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Published: May 25, 2010
 / Summer 2010 / Issue 59

 
 

CEO Succession 2000-2009: A Decade of Convergence and Compression

• Break the frame. Only the CEO can adjust the way the company defines its mission and its markets. This requires either changing fundamental aspects of the business model or challenging underlying assumptions. For example, the new chief executive of a consumer products company may have to replace the old practice of paying retailers to promote and, instead, price the company’s products with a new model that starts with direct consumer contact. Steps such as these can be perceived as threatening to entrenched interests within specific business units or functions. They can be initiated and sustained only at the level of the chief executive.

George Barrett (Cardinal Health): If you don’t come in with the notion that your frame might need to be broken, you’re not doing your job. You have to ask yourself, “Is there some advantage that I need to exploit relatively quickly — and can bringing a fresh set of eyes to this model enable me to do that?”

Jan Lång (Ahlstrom): Being able to step out of the box and rethink the business logic is critical, and the biggest challenge. The engagement with the board is critical in this process. Also, talking to people outside the company is very helpful. I find the strong cultural aspects of Ahlstrom a great asset to build from: honesty, trustworthiness. No doubt this is the legacy from its many years of family ownership. On the negative side, our asset base and footprint have overly shaped our thinking and actions. Breaking this perspective of the company is what is unlocking new potential. [Lång was recruited from outside; he came to this role in December 2008 after a six-year stint as CEO of Finnish plumbing and indoor climate solutions manufacturer the Uponor Corporation.]

Reinoldo Poernbacher (Klabin): Truly working with your team means engaging others on risk decisions, working toward finding shared solutions, and, if needed, disregarding organization structure in order to promote holistic views of the value chain.

• Reset expectations. A CEO entering office needs to create a new day in the organization by defining what specifically will change. The more succinctly and precisely you connect these changes to people’s  expectations in terms of performance, accountability, and culture, the more likely it is that you will achieve the hearts-and-minds mandate that strategic change requires. Balance your clarity and boldness with a realistic understanding of what is possible in your organization. Your early proclamations should be delivered with conviction, but also with the recognition that they will have to evolve over time, as you and your staff incorporate the wisdom you acquire.

Kenichi Watanabe (Nomura): My mission as CEO is to create a series of changes inside the company, and the speed of that change is a very important factor, especially when market and business circumstances are changing so rapidly. The key to managing change is to make the organization realize we have no choice but to embrace it — we cannot turn away from it. However, it takes time for an organization like ours to change. We have a strong culture that was developed in a tightly regulated environment where most staff were employed for their entire career. One of my roles as CEO is to ensure that the organization is always alert to the direction of the external environment, agile in adapting, and moving quickly toward new goals, as I believe a strong organization is capable of transforming itself as it finds its place in the new order.

Doug Oberhelman (Caterpillar): I feel that if I personally move the pendulum toward authority through persuasion, then each of the leaders down the chain, without giving up the soft side of persuasion, will use authority to drive results. I do not want to move it all the way over. That’s not good, and that’s not our company and that’s not our culture. But we need to move from where we’ve been.

 
 
 
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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. Ken Favaro, Per-Ola Karlsson, Jon Katzenbach, and Gary Neilson, “Lessons from the Trenches for New CEOs: Separating Myths from Game Changers” (PDF) (Booz & Company, 2010): The practices that will substantially contribute to success for new CEOs.
  3. Per-Ola Karlsson and Gary Neilson, “CEO Succession 2008: Stability in the Storm,” s+b, Summer 2009: Last year’s study documented how the financial crisis had held down the rate of CEO turnover, except in hard-hit industries like financial services and energy.
  4. For more thought leadership on this topic, see the s+b website at: www.strategy-business.com/strategy_and_leadership.  
 
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