November 27, 2007
It’s a basic management rule, but only about half of corporate boards have CEO-succession plans, even at giant global companies, The Wall Street Journal reported yesterday. The problem is succession plans are best made long before they’re needed.
Citigroup directors didn’t start looking for a new CEO until Charles Prince stepped down earlier this month, leaving the company rudderless after suffering huge losses in mortgage-backed securities and falling behind its rivals. At Merrill Lynch, directors waited until they had ousted former CEO Stan O’Neal last month before they began interviewing candidates to replace him — forcing the board to hasten its decision to choose outsider John Thain.
“Succession planning isn’t an event, it is a process that is best managed over three, five, even 10 years,” the Journal quoted Harvard Business School professor Joseph Bower saying. And yet, “a lot of CEOs are focused mostly on getting through the next quarter, and they ignore the hard work of grooming future leaders.”
According to the paper, directors often look the other way when CEOs don’t groom successors — and even when CEOs purge talented subordinates instead of preparing them to take over. But CEOs who want to identify top talent shouldn’t surround themselves with executives afraid to criticize them or offer different perspectives, the paper wrote.
According to Stephen Miles, a managing partner at Heidrick & Struggles’ leadership consulting practice, quoted by the WSJ, “Succession planning is often done looking at the rear-view mirror when it should be done looking out the front windshield.”
— Compiled by Greg Beaubien for Tactics and The Strategist Online