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:
Create consensus among managers in terms of skills, strategies, systems, and structure.
Build their own team.
Establish relationships with their subordinates.
Assess inherited talent and understand which gaps can be fixed by developing talent and which have to be fixed by adding talent.
Diagnose power relationships in the company — learn the “chart behind the organizational chart.”
Instigate conversations to gain understanding of relevant elements of the past, present, and likely future of the company.
Learn to manage complex and critical relationships with the company’s board.
Achieving these goals demands a simultaneously deep and nuanced understanding of the company and its people, something that the newcomer may lack for the whole organization but that the exiting executive has in spades. As a result, departing chiefs can help their successors facilitate connections to the hubs of power and influence and deepen their successors’ understanding of current strategy and how and why it was formulated. Moreover, with their knowledge of the skills and talents of the organization’s employees, the outgoing executive has a responsibility to provide the newcomer with a dispassionate review of team member capabilities — who on the bus is “right,” who can be “made right” through development, and who needs to exit.
Newcomers are driven by a natural desire to further their own careers. To that end, securing early wins to build momentum is important. The exiting executive can help the newcomer identify areas that offer the best chance for quick success and highlight potential flashpoints or quagmires. Newcomers often arrive with a forceful “action imperative,” ready to undertake major change initiatives as a way of demonstrating bold leadership. Exiting executives can provide wisdom regarding how quickly and at what scale the company might support such actions.
In addition, newly arriving executives must be realistic in their performance expectations. To help with this, the exiting executive could provide a well-developed depiction of the position’s constraints and resources as well as insight about workplace norms, such as the right way to express disagreement, address conflict, and make shifts in strategy.
As these interactions demonstrate, outgoing executives play a key role in building the foundation upon which their successors begin their tenure. Ironically enough, departing chiefs, rather than newcomers, may have the greater stake in the pragmatic, reasonable, and tangible aspects of leadership transition that are necessary to protect corporate interests.
Nathan Bennett ([email protected]) is the Catherine W. and Edwin A. Wahlen Professor of Management at the Georgia Institute of Technology.
Stephen A. Miles ([email protected]) is a managing partner at the executive search firm Heidrick & Struggles, where he oversees the worldwide executive assessment/succession planning practice.
This article is adapted from Bennett and Miles’s book, The Career Game (Stanford University Press, 2007).