How Successful Companies Set Up a Succession of Leaders
By “set up,” I don’t mean a bad thing, but it struck me that we often point to a departing CEO as bad and the incoming CEO as good. This is often done for good reason, for out of the thousands of CEOs replaced every year a significant number have been losing their jobs for misogyny and abuse of power.
That wasn’t the case in this instance. But it struck me that without Steve Ballmer, we never would have seen Satya Nadella take over at Microsoft, and that for IBM, without Ginni Rometty, we would have never gotten Arvind Krishna, who is similar in skill to Nadella and should be able to execute as Nadella did.
Let’s talk about CEO replacements this week and why it is important to give credit to the departing CEO while we anticipate the positive changes of the incoming CEO.
Back when I was at the university, I took a business class that talked about the CEO skill set, and the textbook author argued that companies typically go through three phases: startup, transition and then, finally, sustaining. If the firm needs a turnaround, it is back into a transition phase; the author also argued that the skill sets were very different, and that it was very rare for a human to be good at all three phases.
For Microsoft and IBM, they were in turnaround modes when Ballmer and Rometty took over. Both firms had lost their way, and, as a result, both firms effectively got a generalist CEO that was supposed to figure out the direction the company needed to then pivot to and, once on a new track, the following CEO could be selected for his or her specialty.
It wouldn’t, for instance, do either company any good to hire a hardware specialty CEO if the firms weren’t going to be focused on hardware going forward. That is what IBM almost did when it was going to promote Bob Moffett to CEO. I’ve often thought Bob got a raw deal, because he was seduced by a professional, and she mined him for information that the SEC finally arrested him for providing; this cost him his reputation, career and much of his wealth. You could argue he should have known better, but one thing we don’t train executives to do is how to avoid being seduced by pros. When you have power and information worth millions, you can become a target, yet we do a poor job in the States helping executives fully understand the implications of becoming a target for people who want to gain illicit financial advantages.
