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Published: May 26, 2009

 
 

CEO Succession 2008: Stability in the Storm

Muhtar Kent, the new chief executive officer of Coca-Cola Company, provides an example of the international background that may become more typical of CEOs. The son of a Turkish diplomat, he was born in New York and educated in Turkey and the United Kingdom. Kent won company acclaim guiding Coca-Cola operations in eastern Europe as the Berlin Wall came down in 1989 and running bottling operations across 12 European countries for the Australian firm Coca-Cola Amatil. From 1999 to 2005, he oversaw the significant expansion and London listing of Efes Breweries International NV, which also controls the Coca-Cola bottler in Turkey. Today, Kent looks to a future in which the bulk of Coca-Cola’s growth will come from overseas markets.

One final criterion that we assessed, though it is a hard one to quantify, was the presence of a “defining experience” in the new CEO’s history: involvement in a transformation campaign, turnaround, or major new product introduction that caused the individual in question to catch the notice of the company’s leadership and board of directors. Our hypothesis is that a well-developed, well-executed, and well-monitored career path can get a candidate onto the short list, but a defining experience often closes the deal.

For Brian Goldner, CEO of Hasbro Inc., it was a cold call he made to a Hollywood producer in 2003 that fueled his rise to the top. He pitched the idea of building a movie franchise around a set of 1980s-era action figures, and the result was a US$700 million-grossing film called Transformers that rejuvenated Hasbro’s fortunes and expanded the power and reach of its brand and characters into a new medium.

For Angus Russell of U.K.-based Shire Pharmaceuticals, it was the M&A prowess he demonstrated throughout his career that earned him top honors at Shire. He handled the spin-off of ICI’s pharmaceuticals division into Zeneca in 1993 and then as vice president of corporate finance successfully negotiated the merger of Astra and Zeneca in 1999. Since joining Shire as CFO in 1999, he has played a key role in growing the company through product and licensing acquisition and diversification.

If these defining experiences truly distinguish leaders with real CEO potential, then it may be wise to foster such experiences in preparing the next generation of executives. Our review of this study’s data and our experience as practitioners both reinforce our conviction that the best way for companies to provide these kinds of developmental opportunities for future CEOs is by investing time, energy, and other resources in leadership development.

Seven Actions for the New CEO

Today’s freshman CEOs face unprecedented challenges, but also myriad opportunities. In the absence of any clear read on when the recession will bottom out and markets will rebound, CEOs have to steer a prudent course while trying to position their companies for longer-term success. That prospect is both exciting and daunting; with the fate of the company starkly in the balance, these should be a new CEO’s first moves:

1. Declare a new day. Now is the time to reset expectations in terms of how the businesses will work, how decisions will be made (or not made), and how people will be held accountable. Most organizations offer few windows for this type of sweeping change, but the appointment of a new chief executive provides one of those rare opportunities.

New CEOs should resolve early on whether the company’s structure and operating model are the right ones. Would a redesign unleash latent productivity or better align decision making with information flows and motivators? There will be a honeymoon period of roughly one year in which these sorts of wholesale changes are easier to make. In fact, investors and other observers, both external and internal, typically expect and more willingly accept such changes early on.

 
 
 
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Resources

  1. Corporate Leadership Council, “Creating Talent Champions, Volume I” (2008) and “Hallmarks of Leadership Success” (2003), Corporate Executive Board: The source of research on leadership development.
  2. Cyrus Friedheim, “Commit and Deliver,” s+b, Spring 2006: Reflections on the challenges of being an incoming CEO.
  3. Per-Ola Karlsson, Gary Neilson, and Juan Carlos Webster, “CEO Succession 2007: The Performance Paradox,” s+b, Summer 2008: Last year’s study shows that even those chief executives who deliver subpar returns show unexpected staying power.
  4. Thomas Neff and Julie Hembrock Daum, “The Empty Boardroom,” s+b, Summer 2007: The most desirable board members have always been those with CEO experience, but they’re in short supply.
  5. For more business thought leadership, sign up for s+b’s RSS feed.
 
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