Monday, February 02, 2009

SUCCESSION PLANNING: REMEMBER THE CEO JUST RENTS THE OFFICE

In just the first few weeks of 2009, a number of corporate CEOs were sent packing. Seagate, Tyson Foods, and Borders Group were just some of the companies that announced changes at the top. Also, Apple chief Steve Jobs is taking a leave of absence for health reasons after months of speculation. More CEO changes are rumored to be on the way and may include some of the world’s leading companies.

The company’s reputation can be seriously tarnished if the succession issue is left unaddressed. For instance, commenting in his blog on the situation at Apple, New York Times business columnist Joe Nocera wrote: "The time has come for Apple's board to take control of this subject from Mr. Jobs and do the right thing by the company's investors.”

One of the main responsibilities for a CEO and the company’s board of directors is the development of a succession plan to insure the continuity of the company. Despite the critical importance of CEO succession, many companies are unprepared for the “changing of the guard” – either planned or unexpected. As a result, what should be an orderly, well-planned transition often turns into a crisis situation alarming virtually all of the company’s constituents – employees, suppliers, customers and, of course, investors.

One of our clients faced a succession issue, more specifically how to communicate the change at the top. The outgoing CEO was popular and successful. The board had identified his successor, a dark horse candidate virtually unknown to the outside world. Their initial plan was to announce the early retirement of the CEO without mention of his successor; a follow-up release would have identified his successor. We advised them that the executive changes should be announced in one comprehensive release to avoid unnecessary speculation and investor panic. They listened and we helped build an identity for the incoming CEO by arranging media interviews as well as through direct contact with the company’s investors.

In its report entitled, “A Practical Guide to CEO Succession Planning,” Russell Reynolds Associates, a leading executive search firm, outlines a number of steps designed to insure a smooth transition at the top. These include creating a written succession plan by the board, which should be reviewed twice a year. This plan establishes the basis for selecting a new leader through an examination of the company’s strategic direction while factoring in various business challenges. With the plan in place, the board can review internal as well as external candidates. The report also outlines the steps to insure a successful transition such as knowledge sharing between the outgoing and incoming CEO as well as a program to communicate with the company’s various stakeholders.

The current economic downturn will undoubtedly lead to more CEO departures. As the CEO is often “the face of the company,” its standing and reputation will depend on how the issue is handled.


Technorati Tags: Seagate, The New York Times, Tyson Foods, Borders Group, Steve Jobs, Apple, Joe Nocera, succession plan, Russell Reynolds Associates, investing, CEO, investors, business, communications, public relations

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