Leadership Succession: Decisions On The Rebound?
Leadership Succession: Decisions On The Rebound?
Judy Olian
(Judy Olian is Dean of Penn State's Smeal College of Business and a leading expert in strategic human resources management.)
In some cases, decisions of boards to anoint a new CEO remind me of jilted lovers picking a new object of infatuation. They’re looking for anyone other than a clone of the just discarded partner. Goodbye, good riddance, and bring on something different. But in love, as well as in leadership succession decisions, seeking an antidote to the past isn’t necessarily a recipe for future success.
Take the case of Sallie Krawcheck brought in to lead Smith Barney, the brokerage arm of Citigroup. Her previous assignment was CEO of the squeaky clean financial research firm Sanford Bernstein, one of the few research houses whose reputation survived intact and unscathed. Sandy Weill, Chairman and CEO of Citigroup, scrambled to stem the fallout from conflict of interest scandals between the research and investment arms of Citigroup. He sought a leader with an unblemished reputation to heal Citi’s image on the street and among investors.
The public message conveyed through this hire is that, “ we’re pure and our researchers are fiercely independent”. But can Krawcheck lead and manage such a complex enterprise, moving from a company with revenues of less than $300 million, to a corporate giant with $5.7 billion in revenue? Is her track record as an influential researcher with high integrity sufficient for the huge leadership assignment?
Rakesh Khurana of the Harvard Business School, author of “Searching for a corporate savior: The irrational quest for charismatic CEOs,” laments the backlash from our love affair with charismatic CEOs like Dennis Kozlowski of Tyco, or Jeff Skilling of Enron who dazzled Wall Street as well as their employees into blind submission.
The pendulum has swung to a new fad of infatuation with ethical CEOs. The current corporate mantra is that CEO integrity swamps all else in selection for the top job. Not that there is anything wrong with that. On the contrary. It’s a necessary condition for effective leadership, but not a sufficient condition.
Jim Collins, author of “Good to Great” and “Built to Last,” reminds us about leadership fundamentals. In the most recent edition of Fortune, he identifies the ten greatest CEOs of all time, including David Packard (no. 10), Katherine Graham (no. 9), and Charles Coffin who was GE’s first president (no. 1). They shared several common characteristics. They were pretty low key, devoid of a cult of personality, trappings of royalty, or marketing gimmicks. Most had been with their companies for decades before ascending to the CEO spot and many remained in that role for years. Many were decidedly uncharismatic. They recognized that the company was not about them, but about building value to last well beyond their departure. They were CEOs for the long haul.
A striking assertion by Khurana in “The Curse of the Superstar CEO” (Harvard Business Review, September 2002) is that CEOs have much less impact on companies than is commonly believed. He estimates that anywhere from 30 to 40 percent of the performance of a company is attributable to industry effects, 10 to 20 percent to cyclical economic changes, and perhaps 10 percent to the CEO. Given the limited impact of the CEO, it’s misguided to place hopes for total corporate turnaround on savior CEOs whose main attribute is that they compensate for their predecessor’s flaws.
Yet, we are overly swayed by the immediate past. After the moral weaknesses of President Clinton, the country chose a religiously oriented new president in George W. At Xerox, Paul Allaire and Richard Thoman were both charismatic leaders presiding over disastrous financial declines and accounting scandals. To remedy core weaknesses in the business, Anne MulCahey, an insider known for her straight talk was brought in to signal return to the basics. After the flamboyant years of Ford Motor Company’s Jack Nassar, the company returned to its core values by bringing back the prodigal son—William Clay Ford—to restore its previous greatness.
These successors may ultimately emerge as phenomenally successful leaders. But that may be a happy accident of a choice guided by considerations other than the leadership fundamentals. The dominant reason for their anointment was not what they were, but who they were not. They were chosen as an antidote to their predecessor.
It’s dangerous when boards and selection committees are on the rebound, after an unsuccessful love affair with a prior CEO. Many of these companies need healing and turnaround from the damages of their former leaders. Collins’ case studies of companies with long track records of success showed that their CEOs stuck to the basics of building quality in people and processes across the board. They sought to build excellence sustainable long after their departure, and long after any crisis that might have preceded their selection.
In identifying the next CEO, the PR headline shouldn’t be the driver. It’s about building for the long term, and not just solving the last crisis. Love on the rebound rarely lasts.
REPORTERS & EDITORS: For more information, please contact Wyatt DuBois in the Smeal College of Business Media Relations Office at 814-863-3798 or wed112@psu.edu.
Penn State's Smeal College of Business offers highly ranked undergraduate, MBA, executive MBA, Ph.D., and executive education opportunities to more than 5,500 students at all levels. Featuring academic departments of accounting, finance, marketing, insurance and real estate, management, and supply chain and information systems, the college is also home to major research centers such as the Center for Supply Chain Research, the Institute for the Study of Business Markets, the Center for Digital Transformation, the Farrell Center for Corporate Innovation and Entrepreneurship, the Center for Global Business Studies, and the Center for the Management of Technological and Organizational Change.
