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What’s Wrong With Executive Succession?

Headhunting and appointing new Executives is a risky and expensive business! The South African Business Times of 22 January 2012 displayed the headline: “Execs do the Shuffle”, showing how a number of South African Executives had moved jobs in the previous week. In almost all cases there appeared to be no obvious internal successor, and the movements were the result of a “crisis” rather than planning, writes Terry Meyer.

by Terry Meyer

In the article “The Art & Science of CEO Succession” in the October 2011 Harvard Business Review, Noel Tichy quotes a PWC report showing that nearly 50% of Board members are dissatisfied with their companies’ succession plans. He quotes companies such as HP, who seem regularly to have to begin an external search when there is a CEO crisis, and points out that in the last decade the median tenure for Fortune 500 CEOs has dropped from 9.5 years to 3.5 years.

AG Lafley, ex-P&G CEO, explains how much importance P&G attach to Executive succession. In a recent visit to the company in the US, I was told by our hosts that in principle, P&G does not recruit above graduate-entry level. They grow their leaders from within, and their remarkable fixation on leadership development is explained in more detail in Ram Charan’s book The Talent Masters.

When discussing these issues with client Executive teams, I start with strategy. What is the future strategy and what will change? What does the world of business look like over the next five to 10 years? In the latter case, issues such as the impact of social networking, sustainability and social transformation (in the South African context) are raised in addition to the traditional “business” issues and uncertainties.

I then ask what the Executive team needs to look like in five years’ time to drive the business and deal with the challenges of the future. This normally results in a prolonged silence before some discussion. (Incidentally, if I ask the next level of leadership, the response is generally instantaneous!)

In a mature Executive team this is a very personal discussion, because it highlights issues of diversity as well as suitability to create a strategy in a technologically dynamic environment. Younger Executive teams tend to be more confident, but the question then has to be around how they are going to deal with their own maturing process.

The next question is “where are they (the future Executive team) now”? This provokes some intense discussion on the extent to which future Executives have been identified and are in a development pipeline.

Discussions with Executive Search consultants reinforce the often expressed view that Boards are not doing enough to ensure an effective Executive pipeline, particularly in respect of the position of CEO. »

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