>> MIM Speaks
CORPORATE LEADERSHIP SUCCESSION
AUGUST 9, 2001 (P.7) -
BUSINESS TIMES
ABOUT a ear ago, the Harvard Business Review (May-June 2000)
carried an article with the heading, "Don't hire the wrong
CEO".
Leadership guru Warren Bennis and professor James O'Toole
touched on a growing trend of hiring and firing of chief
executive officers (CEOs) in corporate American, including many
in the Fortune 500.
This trend was noticed when the rate of new CEOs, coming in and
going out of 215 firms, in recent years, became rather
alarming.
To add some spice to this phenomenon, they coined a new term
for it "CEO churning".
A brief word on churning. Those of us who have some knowledge
about traditional butter- making will know that a churn is a
container in which milk or cream is shaken to produce butter.
Back to the CEO churning. To Bennis & O'Toole, this recent
phenomenon of CEO shake- out is caused by any or some of the
following factors, which, each by itself is complex enough to
cause come unfortunate new CEO to lose his job.
These factors are:
* Globalisation and intensifying business rivalries further
increase the already difficult job of the CEO
* Technological rate of change in recent years, particularly in
the information technology (IT) arena, have been sending shock
waves through the largely brick and mortar firms. These waves
bring with them additional volatilities and uncertainties.
They add more pressure on the CEOs' shoulders; and
* Similarly, the wave of multi-billion dollar mergers or
mega-mergers, also contributed to CEO churning. Whenever two
firms merged, one CEO usually ends up somewhere else. Corporate
culture differences or pure financial considerations make the
parting of one CEO, together with many senior managers,
inevitable.
In addition to the above factors (which are by no means
exhaustive), the two authors argue that one of the major
underlying causes of CEO churning is the board's failure to
hire the right CEO in the first place.
And this is largely attributed to the fact that board members
pay no heed to the importance of leadership as a selection
criteria.
WHAT IS LEADERSHIP?
In the context of this article, Bennis and O'Toole define
leadership as "the ability to move human hearts to challenge
people and make them want to scale steep peaks".
To these two reputable academicians, "leadership is a
combination of personal behaviours that allow an individual to
enlist dedicated followers and create other leaders in the
process".
Real leaders, like Intel's Andy Grove and Corning's Roger
Ackerman, are great because they demonstrate integrity, provide
meaning (to work), generate trust, and communicate values.
In doing so, they energise Weir followers, humanely push people
to meet challenging business goals, and all the while develop
leadership skills in others.
Real leaders, in a phrase, move human hearts.
APPOINTING CEOs
In corporate America, it is the job of the company's board to
pick the next CEO. Professor Bennis and O'Toole, while being
fully aware of the difficulties inherent in the task,
nevertheless, provide the following
suggestions: The CE0 picking recipe:
1. The boards need to agree upon a clear definition of
leadership. Surprising as this may sound, most boards in
corporate America don't ever get to a shared definition before
the organisation goes out looking for the next chief executive
2. They, the board members, need to resolve any differences in
strategic direction, or political conflicts, and the like,
among themselves. Agreeing on the firm's future direction helps
make easier the task of picking the right man with a corporate
vision that jives with the organisation's.
3. They need to take heed of every potential candidate's
personal characteristics or soft qualities: Qualities such as
integrity, the ability to provide meaning, to espouse values
and create trust, are important leadership attributes.
4. They should be careful about potential CEOs who act like
CEOs. Executives who exude personal dynamism or who are smooth
talkers seldom make great leaders. Do beware, for appearances
are deceiving.
5. They should know that real leaders will, more often than not,
bring about change; sometimes drastic ones, when made CEO.
True leaders have a tendency to chart new directions, introduce
new ideas and new ways of doing things. They upturn the status
quo.
6. They must also know that internal executives with the
potential to be the company's new chief executive are usually
not apparent.
Unless the recruiters look very hard within their own firms
they will miss them.
A classic example here is the CEO of GE (General Electric). In
the late 1970s, when the GE board was looking for its next
sucessor from within, Jack Welch came in later as a dark horse.
That Jack Welch Today is the world's most venerated CEO speaks
volume for rule no 6.
7 Lastly, the process of choosing the right man takes much time
and effort. Any hasty attempt will only end up with greater
problems on the board's hands. So, avoid hasty decisions.
TWO VIEWS ON CHOOSING THE RIGHTMAN
Slightly more than two decades ago, Professor Ray Wild of the
University of Bradford, in UK, went around collecting words of
wisdom for the corporate world from practitioners or captains
of industry.
Being non-academicians, their views should carry more weight.
The following two views were adapted from Wild's book, "How to
Manage":
* In 1981, Sir Richard Dodson, then chairman of the British
American Tobacco (BAT), in UK, remarked that a man who has made
a good No.2 proves little.
Success at a business school is proof of intelligence but not
of courage. The fact is that we do not ourselves know how we
shall behave under fire until we have tasted it. Luckily large
companies can try men in minor commands on the way up. And with
recruits from outside there is always some sort of a track
record. Nevertheless, each further promotion is a leap in the
dark.
* In a separate occasion (1984), Australian billionaire Robert
Holmes A'Court replied when asked how he picked the right man
to run his numerous and large subsidiary companies:
"I cannot foresee or forecast how they'll come out. But I'm
very capable of telling after the event whether they are any
good or not.
"I place a person in a position that is challenging and
exciting, and I get a lot of enjoyment watching him succeed.
You can't judge how they are going to perform. There are too
many invisible factors. I just put them on the job and try
them."
CONCLUSION
Since soft leadership qualities such as personal integrity, the
ability to generate trust and espouse values, and the like,
figure so importantly; and since success as No.2s are no
indication of capabilities as the No.1s, the picking of the
right man or the next CEO is no easy task.
Let's see what Peter Drucker, doyen of the management world,
has to say. His following observation was made in 1981:
"In my opinion, the best system of management which I've
learned most from, is the way the British picked young men for
the jobs in the overseas branches and agencies of British
trading firms and merchant banks in the early 19th century.
"The men were carefully selected; and primarily for character.
They were given the simplest of objectives, but demanding ones.
And they were on their own and trusted as long as they
performed. And if they don't, there was no forgiveness.
"I admit it was a cruel system with no compassion for the weak
or no understanding of human complexity. But it worked."
|
