Leadership transition of the CEO is hard and messy, but it’s possible to effect transition in meaningful, gratifying ways that build legacy companies for generations to come.
The central issue appears to stem from alignment of the company’s products and services to purpose, vision or the Why to stakeholders i.e. CEO, board, employees, customer, shareholders (private and public). Combine this with ineffective communication and there’s a mess on your hands.
Paul Strebel, Emeritus Professor ,at IMD presents thoughtful points and how to’s in his article Pitfalls in CEO Succession. Much of the challenge in getting the CEO position right is due to corporate culture and politics.
6 Factors are identified:
- Board is out of touch
- Ego Interference
- Ignorance of Internal talent
- Superficial Search Process
- Poor on-boarding of CEO
- Relationship and Communication Break Down Between CEO, Chair and Board
I believe it’s important to look at the objective strategic planning and operating execution approach in the next growth cycle of the company. Assess the organizational and leadership needs and skills required relative to the current and anticipated business situation.
Evaluate if the current vision/mission is up to date with market conditions.
Determine if the current leadership and team is capable of the changes necessary through the next stage.
Create an independent team to properly review the company’s condition and leadership.
Too often the company will view succession appointments as some version of the current CEO’s qualities and board perspective. This will lead to a redundant appointment of past and current leadership perspectives on the company prospects.
Less probable will be a fresh take on the company’s future potential or the skills needed in new leadership that could differ greatly from the current CEO.
Examples of this might be the current CEO was excellent from start up to early stage development. The next CEO, however, needs to deal with growth challenges for a mature company. Different traits and skills from the past.
Or functional skills need to change. Engineering background gives way to more product, customer centric marketing skills; financial etc. to accommodate acquisitions, divestitures.
Companies and their boards need to avoid working with reference points wedded to their past. Especially true if anticipated market conditions will be quite different.
In fast moving markets companies need to adjust to business cycle changes. Often the CEO and team of the past won’t be able to meet the challenges going forward.
Industry specific expertise or experience may not be as critical as people think. If the company has a deep bench of talented industry veterans, then why should the CEO background match that?
You can follow a good LinkedIn discussion group on this point re: Lou Gerstner becoming IBM CEO with no technology industry background. I commented as follows….
…Intellectual curiosity combined with broad organizational experience, and an ability to listen intently to draw insights will work better vs an over emphasis on industry experience in choosing C-suite leadership. The CEO can’t ignore industry expertise but shouldn’t be constrained by it in viewing strategic directions and org changes. Humility, objectivity, and decisiveness is a real balance. That’s why not everyone is cut out to be CEO/leaders.
Gerstner is a notable example of bringing such traits forward to help re-imagine IBM’s potential, and aligning many of the execs from industry to new possibilities. The succession of IBM CEOs since Gerstner’s time are all long time company and industry people who have ably adjusted to changing market conditions. A line of IBM execs that can do that is Mr. Gerstner’s legacy as well as long term shareholder value…
It is a rare CEO that can change from one growth stage to the next over long periods of time or bring varied industry backgrounds to a new role and situation. But why use the past CEO’s credentials and qualities as a basis for the next CEO?
Peter Klinge, Jr. is an executive who addresses challenges as described here. He works with small to mid size companies on growth stage opportunities and organizational transition. He is asked by founders and CEOs to affect change via interim, project, and board adviser engagements.
It is interesting to see how many companies fail to not only transition leadership smoothly but also improve corporate engagement/excitement during periods of change.