CTV recently interviewed Joseph Bower, Baker Foundation Professor of Business Administration at the Harvard Business School, on CEO succession. The interview is worth reading in full, but two power quotes jumped out at me.
“There’s a great tendency to treat CEO succession as an event; it’s something that happens and you begin to worry about it about a year before it’s necessary.”
He’s right. And many of the problems with CEO succession can be traced to the practice he describes.
Remember HP? They fired Mark Hurd and then had to scramble for a new CEO.
It’s like companies lose a CEO and then ask, “Who can we get?” It’s also the reason why only about half the CEO vacancies are filled from inside.
So, what do you do? Bower has some advice.
“You are either managing the company to develop talent, which means that, at each juncture, when you have opportunities, you think of them both in terms of the development of the business, but also in terms of the development of the managers.”
In other words, you see talent development as part of everything you do in the business. Emulate companies like General Electric who have done that for decades, producing a string of effective, generally long-tenured CEOS.
Or consider the way that Enterprise Rent-a-Car works. Their succession pipeline starts with a premier management training program that puts new hires to work in the branches. The result is that top executives come up with front line experience and absorb the corporate culture along the way.
There’s no mystery about all of this. It’s the usual hard work and attention to detail. My theory is that board members would rather fight fires (it’s exciting) or engage in discussions of grand strategy (it’s interesting) instead of holding management’s feet to the fire on the most important factor in corporate success: the development of great people.
