The single most valuable player in almost any company is its chief executive officer. Given that, most firms surely have succession plans ready to go when Mrs. CEO steps off to another opportunity or the Board decides to go in another leadership direction. Right?
Um, not so much. How many times do you read that a company that has just lost its top executive will now engage a search firm to conduct the fabled “Worldwide Search.” But isn’t this an admission that a company’s internal leadership development program is failing. Where are the internal candidates ready to step up to the top rung?
In an article for the Harvard Business School alumni magazine, professor Joseph Bower offers three primary reasons for CEO succession crisis:
- CEOs find talk about their successors depressing, a threat to their identity, and an indication of personal and organizational failure.
- Some company cultures consider CEO hiring a process best left to HR, and only to be engaged when the chief exec’s retirement date draws near.
- Organizations designed by turnaround CEOs are focused on current performance, not long-term strategy.
Bower argues that CEO succession should be baked into the management of the organization, a process that takes years, not months.
The key elements in this process are the way a company recruits; how it is organized; how it manages budgeting and planning; and how evaluation, compensation, and promotions are conceived and carried out.
He also believes that the best CEO candidate is what he terms the “inside outsider.” This is a person who has risen through the ranks, is respected by other insiders, but who also maintains a clear-headed critical view of the organization and is ready to make change.
“Building inside-outsiders means managing succession to bring to the fore leaders who will challenge their strategic inheritance,” Bowerwrites.
Clearly, some companies have profited very well by bringing in an outsider. Think IBM and Lou Gerstner. And insiders don’t always work out, as Apple discovered when it named longtime veteran Michael “The Diesel” Spindler to the top post.
But the point remains: Given the importance of the CEO to the future of the organization, given the disruption and uncertainty created by their sudden departure, firms and and their boards need to spend a lot more time on succession planning.
