March 22, 2010 • History Factory
The economic crisis has offered food for thought on a number of business related issues: corporate responsibility, government control, inflated salaries, etc. Here’s a new one, offered up in a recent McKinsey Quarterly article: succession planning. The article cites Ken Lewis’s departure from Bank of America and the resulting “scrutiny and criticism” the company faced for being so unprepared for such an event as a prime example of the issue’s importance and relevance in today’s business world.
The article offers several suggestions as to why succession planning is not top of mind. But whether it’s an unwelcome reminder of the current CEO’s mortality or a sticky issue for the board—an awkward discussion in good times; a threat in bad—authors Ana Dutra and Joseph Griesedieck see all of these as poor excuses for the fact that “only about half of boards actually have [a CEO succession plan] in place.”
After identifying the issue, the authors—Dutra, a talent management executive, and Griesedieck, a board and CEO services leader—provide guidance as to the role succession planning should play in a company and ways to effectively implement it. The History Factory, however, can add to the discussion with a lesson from its own client history.
A few years ago one of our clients faced an urgent need for leadership change. The current CEO had made some questionable decisions and it had become clear to the board that he needed to be replaced. Fortunately, the company had a succession plan in place—their “beer-truck” scenario, i.e., should the CEO ever get hit by a beer truck . . .
The plan designated an interim CEO while the board found a permanent replacement, providing stable leadership and an opportunity for the board to assess viable candidates without being forced to make an immediate decision. Ultimately the board found the interim CEO to be the best candidate and installed him permanently. But the beer-truck scenario also allowed the company to review the role of the board itself and make changes. By giving the board more oversight and input into strategy, the company positioned itself to fend off a repeat of the previous CEO’s mistakes, which were enabled partially by the fact that he held a great deal of control.
The changes proved beneficial and timely, as the strengthened organization not only eased through its own turbulence relatively unscathed in the marketplace, but has also been able to pass smoothly through the economic crisis. It now stands poised for future growth and success.
Succession planning seems to be a valuable corporate strategy, during seamless transitions as well as turbulent ones. But perhaps just as important is the recognition that it is a time of transition, for leadership on down to the front lines, and the organization’s response to all that encompasses will set its course for the future.
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