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For many companies, succession planning is like a regular fitness routine. While nearly everyone agrees it yields important benefits, many folks simply aren’t disciplined enough to incorporate it into their daily schedules.
Marshall Goldsmith, an executive coach who authored the forthcoming book “Succession: Are You Ready?” and writes regular columns for BusinessWeek.com and HarvardBusiness.org, says many top executives believe they can’t devote time to the long-term goal of succession because they are busy dealing with the short-term problems involved in running a company. This is especially true in times of legitimate short-term crisis, such as the current economic downturn.
“Executives often feel over committed. That’s why they don’t put time and energy into succession,” says Goldsmith. “It’s not because they’re bad or mean or evil or stupid, and it’s not because they don’t understand that it’s important. They think they are going to do it, but they just don’t. They don’t get to it because they are caught up in day-to-day operations.”
According to recent research from CPP, Inc., publisher of the Myers-Briggs personality assessment and other personality, career and organizational development tools, fewer than 40 percent of global organizations say they have a formalized succession or executive coaching program. Just 54 percent of respondents have a formal process for identifying individuals with high leadership potential.
That’s especially worrisome since 52 percent of respondents report it’s somewhat or very difficult to fill top executive positions, and 47 percent expect this already-tough task to become more challenging over the next decade.
“If you work with someone on a daily basis, you know who they are. You can leave the company with someone you trust, who has values consistent with yours, someone who will promote your vision into the future of the company.”
- Marshall Goldsmith
- Author, "Succession: Are You Ready?"
In addition to time-pressed executives, other challenges of succession management include limited human resources staffs and a rapidly changing business environment that can render the skills of leadership candidates irrelevant before they move up the management ladder. “Predicting future needs of a company has always been hard, but it’s especially true now that change is the norm,” says Tracy Duberman, senior vice president of organizational effectiveness practice of WJM Associates, a provider of executive coaching and organizational development consulting.
Succeeding in Spite of Themselves
Then there are big egos, in many cases found in both top executives and those tapped to replace them.
“Often the person coming in feels that they need to put their stamp on the company and do things their mentor wouldn’t have agreed to. This can cause massive problems and possibly wreck the company,” says Rob Enderle, president and principal analyst of the Enderle Group and an IT Business Edge contributor. “People who are good at being CEOs like complete control and don’t want to share, so they typically don’t explain why they do things and the subordinates think their own more brilliant ideas are getting overlooked. As a result, they enter, prove their mentor right and learn by doing why their ideas were bad ones.”
The technology sector is home to some famously large egos, including Oracle CEO Larry Ellison, former Sun Microsystems chief Scott McNealy and Salesforce.com CEO Marc Benioff. Many observers consider ego a contributing factor in Apple’s apparent lack of a clear successor for Steve Jobs, the quintessential “rock star” CEO. Jobs last month announced he was taking an open-ended leave of absence because his health problems were “more complicated” than he first thought.
The company’s stock price fell 4 percent after his announcement. Apple stock also cratered last October following false rumors of a Jobs heart attack, leading many financial analysts to speculate that stock would fall at least 10 percent if Jobs were to leave the company.
Jobs may be more gun-shy than most because of his disastrous past history with succession. In 1983, he personally recruited Pepsi CEO John Sculley to succeed him. Instead, the two men clashed and Sculley fired Jobs. Critics faulted Sculley’s highly splintered product strategy and other business decisions for Apple’s falling profits, and he resigned in 1993. Two unsuccessful CEOs later, Jobs returned to Apple in 1997, turned the company’s fortunes around with the introduction of the iPod in 2001, and has been on a winning streak ever since.
Would it have worked out better for Jobs if he’d groomed an internal candidate rather than looking outside of Apple? Probably, says Goldsmith.
“You can read about outsiders, but you have a limited knowledge of who they really are,” he says. “If you work with someone on a daily basis, you know who they are. You can leave the company with someone you trust, who has values consistent with yours, someone who will promote your vision into the future of the company.”
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I agree that succession planning is important and shouldn’t be neglected but it is a shame that many CEOs don’t understand that. I recently read a presentation from Med Yones, a business consultant, which covered that topic. The presentation gave a guideline for BODs and CEOs to use then undertaking succession planning and it also gives the best practices of the field. The presentation can be found at http://www.ceocoach.us/ceoseminars/ceoseminars_ceosuccessionplanning.pdf