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 / Winter 2007 / Issue 49(originally published by Booz & Company)


How to Help Your Successor Succeed

Building the leadership bench helps to protect corporate interests.

Considering what happened the last time Steve Jobs left Apple, it’s no surprise that there’s so much speculation about his next departure from the com­pany. In 1985, Jobs lost a power struggle to John Sculley, the former Pepsi executive whom Jobs had brought in to add marketing pizzazz. When the dust settled, Jobs was out of a job and Sculley was riding solo, running the com­pany without the help of the man who had cofounded Apple and knew it best. Unprepared for the task at hand, Sculley faltered, and Apple didn’t recover until Jobs re­turned to the company more than a decade later.

This time, Apple faces a similar quandary: Although no one is predicting Jobs’s imminent departure, questions have arisen as to whether or not he has invested sufficient effort in preparing for his successor.

Contrast Apple’s dilemma with how Bill Gates has transitioned leadership of Microsoft to a new CEO, Steve Ballmer. In 1998, Ballmer was publicly trotted out as Gates’s number two, and at that point was given an independent voice in the company, access to a public stage, and real decision-making authority. These steps al­lowed Ballmer to demonstrate his legitimacy as Gates’s heir.

Leadership transitions are complex. Exchanges of responsibilities contain any number of challenges, primarily because they happen in real time with no pause in the or­ganization’s activities. The exiting executive is in the best position to direct events so that newcomers can avoid the usual “perfect storm” of tests: an overly stimulated imperative to jump into the job with both feet, ready for action; a sense that the appointment carries a change mandate; and an insufficient appreciation of company challenges, culture, and constraints.

Indeed, the last 90 days of the outgoing executive’s tenure may be as critical to a successful transition as the first 90 days are for a newcomer. Yet the norm all too often calls for a “clean break” between the outgoing and incoming executive. Our research suggests, however, that a productive exchange between the two executives can significantly diminish the factors that may derail the successor’s performance.

Clearly, new CEOs, investors, and fellow employees share an interest in ensuring that leadership changes hands smoothly. Outgoing executives also have much to gain: The value of stock options and stock holdings in retirement plans will depend on the company’s future performance — as will the value of the executive’s legacy.

Yet most departing executives — even those with the best intentions — have little idea how to play a worthwhile role. The most important task is for the former CEO to provide sufficient space for the new top gun to fully assume his or her responsibilities. Each episode of second-guessing erodes the newcomer’s authority. And each time an out­going executive “hovers” — that is, attempts to assert his or her authority, how­ever dimin­ishing — a lack of con­fidence is displayed that can undermine the new CEO’s position.

Newcomers can also be clumsy in their first steps. Many of those who are promoted to leadership roles from within fail to rise fully to their new positions at first. They do not let go of their old responsibilities or fully take on their new ones, perhaps out of a fear that they’re not worthy of the job. That’s a mistake that must be avoided. When a newcomer hasn’t accepted his or her own promotion, it’s unlikely that others will.

There are several organizational areas where a choreographed “handing over–taking over (HOTO)” process is essential. One executive showed us a HOTO policy that specifies in a highly detailed manner how documents, supplies, petty cash, and the like should be transferred. Regulations require departing and incoming executives to document their attendance at meetings that take place as a part of the transition process. However, the most important things to hand over are intangible — a company cannot design a form to document that outgoing executives have transmitted culture, norms, experience, or tacit knowledge about the company. Given that, newcomers must move quickly to:

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