Succession--A Strategic Decision

The selection of an organization’s chief executive officer, or CEO, is the most important decision a board makes. Boards carry the ultimate responsibility when it comes to deciding who will serve in this vital role. They need to make sure the CEO and leader will be one in the same.

Beyond the CEO

What is leadership succession?

Succession planning or management is an on-going process that boards, with the help of their chief executives, can use to create an environment for leaders to succeed from the very beginning of their terms until the cycle is repeated with their successors. (BoardSource)

While the board cannot run the process, it can make sure it’s in motion.

The need is for a wider focus than succession at the top. It’s getting the right person in the right place at the right time throughout the organization. Succession is a continuous process—a journey, not a destination.

Planning for the future requires an on-going effort to nurture those who show potential for increased responsibility. The board can ask periodically if this is being done and what are the results.

Succession is strategy. The two are inextricably linked with the organization’s long-term goals and objectives.

Avoiding a Bad Start

According to our studies the four biggest mistakes or misjudgments made by boards in the CEO search process are:

1. Not being ready with a good plan so the search gets a timely start.

2. Not clarifying what kind of leader the organization needs for the next 8 to 10 years.

3. Not understanding the strengths, abilities, personality, leadership style, etc., of the top two or three candidates. This is essential in order for the board to project how this person would fit the culture of the organization and its various constituencies.

4. Not letting go of any operational duties picked up during the transition once the new CEO is in place.

Board Options

Boards have at least two options in the search process:

Option No. 1

Conduct the search from within the board using the policies and procedures in place for this purpose. A “search committee” is the most frequently used term to oversee this work.

The board is responsible for:

1. Communicating to the search committee all input positive or adverse.
2. Considering cultural nuances which influence the selection process of the CEO.

Option No. 2

Retain the services of an executive recruiter or consultant who specializes in this type of search. Even if this option is chosen, the board must retain final say over the process.

For those who wish to engage an executive recruiter, there are several things to keep in mind:

• There is a need for an effective working relationship with the consultant.

• Search is a consulting engagement and not just a recruiting activity.

• Executive search may or may not result in the hiring of a CEO. It’s misleading for anyone to guarantee that a position will be filled as the inevitable conclusion of a search assignment.

• The search is to help the candidates and organization discover whether there is a potential fit between their capability and the need at this time.

Nature of the Leader

What is the key to a successful search?

Finding the one individual who stands out from the rest—whose unique skills make this person central to the organization’s success.

While lists are never long, there may be several qualified persons for the position. However, the goal is to match qualifications with cultural fit. Even in turnaround situations. A record of accomplishment, style and adaptability are all very important. But the real question is what can a candidate immediately contribute?

Things to keep in mind…

• Identification of duties

• Responsibilities

• Qualifications

• Cultural nuances including fit

What’s so important about a person’s fit? A close match with the organization is essential for legitimizing the selection process and internal working relationships.

• Do the candidates have the right kind of experiences?

• Will they live the purpose and mission?

• If a turnaround is needed will the candidates have the emotional strength and discernment for this strenuous task?

• Is there likely to be good chemistry with co-workers? The board? Customers?

Lacking criteria by which to make a decision could lead to almost anyone who strikes the board’s interest being chosen. From a distance nearly any individual can look good. Someone who makes a strong impression can be a terrible choice. Appearance, talent and performance are not the same things.

As studies show, human behavior is highly repetitive.

It’s worth noting that frequent past behavior is the best predictor of future behavior.

The way someone has acted, their past results, emotional responses—all these behaviors will repeat themselves in the new assignment. Leopards don’t change their spots and neither do individuals once they are in a place of authority and responsibility.

In some cases a delay in deciding on a new leader is better than a decision made in haste —even if imposing temporary hardships on the organization. This is why interims are an option for a board.

Final Thought

You don’t just hire a CEO; the organization gets a philosophy of life and world view. These don’t always show up on paper. This personal dimension may not come up in the interviews either unless you are intentional with the questions.

It’s worth taking time to know who the candidates are, not just what they have done in their previous assignments.

Are the individuals the board is considering capable of learning, growing and changing? How they continue developing as individuals, not just executives, weighs heavily on their likelihood for future success. Better to think about this before the final decision rather than after the fact.


(C) 2010 All rights reserved.

Creating the Future--Even in Difficult Times Part 4

Execution More than Vision

“Everything depends on execution, having just a vision is no solution.” (Stephen Sondheim) Not that vision is unimportant. A sense of direction and a direction that makes sense is foundational, but incomplete.

Too much attention on vision is like spending most of your time on the driving range while neglecting to practice chipping and putting, which is how you lower your golf score. (Harvey Penick)

Execution is people, strategy and operations.

“Execution is the missing link between aspirations and result.” (Larry Bossidy and Ram Charan)

Summary

1. Creating the future is about pursuing the right opportunities which often emerge in times of great change. (“Buy or lease a new car and, if in the next 12 months you lose your job, we will take the car back.”—Hyundai Motors)

2. The importance of managing oneself—having a sense of urgency and a non-anxious presence at the same time. (Captain “Sully” Sullenberger, US Airways Flight 1549 landing on the Hudson River offshore in New York.)

3. Focus on how to solve problems—not how intractable the problems are. (Apollo 13 moon mission.)

4. If you don’t learn to make decisions, time will make them for you. (JPMorgan Chase going into the recession having slashed costs, investing heavily in technology and core businesses—buying Bear Stearns for the bargain price of $10 per share.)


(C) 2010 All rights reserved.

Creating the Future--Even in Difficult Times Part 3

Where is “Normal?”

History is a reminder that periodically cultures, economies and governments, for different reasons, cross a threshold. Once there they don’t go back. Is this one of those times?

Current examples of restructuring:

• Financial services
• Real estate and construction
• Retail
• Legal profession
• Transportation
• Media and Publishing
• Healthcare
• Jobs (Is 5% unemployment an old idea?)
• The role of government in our lives


Learning to Ask the Right Questions

Here are 6 questions to get you started:

• What is your business?

• What is it you can’t afford to lose? (The core)

• What are you doing that needs to continue?

• What are you doing that needs abandoning?

• What are you not doing that needs initiating?

• How do you make a profit?


(C) 2010 All rights reserved.

Creating the Future--Even in Difficult Times Part 2

"Assessing—Not Predicting"

Creating the future is no longer based on probability.

Old: What is most likely to happen?

New: What has already happened to create the future? What are the facts as we know them to be? What do they mean to our business? What opportunities are created that match up well with us? (Peter Drucker)

Predicting is a difficult undertaking. We still don’t have flying cars, orbiting space cities or endless time. People and social phenomena make it hard to predict. Status quo is slower to change than most realize.

“If you predict for a living, you have to predict often.” (Neils Bohr, the late Danish physicist)

How to assess? By asking good questions.

• Looking externally at current and prospective customers

• Looking at the edges where change often occurs, first

• Looking internally to operations

Some examples of a changing landscape:

• Jobs (how people work and earn a living)

• Frugality linked with value—even among higher income households (consumer is 70% of the economy)

• Smaller—not larger businesses

(C) 2010 All rights reserved.

Creating the Future--Even in Difficult Times Part 1

This is the first in a series of posts on the global economic situation from a workshop presented in 2009.

How would you describe the past 24 months? A 100-year phenomenon? A “black swan?” “A Great Recession?”

“It was a year when the unpredictable turned into the unimaginable.” (Larry Fink, CEO of Black Rock Investments)

How could so many have misread this financial crisis? What else did we know back then?

What are we missing now?

The way we see things determines our attitude and behavior. We are at all times creating the future whether we realize it or not.

Sometimes success blinds us to new realities—this can be a dangerous thing. Regardless of the circumstances facing us, we can and do have a say in shaping and influencing our future. We need to know the things over which we have some control—work there. What are those things?

“No new idea springs full blown from a void. New ideas emerge from a set of conditions in which the old ideas no longer seem to work.” (Machine that Changed the World)

“Ideas are not created, they escape.” (Lou Gerstner, former CEO of IBM)

In a practical way, how do we go about creating our future?

-Assessing—not predicting
-Finding the new “normal” for your organizattion
-Asking the right questions
-Executing more than envisioning

More in the next post.

(C) 2010 All rights reserved.

Leadership Agenda Now Online

Our leadership agenda for business and nonprofits is now available at http://www.strategist.com/. Download and begin setting the agenda for your organization.

Setting the Agenda

In their book, "You’re in Charge—Now What?," Thomas Neff and James Citrin recount the time A. G. Lafley, now the former CEO of Proctor & Gamble, took over following the forced departure of his predecessor, Durk Jager.

Within days of taking the job Lafley announced his priorities. Instead of a radical makeover, he concluded initially that P & G needed to do better what it already did well. “The message was shocking in its simplicity. Everyone down the chain of command could understand it,” Neff and Citrin note.

Mr. Lafley’s priorities for P & G became the first installment of his leadership agenda. Innovation was added later.

Does the new president and CEO of General Motors, Fritz Henderson, have an agenda?

Rick Wagoner, the former Chairman and CEO created a few clear and easily understood performance targets. Wagoner laid out his agenda for North America at GM’s annual meeting some time ago. His four goals were simple and direct:

-Build great cars and trucks
-Revitalize sales and marketing
-Cut costs
-Fix health care

This was in addition to the continual restructuring at GM.

Misplaced bets on SUVs and large trucks, a global economic crisis and government intervention, however, cost Mr. Wagoner his job. This was evidently part of the price for seeking a federal bailout needed to cover huge operating costs until sales turn around.

Although some progress had been made toward these goals, what was missing in the Wagoner agenda was a greater sense of urgency. This is an important lesson for any leader facing a crisis situation.

Henderson’s agenda is to a large extent the making of others.

With GM now in bankruptcy, the new government-appointed CEO must quickly deal with:

-Returning to profitability—selling products consumers want and are willing to pay for

-Managing the political and financial tension of building smaller “green” vehicles with the demand for large (and more profitable) cars, SUVs and trucks

-Continue working with the White House Auto Task Force (cash infusions)

-Getting along with new GM board chairman, Ed Whitacre

-Building confidence in his own leadership abilities

Another vital lesson from GM’s experience: If you don’t learn to make decisions, time will make them for you.

There’s a new agenda at Starbucks. “Back to the bean,” says CEO, Howard Schultz. Mr. Schultz’s agenda, in the midst of a huge fall-off in sales due to the economy and rapidly changing consumer behavior, includes:

-Reasserting Starbucks’ position as the world’s coffee authority
-Reigniting the emotional attachment with customers
-Carving out new areas for growth
-Closing nearly 800 stores—while opening 200 more

Will this be enough to turn around Starbucks? There are some early signs of progress.

What’s an “agenda?” And how does it help leaders accomplish their goals?

A leader's agenda is a personal plan for guiding the organization. It's not a business plan in the traditional sense. An agenda is a set of themes and priorities requiring action and progress in a given period of time. The agenda includes the main message and identifies critical issues needing attention. (Briefing for Leaders Harper Business)

“It’s not a plan or a strategy,” says Jeff Immelt, Chairman and CEO of General Electric. “It’s what you stand for, what you’re focusing on.”

What are the benefits of a leadership agenda (which also apply to nonprofits)?

1. It clarifies the main message. There was no question in the minds of those at P & G what was important to A. G. Lafley—at least initially they were going to find ways to sell more Tide.

2. It provides focus. For GM it comes down to this: Everyone needs to make sure their attention and behavior are focused on the goals determined to be crucial to GM’s future.

One criticism against Carly Fiorina, the former CEO of Hewlett-
Packard, was the globe-hopping and time spent on a long list of issues. The late Peter Drucker observed that effective CEOs pick two tasks and devote their energies there. When those tasks are done they don’t go to #3. They make a new list.

While multi-tasking for executives is a reality, the discipline to focus on a few things is an antidote to “corporate attention deficit disorder.”

3. It’s a filter for allocating scarce resources. Human. Financial. Time. Communication.

4. It improves organizational health. An agenda designed for action and results creates clarity and a positive climate. If people know what’s going on in the CEO’s mind they know where to place their energies. There’s no substitute for a sense of direction and a direction that makes sense.

5. Provides accountability for results. First, for the CEO. Then for everyone else. Call it follow-up, implementation or execution. It’s all the same thing. Getting the right things done.

What does an agenda look like?

A more developed but concise leadership agenda contains the following:

· The preferred future and core idea of the business. It lists the building blocks of that strategy with the concept of the business at the center.

· The main message of leadership. What needs to be said by the leader to the employees? The stakeholders? The investment community? What is the dominant message that should cascade over all these constituencies?

· The top priorities—with a clear no. 1. What should get your attention? A. G. Lafley offered a few priorities—inside a clear and simple theme. It allowed his people to move ahead with purpose.

· The critical issues needing attention. Critical issues are barriers to achieving the goals. Sometimes they are within your influence. Other times they are not—like the weather. They can be financial (as in recession), human resources, competition or government regulations.

It’s essential to have a common understanding of the issues, who is responsible for each, and how to deal with them in a timely manner.

· Operational issues. What, if anything needs changing or reorienting to support your direction? What should be abandoned? What groups need improved communication in the coming months? What rises to the top as the two or three things that must happen in the coming year?

Most people are not mind-readers. What’s inside your head needs to be made known repeatedly and in different venues among a wider audience. A leadership agenda is a simple and practical way to improve the communication process vital to your success and that of the business.

(C) 2009 Bredholt & Co., Inc. All rights reserved.