It is the desire of those who teach and hold doctorates to become tenured in the educational facility of their choosing. Typically, in Corporate America, The CEO has climbed the ladder of success within an organization. Maybe this individual started in the mailroom, or was hired right out of college. In some cases, the person was hired through a recommendation by another executive either inside or outside the company or a Board member. If the person making the recommendation is trusted, perhaps the one being recommended is a good fit. Time will tell.
Time may indeed tell, but by the time a mistake is discovered, you may be out of time and it will be too late. Mulling over some recent examples of succession nightmares, may help with your succession planning. Bernard Ebbers became a self-made millionaire by investing in motels. Soon he discovered LDDC (Long Distance Discount Company). He invested in this company. While operating WorldCom, it became one of the largest companies in America. Mr. Ebbers was the driving force growing the company through no less than 75 acquisitions. He was also over-zealous in his attempt to have WorldCom as the number one stock on Wall Street. He may have had the talent for making deals, but not so much for managing them into a cohesive, well-functioning and profitable company. WorldCom could no longer bring in the revenues it needed, there were ethical questions, and soon thereafter, WorldCom was no more. While Mr. Ebbers was the founder, there weas no one in place who could have succeeded him. Bear Steams, an 85 year-old, well-respected corporation suffered a similar fate.
Jimmy Cayne was a sales representative who became a top stockbroker. He was recommended to be an executive at Bear Stearns because he was a good Bridge player – a similar interest of the person recommending him. Mr. Cayne elbowed his way up through the executive ranks and when his predecessor retired, he had tenure and viola! he became CEO. Unlike Mr. Ebbers, Mr. Cayne’s forte was not acquisitions. The company missed several good opportunities to diversify. When the mortgage crisis hit, Mr. Cayne was out to sea without a paddle. By his own admission, he had no clue what to do. The company’s stock was devalued so much that it was acquired by another Wall Street giant, J.P. Morgan Chase for around $10.00 a share. There are other similar, sad stories like these, for example Anderson and Enron.
If your organization’s succession program is based on tenure alone, it would be wise to revisit your plan. Regardless of the reason for the CEO seat becoming vacant, for succession to be successful, organizations would be wise to require a pool of five to seven top ranking names from which to choose from in order to carry the company forward. Considerations for your company’s next leader should include understanding the following:
- Behaviors – What personality style is the individual? Are they assertive and aggressive, overly so? Do they have difficulty making decisions? It’s important to be good at networking. However, when making new friends over shadows accomplishing company goals, something has to change. While it is also good to be careful of mistakes, personalities who strive for perfection can delay project completion, they may set standards so high that it is impossible for others to reach them, or they may not be assertive enough to meet goals.
- Motivators – What drives this individual? Understanding an individual’s drivers will serve to help you understand if there is a difference of not only opinions but of ethics. This is important if they are different from what your organizational culture values.
As you can see, succession planning can be a slippery slope. However, with a few fundamental activities, disasters such as WorldCom, Enron, Bear Stearns and others can be avoided.