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Managing Succession Successfully for All Concerned
Marshall Goldsmith
Choosing a successor is one of the greatest accomplishments leaders in all key positions can achieve. This chapter mainly examines how to manage succession at the very top of an organization, but the same basic principles apply to the succession process for leaders at all levels. At the beginning of this process, an important issue that will come up is whether to put your energies into an internal or external successor.
Inside or Outside the Organization—Where Will You Find Your Successor?
There are many reasons to choose your successor from inside the company, as many companies do (figure 10-1). If you hire an external successor, the board will likely want someone with a proven success record. These leaders are not abundant, and they are not cheap! And if things don’t work out, the external hire will likely expect a large exit package. However, the damage from the failure of an external hire is far more than monetary. The negative stories in the business press about such a failure can cost the company severely in terms of its reputation. And the damage exacted by this failure inside the company is even worse, as employees are let go and resources are slashed. Twenty-year company veterans are not happy when they must take less so the failed externally hired leader can leave with more.
When hiring a name-brand leader from outside the company fails, it is often a disaster. Money is wasted, the board is embarrassed, and the perception is perpetuated that high-up leaders are overpaid and executives and board members are self-interested. Seen as part of the selection process, and thus as part of the problem, you and your reputation as the former person in this position are going to go down with the company’s.
Finally, external leaders often bring their own entourage of trusted, high-level personnel with them. Internal executives are passed over, promotional opportunities are negated, and leaders at many levels feel they have failed. Valued employees leave the corporation, because they don’t have high hopes of being promoted in the future and even have fears they may be fired.
This is not to say that companies should not hire externally. There are many companies that do (for example, IBM). However, hiring from the outside does come with high risk. If it is possible to develop an internal successor, that is often the best route.
What Message Are You Sending About Leadership Development?
Hiring from the outside is indicative of a failure in leadership development for the company—at least that’s the opinion of one famous CEO with whom I teach in a corporate leadership development program. Ironically, he was hired from outside the company. But he has made it his personal mission to develop talent from within, to develop his own successor.
Leaders at all levels have to answer this question: “If I weren’t here tomorrow, who could take my place?” If you can’t think of anyone, then you haven’t been developing your successor! You have not been participating in what you have been requiring of your line managers. You have not been practicing what you preach. You have not been developing leaders!
Ensuring Continuity of Vision Through Internal Succession
As explained above, hiring a key executive from the outside can bring great risk and send people the wrong message about the organization’s leadership development process. The opposite can be said of effective internal succession, which can produce many positive outcomes.
Hiring from the inside shows that you and your organization are developing talent just as you are asking everyone else to do. When you promote from within, it opens up another top-level position, which leaves room for the promotion of another internal executive.
As part of the leadership team, you have a vision for the company, which you want to endure after you leave. Of course, you will want your successor to have his or her own ideas; however, you don’t want all your hard work to be negated. Who better to carry on your vision after you depart than someone who has lived it with you over the years?
Business Forces That Eliminate the Chance for Internal Succession
Sometimes forces in the business environment eliminate the possibility of an internal successor, even though this may be your goal. For instance, in one famous case, a high-level executive committed an ethics violation. Though the outgoing leader was not involved in the violation, he was held responsible for the damage. The board felt that it was important to send a message about the severity of the problem and the need for the company to change.
In another case, even though an internal candidate was seen as a potentially excellent leader, the business environment led to the selection of an external candidate who was seen as an even better immediate choice.
How do you decide when not to develop your successor from inside the company? The answer, though complicated at one level, is quite simple at another. Do a cost-benefit analysis. What will it cost to bring in an outsider? What are the potential benefits? What are the costs to promote each candidate? What are the benefits? And finally, are there any outsiders who cannot be matched by someone in the company? If the answer is “yes,” by all means hire the outsider. If the answer is uncertain or “no,” promote from the inside.
Whether you choose an internal or an external successor, you will probably find that these talents are required:
The executive will undoubtedly be very bright; stupid people are not often considered for these positions in major corporations.
Now that you know what to look for, remember that developing your successor is an extremely personal matter. Your job is to help this person become a great leader for the company, person to person, leader to leader, and that is a great accomplishment! For a detailed example of how this can be done, see the sidebar.
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Moving On: Advice to CEOs on How to Exit Gracefully Succession is a process that every leader faces eventually. Some leaders handle it very well; those who aren’t prepared for succession do not. They often regard it as something that will happen “later”—that is, until it is happening, at which point it is too late to prepare. Rather than be shocked when the time actually does come to leave, how can you prepare for transition? What is the human side of transition? And how can you leave your position with class and dignity? Preparing for Succession At some point, you will have to hand off the baton of leadership to the person who will take your place. How you prepare yourself and your successor will determine how successful the handoff will be. You’ll have to take two important steps. First, you’ll have to slow down, so you and your successor don’t drop the baton on the pass. Second, you’ll have to coach your successor to speed up and carry the baton. You’ll have to do all this while your team’s competitors are running merrily along—so you’ll need to keep an eye on short-term quarterly results as well as long-term goals—while an audience of stakeholders watches your every move. Stockholders will be checking to make sure they are getting a return on their investments, analysts will be making sure you are keeping your commitments, customers will be watching to see if you are delivering value, employees will be ensuring that your actions match your words, and your competitors will be watching for any sign of failure or exhaustion on your part. After a successful handoff, you will quickly disappear from view. There will be no grand hurrah, because if you have done a good job of developing your successor, your organization will be even more successful after your departure! The best thing you can hope for is to leave a legacy as a leader who made sure that the values of the organization were carried on even after you were gone. The Human Side of Succession The process of readying yourself for succession is often influenced by emotion as much as by logic. You are not a robot; you are likely to experience nonrational hopes and fears and perhaps even a sense of loss as you prepare to move on. Sometimes leaving your job is like leaving your best friend, as was the case with one of my coaching clients. This gracious CEO shared her personal feelings about leaving her job with me and a group of fellow executives. “It seemed like I was getting promoted every few years. I loved the company, my co-workers, and our customers. Going to work was always a joy for me. . . . The time just flew by—and then one day it was time to leave. It hurt.” As a successful CEO, you are probably very ambitious and hardworking. It is very unlikely that this drive is going to go away when you transition out of your position. Though you may have dreamed of relaxing on the beach, spending more time with your family, playing lots of golf, and going on cruises, chances are that if you really wanted this dream, you would have it already. Make no mistake about it; your family has learned to live without your constant attention over the years. Just because you are now “free” does not mean that they will be falling over themselves to spend time with you. The allure of golf and relaxation will quickly wear off, and you may find yourself bored and restless, longing for the good old days when you were CEO. The good news is that as you prepare your successor to take over, you should have less to do. My suggestion to you is that you spend this down time planning what you will do with the rest of your life. Leaving With Class and Dignity It is easy to fall in love with being a leader. When this happens, it is almost impossible to let go. As a CEO, you’ve faced enormous pressures, lots of work, and even mind-bending grief and frustration, but let’s face it—this job comes with great benefits:
If you cannot make peace with letting go of wealth, perks, status, and power, you will not have a successful handoff. You will also be letting go of some things on a deeper level:
At the beginning of the succession process, many CEOs are in denial about how much they love their jobs. As they go through the process and add up the personal cost of actually leaving, they lose focus and fail to pass on the baton of leadership with class and dignity. You don’t want this to happen to you! The goal of a successful transition is to get through the process in the most positive way possible. Enjoy your final year or so in office, coach your successor to a position where he or she has a great chance of success, slow down, and ready yourself for the changes ahead as you allow your successor to speed up to take on the challenges of your position. |
Wealth : You have made lots of money, and though it probably hasn’t been the most important thing, it has helped you keep score of how successful you have been. Now, as you make less money, you’ll have to use a different measuring stick. About the Author
Marshall Goldsmith is a world authority on helping successful leaders achieve positive, lasting change in behavior. He has recently been recognized by The Times of London and Forbes as one of the world’s top 15 business thinkers. He is the author or editor of 31 books, including the New York Times bestsellers Mojo: How to Get It, How to Keep It, How to Get It Back If You Lose It (with Mark Reiter; Hyperion, 2010) and What Got You Here Won’t Get You There: How Successful People Become Even More Successful (with Mark Reiter; Hyperion, 2007) and a Wall Street Journal number 1 business book and winner of the Harold Longman Award for Business Book of the Year. He is one of a select few executive advisers who have been asked to work with more than 120 major CEOs.