Succession planning and the cult of the CEO

When it comes to explaining business success, you usually hear the story of the leader. Western culture has a rich history of story telling – heroes venturing off into the unknown, facing adversity, returning with “unique” and extraordinary new skills.

In 1949, Joseph Campbell documented this almost primeval underpinning of our culture in “The Hero with a Thousand Faces”, an influential study of the way we communicate and construct myths. Campbell’s work has permeated Hollywood and the media, and has become woven into the fabric of corporate communication.

Human PyramidBusiness success isn’t just reported, it is attached to individuals.  The larger and more successful the organisation, the smaller the spotlight becomes, as a few “heroic” individuals come to represent the efforts of thousands.

Credit tends to rub off onto the spokesperson, which is one reason why you often find CEOs performing solo in the spotlight, long after you might expect their swan song.

The cult of the CEO is of course nothing new. It is just looking rather threadbare. The key problems it creates stem from risk management, and of course succession planning.

When it comes to high stakes succession planning, the board of Apple has obviously had the tiger by the tail for many years. With Steve Jobs relentlessly heralded by the media as a business hero, his inevitable departure was always going to be disruptive. What is suprising is that the board allowed Jobs to remain CEO for so long, given his many years of serious illness with lengthy periods of leave. Perhaps Apple has found itself in a situation where they don’t actually need a full time CEO.

From a risk management perspective, Apple’s recent June 2011 quarterly financial report gives an interesting perspective, identifying 17 areas of substantial risk which might significantly impact financial results. These included things like inventory management hiccups, product launches failing, content providers imposing onerous contractual terms, disruptions to the supply chain, patent disputes, component shortages, and IT outages. Risk 15 out of 17 was:

“The Company’s success depends largely on the continued service and availability of key personnel.

Much of the Company’s future success depends on the continued availability and service of key personnel, including its CEO, its executive team and highly skilled employees in technical, marketing and staff positions. Experienced personnel in the technology industry are in high demand and competition for their talents is intense, especially in the Silicon Valley, where most of the Company’s key personnel are located. The Company’s CEO has taken a medical leave of absence and will continue to be involved in major strategic decisions during his leave. There can be no assurance that the Company will continue to attract and retain key personnel.”

There are clearly plenty of serious risks for the Apple board to balance, and the departure of a megastar CEO is one that was clearly addressed well in advance. When a global organisation has 48,000 employees, there are likely to be plenty of talented people already on the team. Regardless of whether the CEO is sitting behind their desk tomorrow, the show will undoubtedly go on.

Succession planning is in one sense a form of disaster recovery planning, and should be considered both from a risk management perspective, and an employee retention and development perspective. Mentoring and employee development should be happening at all levels of an organisation. They can be used to both identify skill gaps and succession candidates, and prepare team members for situations where they need to cover for absent colleagues.

When it comes to succession planning at key executive levels, timing and communication can be quite critical. Sudden departures can be very disruptive and damaging – scandal could hit at any time, like the resignation of Mark Innes from David Jones over allegations of sexual harrassment. This is precisely the time when you need to pull plan B out of your bottom draw, and not the time to go through a long drawn out executive search process. When the situation permits, key executive departures and replacements should be  announced publicly months before they “officially” take effect, making it much easier to achieve a smooth transition, and providing reassurance to clients and stakeholders.

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