-interested committee chairmen-like members of a parliamentary body, without a sense of political courage, which is the key missing piece in this issue.- Ms. Gauri Hemjith
- Officer, Reliance Industries Limited
Succession planning too is a critical business continuity exercise. However, there is no hard and fast structured approach to CEO succession, primarily due to dynamic business challenges that companies face in today's times. When it comes to family managed business, it is often clear that the successor would emerge within the family. Whereas in organisations which are not family managed, grooming the right successor becomes so crucial that the management thought leaders or so-called management gurus are yet to develop a "a succession matrix" which one could apply for grooming the right talent to meet the newer (unmet) challenges for which he/she needs foresight.- Fred Pane
- Sr. Director, Pharmacy Affairs, Premier, Inc.
There are a combination of issues. Many Boards of Directors are made up of businessmen, who maybe successful in their area of expertise, but have limited knowledge of the business they are now on the board of. They rely on the CEO of the company to keep them abreast of issues. Besides the CEO, do the Board Members have succession planning in their organizations/businesses and if they do, can they help direct that program? A secure CEO or any leader/manager will bring his other management team to the Board Meetings and give them exposure and an opporunity to participate. This is part of succession planning and mentoring. We are failing as a country, because of the good old boys running of business and lack of accountability and developing good leaders. CEO's move from one company to another and breed the same business skills or lack of it.- Wesley Calvert
- Assistant Professor, Mathematics, Murray State University
In my industry, higher education, we talk of a belief that real excellence is somewhere else. Even at institutions that are indisputably at the top of the craft (I know this happens at private top-twenty institutions), there is the general sense in the internal politics of the institution, that most of our competitors are doing much better and that we're really the weakest in our market.This aspect (at least) of the organizational culture seems to feed back from one level to another. Upper management believes it because they believe the board does. Middle management believes it because they believe the upper management does. The board (in my limited exposure to them) seems to believe it because the management seems so convinced.
The strong tendency to hire top-level management from outside is a natural outcome of the belief that almost any of our competitors has better people than we do.
- Andrew Campbell
- Director, Ashridge Business School
Most of the comments focus on politics and lack of preparation. This seems to be looking at the symptoms not the cause.For me there are three big causes. First, you need to choose someone who can deliver the strategy you think will be needed. But, you do not know in advance what the strategy should be, or you think you do and then the world changes. Hence you often have to reassess your secession plan when the time actually comes. This makes Boards reluctant to put a lot of effort into succession because they find that it does not help very much when the moment comes.
Second, few people properly understand the job of running a divisionalised organisation, which most organisations are. Even many current CEOs fail to have a clear strategy for adding value to the decentralised units below them, preferring instead to think of their strategy as the sum of the division strategies. This means that CEO job descriptions are not well defined making it hard to choose the appropriate candidate.
Third, the next CEO needs to teach the organisation something different from the last CEO. This is because the incumbent will have done a good job of imparting his or her wisdom, making a repeat performance unhelpful. Also the environment will have changed so that the organisation now needs some new wisdom. The current CEO is therefore unlikely to be a good advisor on the issue of succession.
- Frode Hvaring
- Manager Human Resources, www.turbomach.com (CAT Group)
The balance between "make" and "buy" of the next managers and leaders should be inspired by the firm's physical growth potential and development speed.If there is a given amount of career positions, there also has to be a well-planned development pace for internal resources.
My experience in various contexts shows that Vision and Reality on career planning rarely coincide, because people's expectations tend to get out of control when you start talking about career... often without a sufficiently precise concept and process.
The external hire of potential leaders is a stimulus to the existing leaders in the organization, and is an essential alternative benchmark for HR and Managers. The proportions between inside-outside leaders and outside leaders coming inside are however subject to the specific firm's culture, size, market position etc.
But above all, you need great Leaders (or at least a great CEO) that know and constantly will apply sound and effective leadership, career and succession planning.
- Frank Fabela
The "outsider" element is vital for as Peter Drucker pointed out - if you keep doing the same thing that brought you success, you will eventually fail. The reason is that change and innovation are essential. But an outsider's perspective can and should be nurtured from within. Openness and candor... dissenting opinions ... only when these are fostered among the insiders will the leadership be healthy and the culture prepared to accept a successor from within that is not a clone.The benefit of the successor coming from the inside stems from the importance of knowing the organization's values. As long as the organization sticks firmly to its values and mission, it can afford to allow openness and dissent thereby cultivating many more potential successors.
- Anonymous
Selecting the right 'outsider' is the most crucial role of the Board. The 'outsider' then becomes an 'insider' adopting the organization's values and contributing to the strategic direction and all its complexities. They can then begin to identify new leaders with skills and attributes from within or outside the organisation to complete the executive team, allowing the organisation to further grow and develop its business.- Matthew Tuttle
- Executive Coach, Pure Performace Coaching
Simply, the evaluation of the needs of the position don't match the strengths of the leader, outside or inside.Organizations need to allow for the "style" of the manager to permeate through the company. Unfortunately, because of the urgency to make a profit, there doesn't seem to be enough time. One solution may be onboarding.
- Cheryl Johnson
- Adjunct Professor, Strayer University
That there is no succession planning by 60 per cent of the surveyed HR managers suggest that HR is under the table rather than at the table in these organizations.There is this big disconnect between HR Strategy and organizatioal strategy. Each is created in a vacuum. The organization didn't think to include HR and HR didn't think they needed to be included.
In some instances when we tried to include HR in the organizational long-term planning, they replied, that's not what we do, that's your responsibility. The need to rethink the role of HR is long over due. They should be parternering with the organization as a whole and advising them on the need for succession planning, talent management or whatever the term you want to use. I think HR still gets no respect in most organizations.
- Edward Hare
- Retired Director, Strategy and Quality, Fortune 300 Mnf'r
Picking the "right" successor takes not only work, but a talent for great judgement. One needs to get to know an individual, their values, and their real, not hyped-up, talents. In today's break-neck world who has the time for such things? The king-makers choose those they feel comfortable with, who don't make waves, and say the right things with unknown authenticity. Besides, our heirarchical systems often weed out any talented, diverse thinkers long before they reach the height needed to make the leap to CEO candidacy.Let's face it.....The Executive Suite is a Private Club with all the exclusivity that implies. Rare is the CEO who is SO concerned with the well-being of the Enterprise that he/she will devote the time and intellectual effort into seeing to it that the best candidate is identified who suits the needs of the moment. (Do any even think about a situational assessment as a determinant of what the organization needs?) It's easier to pick a Fraternity Brother you rub elbows with frequently. Or to abdicate the work to a search firm who will parade the big names and cast iron resumes around (with the big price tags that come along with them). But frankly, most of those are crap shoots.....unknown entities.
Succession is so incredibly important.....yet so poorly done because it's treated superficially. I was close enough to witness two successions at my employer, a very large firm rife with the usual politics. Both turned out badly.
- Vinod Reddy
- MTS, KPIT Cummins
Succession as aptly said is badly managed. Predominently organizations never look into the company at the board level to see who will best suit the CEO position, either insider or outsider. Speaking of succession lines, insiders are preferable as they know the business pretty well.There are healthy chances when an insider takes up a top level notch of the company as a successor in terms of good prospects. It is in the hands of the directors to act rightly.
- P. Anantha Kumar Menon
- Senior HR/OD Advisor, MPUSP
This is linked with many factors today: Career Planning, Talent Management, Retention, Attrition. Further, bias, the halo effect, etc. come in while picking the right successor. In countries like India, caste and backwardness also come in. So often the best do not find a place. Also often great thought is not given as it should be. Last-minute finalisations are attempted and this may be often driven by an individual and so the results may be not as intended.I know of a situation where a great evaluation was done by the Board, but when the results came, some others were preferred.
What is needed is to select someone with:
1. A clear vision of where the organisation or the department should be 10-20 years from now.
2. A clear mission to achieve this.
3. Awareness of the ground realities in the organisation and the environment.
4. See that the organisation does not go below the break-even at any time.
5. Be aware of talent management, the need for career planning, attrition and retention, and above all be emotionally balanced to meet the challenges of a competitive environment.
- Asiya Shervani
- Talent & Organization Development, Alcatel-Lucent
Perhaps Succession Planning is badly managed because it is a fairly new concept. Strategic HR professionals are still learning how to get the identification and assessment right. In our company, we try to have 3 kinds of successors for all key positions 1) An EMERGENCY successor who can take over as a temporary replacement; 2) A SHORT TERM successor (who can take over within 2 years); and 3) a POTENTIAL successor (a person whom we have identified and have already begun grooming to be able to take over in 3-5 years).- Heather Neary CMCE
- Executive Chef, MCCS
Why Is Succession So Badly Managed?In all reality it isn't badly managed by managers. Many do what it takes to stifle their staff to ensure that their job is safe.
Anyone can become a member of management if they know the right people, do and say the right things at the right time. However, not everyone can be a leader. A manager or CEO is somebody with an organizational title that heads or oversees resources. A leader, on the other hand, is somebody with that same title who commands resources and receives respect from the internal and external customers that they come in contact with. The leaders, not the managers, will recognize their weaknesses and surround themselves with a team of people who compliment their weak areas.
A leader creates the "insider outsiders" by default. The leader will use proven strategies to create strong working teams by cultivating their staff's natural abilities, defining goals and then tracking them with objective accountability.
Why don't we see more "insider outsiders"? First, we need to see more leaders.
- Ibrahim Varol
- Manager
Succession Planning is the real key for success/failure for many companies:To make a successful succession plan you need to know/analyse:
a-The job requirements;
b-Market requirements to fulfill this job;
c-Potential of the inside management/talent pool;
d-The need for extra talents and which level they have to enter the organization;
e-Time frame of the promotions backing up the business plan of the company;
f-Protection of stars/best talents by HR/High level management.
Many companies are losing at least 6 months to one year to replace CEOs and more than a year to replace their mentality. In this fast-moving world, this will not be enough to succeed. A good mixture of the insiders with outside know-how will bring success.
- Margie Parikh
- BK School of Business Management
If I had not read some of the posts above, I would have first linked poor succession management in India to low Uncertainty Avoidance as a feature of Indian culture. But people from across the cultures report the same phenomenon. There must be something universal in the way organizations are nurtured.Clearly, it is not such an impossibility if someone really wanted to do it. I therefore think it is an issue of will.
The will to be visible as a future leader may exist in the now-lower managers, and those who meet the approval of selectors are those who sound like the selectors - so, how do you get the 'insiders with outsider perspective'?
Add to it the ownership realities in companies - in professionally managed companies also, the CEO is a family member (only).
I think we need a different level of business challenges and complexity before succession planning features as a serious item on the agenda of top authorities in organizations.
- Bruce R. Duncil
- Principal, Alderon Consulting, Inc.
In most companies, the CEO's principal role is to increase shareholder value and the Board's role is to put the most likely to succeed person they can find in that job. Circumstantially, planned succession through selection of 'inside outsiders' appears to result most of the time in selecting a CEO that meets (or exceeds) shareholder goals (regardless of how that might be legally achieved). This, however, is a gross oversimplification of both the problem and its solution. As in all things, however, quality processes drive quality results. Unfortunately for too many, management is a disembodied profession and 'talent' remains an abstract characteristic deemed more precious than diamonds, so executive selection is just another day betting the racetrack and may the best 'horse' win.- Lowell "Duke" Kuehn
- President, Pacific NW Consulting
Insiders can never look as attractive to a board as an outsider. The outsider is all promise, while the insider is a known property with some established weaknesses. I've seen outsiders cast a spell on a hiring committee by promising all sorts of things that the insider was realistic enough to know would not happen. In the end it becomes a contest between an outside innovator unfamiliar with the organization and a realistic inside change-agent. The latter is the better choice, in my book.- Lawrence Nwaru
- Operations Manager, United Parcel Service Nigeria
Badly managed succession is a product of lack of leadership vision, defined organization values and poor corporate culture.Experience has shown that multinational corporation that build their organizations around positive values and cultural orientation develop good people to take over when their CEOs leave.
Sometimes, the way corporate culture is fashioned - if badly managed, affects the way succession plan is executed. Companies that build its values around promotion from within have managed succession plan more effectively than others have. This is true given our experiences of multinational corporations in Nigeria.
I have worked for two different multinational corporations and have found efficient management of succession plan in these organizations. One limitation however, is managing the 'politics of succession?, which sometimes, could be destructive. Good succession plan does not have to start and end with replacement of the CEOs. The micro management of succession programmes is the key to effective management of 'corporate' succession. Creating an enduring values support good management of succession programmes.
- Gerald Nanninga
- VP, Retail Ventures
I am reminded of a comment by Al Ries and Jack Trout many years ago. They defined an "expert" as "someone who people think is an expert." It has nothing to do with the knowledge you have but whether you appear to be an expert.The same applies to CEOs. A good CEO is someone who the Board thinks is good CEO. If your resume included the word "CEO" in it, then you become, by definition a "CEO." The better the company you came from, the better the CEO you were in the minds of the board.
Pitty the poor insider who never got CEO in their title. It is hard to be seen as something that you never were. They will see you for who you were, not what you can become. Potential abilities are irrelevant.
It is like Baseball Managers. Once you become a major league manager, you are "in the club." Even if your team has a miserable season, some other team usually will pick you up, because you are in the club. The hardest trick is getting into the club in the first place. For the insider to win, they have to appear as part of the club. It's all about positioning.
- Doug Burns
First thing would be to look sceptically at anyone who wants a mutli-million dollar golden parachute to leave should they fail in their job. Seriously, are these intelligent people who fall for this? Second is to really examine agendas, especially those of the ones doing the hiring. The welfare of the company, its employees, the customer and the greater community being served are often not of primary concern to many who operate at that high a level on the executive food chain. I have found, unfortunately, that competence places a distant fourth to who you know, who's got the dough, and who sucks up to whom in office and board room politics. Pardon the scepticism but the above also relates to the miserable state of American business addressed in other articles in this newsletter.DGB
HBA MBA '72
- Ahmad Rabiu
- Chairman, Dala Inland Dry Port Ni. td.,
Today the vogue in business and government management is good governance, but still the conflicting personal or even selfish interest of CEOs blind many of them from seeing the need to properly plan for their replacement upon the expiration of their tennure or inadvertent incapacity. Most CEOs of large corporations and public companies are appointed on a strict tenure basis, oftentimes with a specific target of performance or delivery.Rather than appreciate that, though, they may run through their tenure including any renewals possible. There are many chances of them leaving the positions for positive or negative reasons. Some tend to think they are simply the only option.
Such CEOs sometimes become too strong and hold the board hostage as their threat to quit is often feared by the boards because it could lead to a run on the enterprise.
The way out for this is qualitative NEDs -- Non Executive Directors -- who have vast knowledge of the inner workings of management and CEOs' behavioural patterns. The NEDs will ensure that the company puts in place a strategy of having more than two capable hands should there be a need for the serving CEO to be removed or quit on his/her own.
This is a very important issue that all boards should concern themselves with.
There is a need to introduce a charter on succession by corporations and large public companies just like various other charters covering various aspects of a code of good corporate governance.
- Todd Rhoad
- Senior Program Manager, Symtx
There's been little evidence to show that a thorough analysis of any talent (internal or external) would identify a CEO that would greatly improve the performance of the organization. The only worry is to make sure you don't choose one who will "destroy" the company. Measuring the impact of one person on a major company is quite difficult. If you know how to do that, I want to read your book! Organizations are metamorphizing at a neck breaking pace due to all kinds of pressures (internal and external). If you can determine how the performance of one individual can have in the midst of all of these factors, no one will believe you.This idea furthers another problem in defining what characteristics, skills, talents, etc. are required for a "successful" replacement. Then you have to hope that one can measure these qualities in potential candidates without being too subjective or worse, biased. Most of us can't judge talent. We can compare it to ourselves but trying to establish it as a broader measure of any human characteristic is beyond our abilities (not without considerable research....and who will do that just to hire a person?).
Changing CEOs rarely generates a lot income for the shareholders, whether it's a high profile CEO or not. Until its proven that this change can create considerable wealth to the powers that be, such planning will have little priority in organizations.
In short, we don't know what it takes, we can't measure it and we aren't interested in putting forth the effort for such little return.
- Kapil Kumar Sopory
- Company Secretary, SMEC (India) Private Limited
Being a legal person, a company has a perpetual existence as long as it remains alive. A Board of Directors headed by a Chairman/CEO guides the company to continuity as a going concern. No individual can be expected to not decay with the passage of time and, therefore, a healthy organisation has got to have plans in place to ensure that replacements at all senior levels are made available at short notice.For this, workable succession planning is a must. However, while the HR instruction manuals dwell on this at length, there is total chaos when it comes to operationalising the guidelines as subjectivity in decision making takes the centre stage.
Experience has established that the upward movement of staff from within has many advantages: firstly, in-depth knowledge of the systems of the organisation and, secondly, awareness of the areas where further improvements are necessary. A SWOT analysis in hand works as a blueprint for all-round focus on desirables.
However, for a good succession plan to succeed, each operator has to plan for a replacement for himself so that he can move up the heirarchy duly satisfied that a void is not created. Ultimately, when he has to quit due to superannuation or otherwise, he will rest assured that no accusing finger can be raised at the standard of perfomance if it shows a decline.
It is in fact more of the organisational responsibility to ensure creation of a conducive work environment for all this to happen.,Once done, the need for an outside search for CEOs and other senior levels can be minimised if not halted altogether.
- Santhanam Krishnan
- Dir (Courses) & Chief Course Architect, National School of Banking
Possessiveness is a genetic vice with which we are all blessed. Willingness to accept change is more preached than practiced - especially if that involves power & position. Corporate boards or corporate heads are no exception to this basic human trait. Hence the question of succession planning remains a paradox even in the best-run organizations.Let's face the basic truth. Nobody starts a corporation or a business to consciously hand it over to another nor allow another to take over unless circumstances warrant. Hence organizations as a rule go slow or soft on this issue.
First let us consider the issue of organic succession. Probably the rule-driven public sector companies in India are the only entities that widely follow the succession plan more as a matter of routine rather than as a conscious need. But when it comes to private business entities, even the best-known private Indian industrial house of Tatas - which should have seen a change at the top in its holding company as a matter of rule - is unable to do it - much to the chagrin of a lot of admirers of this eminent industrial group. The only authentic example I can think and quote is that of Infosys in India, where the CEO promptly handed over the reins to a successor as planned. So much for organic succession.
In-organic succession - which has been a subject of intense study in many institutions - is to my mind more of a remedial treatment rather than a conscious attempt. Remedies come in as a curing measure rather than a conscious choice. The recent occurrence in Citibank is the best example in this regard.
If this is the given status of "succession" itself, how can one expect formal "succession planning" in organizations unless it is forced as a part of corporate governance codes?
- Edward Hare
- Retired Director, Strategic Planning and Quality, Fortune 300 Mnf'r.
There's a thought-provoking story I forgot to mention that's especially relevant to this subject. Has to do with GE and the succession planning by its CEO, Reginald Jones. Seems Jones in his "process" asked his list of candidates the same question, in private. It was called the airplane question: "If you and I were in an airplane together, and it crashed, and we both died.....who should run GE, and why?"Think about what genius this question is. For all the talk about "process" lately it seems to me that asking the terrific question and listening intently to the array of responses can be startlingly informative. Simply asking "What's best for GE" with you and the respondent out of the picture......PRICELESS.
And out of it came a name from outside the mainstream.....Jack Welch.....who, while not perfect, did a pretty good job for the enterprise and its owners.
- S. K. Kotwani
- Asstt. Vice President - IT, IndusInd Bank Ltd.
1. In my opinion, in most cases the board/top management happen to believe that the insider is not a contender for the post. The reason for this belief is that this insider (next probable executive to be appointed as CEO) has failed to show his talent, capability, and willingness to manage/deliver even when he was a prospective contender. The fact may be that he (the insider) may never have got an opportunity to manage/deliver.2. The board/top management may happen to believe that the outsider would bring in fresh knowledge/experience to lead the company, which is not always a case.
I firmly believe that the insider, if meeting the criteria otherwise, should be given a chance to lead, and if he fails within a given time limit, an outsider may be appointed.
- Geary Zale
I believe the answer is simple but we want to complicate it ....Ego .... Too often the CEO loses sight of the fact that other people helped them bolster the company. It is human nature to want the spotlight but it should be shared. No one individual make a company successful; it takes teamwork and sacrifice.
Too often CEOs and other management people forget that their job is to hire and develop qualified successors, not always grabbing all the kudos or hiring puppets so they can continue their puppet mastery. It is like raising children. You provide them with an environment in which they can succeed; and, you equip them with the tools to make good decisions and let them do it.
CEOs sometimes forget that the changing of the guard usually means a change in the way things are done, and once again they let their egos get in the way of good succession process. It is kind of like the record setting quarterback. Unfortunately, the records will be broken and someone new will move into the spotlight .... Move over, you did your job; the company survived and prospered under your tutelage!
- Indrajit Singh
- Executive Director, Nigeria Pipes Limited, Kano, Nigeria
The question of "insider" or "outsider" has to be looked at in the context of why the search for a new CEO is on. Is it because the company is not doing well or the current CEO is retiring or the Board is not happy with the performance of the CEO in terms of the potential of the business? Is the current CEO himself loking for retirement or is he being forced into retirement?The question should be as to who is best equipped to handle the situation. At times an insider is likely to follow the "past" practice and may be averse to change and probably would continue with the same policies and practices. If the business needs a fresh look, then you are better off with an outsider even from a totally different kind of business but having the required skills. An insider succession is more likely to succeed if the change is a planned one with steady business rather than a crisis situation like Citi bank. The insider-outsider debate, in my opinion, is not relevant per se, but what is more important is what the situation demands.
- Gulshan Longani
- Sr. Program Manager, The MathWorks, Inc.
Seems to me that some CEOs have this 'infallible' view of themselves and cannot even imagine a successor when they are still in power. It's the Board's responsibility to have a discussion about CEO's and other senior managers' succession and to make sure that a formal succession process - like GE - is in place.Even if the process is in place, CEO needs to be genuinely committed to the time it would take to groom a successor(s).
It is truly sad that the Boards of the sprawling companies like Citibank and Merrill Lynch, trusted by millions of investors, clients, and thousands of their employees, did not take the responsibility to groom successors for these iconic corporations.
- Sylvia Lee
- Manager, Learning & Organizational Development, Northern Lights Health Region
Many respondents have referred to two issues that I think are critical to moving beyond issues such as ego and fear of corporate mortality and creating an effetive succession process. Those two issues are culture and multi-level succession planning.I deliberately use the word 'process' in the paragraph above because succession IS a process, not a project with a plan. That is, it should be an integral and ongoing component of organizational effectiveness, governance, organizational performance--whatever combination of future oriented activities go on. Once people see it as a process rather than a project, I think that can begin to change mindsets around how to do it.
The culture issue is critical, because hiring a CEO is no different to hiring any other employee - the person must have the competencies and other observable attributes, but must also have "fit". How does this person fit into the corporate culture, or can the person begin to change corporate culture if that is the need? How does this person prefer to work and approach work? Do these preferences and approaches 'fit' what the organization needs? Bob Nardelli moving from GE to Home Depot appears to be a classical case of a CEO not understanding the culture and not having a good fit with the new organization.
Multi-level succession activities is also critical. There are several factors inherent in this.
1. Management and leadership development, in all its forms, not just workshops and coaching, must address leadership at all levels of the organization.
2. People who 'enter' the leadership development program should first have a signed accountability agreement with their respective managers that lays out the accountabilities of the employee in relation to the investment made in him or her, AND the accountabilities of the manager in supporting the employee, enabling her to convert learning into performance through practical application. Far too many learning interventions never achieve much because the learners are not able to transfer their learning into the workplace in a way that actually improves performance. Managers are often the barrier, sometimes consciously, sometimes unwittingly. The work environment itself often gets in the way, too, and managers need to work with employees to identify and remove those barriers.
3. Once the employee's manager has approved the employee's enrolment into the leadership development program, that approval should be signed off by every manager in the employee's hierarchy, right up to the CEO. This is not intended to be an approval as such, but (a) helps ensure the employee understands the seriousness of this leadership development venture and its importance to overall organizational success, (b) forces managers at all levels to publicly value the leadership development program (and if one doesn't then maybe that one should be an ex-one!), and (c) ensures that every manager up to the CEO knows who is in the leadership program and thus pipeline - no-one can plead ignorance.
4. All senior managers in the organization should be actively involved in the leadership development program, teaching, facilitating, coaching, mentoring, assessing - they get to know people in the program and therefore have a much better opportunity to evaluate people as continued high current performers/high future potentials. And I mean 'active' not token participation.
5. As someone else mentioned, every manager in the organization should have an accountability agreement (not merely a performance agreement) that clearly states accountability for sharing knowledge and developing people, and with clearly stated consequences for not doing both of these things. We talk knowledge sharing but currently continue to reward knowledge hoarding. Making EVERYONE accountable, in practical and observable terms, for building a collaborative, knowledge-sharing culture, starts to move us away from knowledge hoarding. Or at least, shows up the people who do hoard their knowledge.
6. Shifting an organization from a function-based structure to a process-based structure helps to ensure all current and future leaders understand entire processes, not just parts of processes, sets up the framework for building cross-functional relationships and stretch assignments, and builds awareness of a person's strengths and weaknesses before placing that person into a cross-functional role and thus allows for an individualized learning and development strategy.
I am about to initiate--perhaps ignite is a better term!--much of this in my organization, at the moment with respect to cross-functional relationships in particular in one of the hospitals in our region. My first goal is to get people from different functions such as emergency, diagnostic imaging, and surgical ward, to see things from the perspective of a patient who experiences a single process and cannot understand why he keeps dropping into black holes between different units and why she, in pain and frightened, has to repeat her medical history on the ward when she gave it to emergency personnel just a couple of hours earlier. In the short term, if we can shift people to thinking about the entire process, not just focussing on getting a patient out of their area and unloaded on to someone else's area, that would be a great start in improving the quality of patient care, and probably patient safety too. In the long term, an employee that doesn't actively participate in or foster participation in, the process as a whole, and keeps the functional blinkers on, eliminates themselves from the leadership pipeline.
Sylvia Lee
- Karen Dempster
- Director, Creating Change
The grooming of potential CEOs starts very early, and I have seen so many organisations fail to identify leadership potential. Often in fact they curtail and discourage initiative and creativity through small barriers, be they process, policy or egocentric middle management. Barriers built eventually become brick walls. The staff turnover rate of an organisation is directly linked to its ability to foster strong leadership potential internally, and thus ultimately CEO material. The quality of internal HR leadership is directly relevant IMO.- Jonathan Smith
- Communications Manager, Forest Products Commission
It seems only Veronica Serrano above has touched on the critical issue of timing.For succession to work, there has to be a pool of second tier talent ready to step up at exactly the same time that the CEO is read to step off.
If the 2IC is genuinely ready to make the next step, he or she is likely to be proactive, openly ambitious and well-known. That kind of person might not want to sit around and wait for the CEO to die/retire/move on to something better.
So, that means the CEO can't just pick one person and hope they'll stick around waiting. The CEO must continuously develop a pool of second, third and fourth tier talent, knowing some of that talent might end up moving to a competitor.
- Nzioki
Many professionals have created within themselves, either by choice or by circumstances, a scourge i would describe as "scarcity mentality". This is in contrast to the more copious virtue of "abundance mentality".People with an abundance mentality let those below them grow and hence give themselves the opportunity to grow even faster and higher. They work with the best minds. They seek out those who are better than them and develop them. They seek a greater joy from the legacy they have built over time. They have a longer term view of life.
A scarcity mentality tells you it is dangerous to let your junior become as good as or better than you. They believe that the cake is not enough and they must grab theirs. They are not visionaries. They seek out and want to work with passive followers and are happy when others don't stick out their necks. Such is the cream of many current professionals who in the guise of capitalism choose to become selfish and greedy. They choose to rejoice in others' failures. They have a shorter view of life and want it for themselves, and now.
The "scarcity mentality" managers will not develop any of their juniors. They will not coach their employees. They will not mentor any of their juniors. They see dangers in their juniors as opposed to opportunities. They will anything to undermine their (juniors) credibility. Eventually, when the time comes for them to exit, there is no one to take on the baton. The consequence being "turbulent" times for the business.
- henry kwok
- global partner
This is a good thought provoking question. Objectively there is no equally good answer.There are examples cited on successful succession planning. There are reasons cited why a properly managed succession is preferable. Yet in reality not all succession plan worked out the way it is intended - therefore necessitating the need to hire from "outside." Board members are appointed because of their wealth of experience, besides other criteria. Thus in all fairness, it would be a bad generalization to think that Board members would rush into some decision to hire from outside because it was expedient politically or otherwise.
Strategically, we must remember that there is more than one way to achieve the outcome we want. Sometimes we need several initiatives to assure long term sustainability and performance. We must also recognise that each of these initiatives could have more than one outcome.
What does this all mean? Does this mean we should do away with succession planning because they have proven not to work all the time? No! Failing to plan for succession is planning to fail on succession. At the same time, we must recognise that some "black swans" can hit us. No amount of planning and management can take away the uncertainty of the future and thus we need to access the scenario in this new light. Organisation needs to be flexible and nimble in recognizing such needs whenever the situation demands it.
- Paulo Wilson Rodrigues
- Student, Escola de Engenharia de Lorena- USP
Well, to say that sucession is badly managed means a possibility of good managed sucession in some cases. An enterprise must always be prepared for the worst.The worst case here is the loss of the CEO. Anyone in the organization must be able to get a different job position than his actual job. I mean that a permanent training program must be done for all employees. So if anyone is missing at a time there will be always someone skilled enough to substitute him. Then all company employees must be able to take at least three differents jobs and anyone that does not fit this qualification must be trained to do so and this includes the CEO. Then the CEO should take vacancies from time to time and someone on the board will get the charge.
A company like this will have no sucession problems even for the CEO position, because everyone will know who is the right man for the right position, no matter if the job is done right or not.