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

 
 

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

Doug Oberhelman (Caterpillar): I’ve had multiple private conversations with each [board member] already, either over the phone or in person. I’m continuing to do that. I want to have a deep, face-to-face discussion on strategy, culture, organization, and individuals — and that brings a lot of things out. My objective has been to listen and then interject to make the points I want to make, and it’s been great.

Jan Lång (Ahlstrom): Boards play a different role today than in the past. They are more important in helping you strategize and are really there for you as a CEO. If you engage them appropriately, they can really help you sharpen your ideas and gain the courage to change course.

Severin Schwan (Roche): Franz Humer, our former CEO and now chairman of the board, is a great sparring partner for me. He and the board will take a challenging position and say, “Are you sure you want to do this?” That’s very important, because he knows the company very well, and he knows the key players very well, and the debate always improves the outcome.

Kenichi Watanabe (Nomura): The existence of an independent board is crucial for governance, since the management must justify their decisions and actions with rigorous analysis. This yields an effective checking function. It’s like a shareholders’ meeting on a monthly basis.

• Provide structure and processes. As CEO, you are responsible for leading the board to be bolder than it otherwise might be in challenging the company’s leadership and direction. The CEOs we have worked with accomplish this by putting in place an explicit structure and processes that guarantee continual board engagement.

José Antônio Guaraldi Félix (Net Serviços): I think the CEO must take the lead in building the relationship with the board — he must proactively schedule the board meetings, take notes of the decisions made and follow up on them, and solve conflicts.

• Build on the board’s expertise. Boards today provide complementary skills by design, with specific members offering expertise in specific areas, such as finance, compensation, operations, or markets. Your process of inclusion must be designed to leverage this expertise. At the same time, because board members often lack a deep knowledge of the business, you must provide them with the background they need to make a constructive contribution.

Neil Kurtz (Golden Living): The CEO can and should be very influential on the board. Boards want a CEO to come with a clear plan, a vision. A vision without a plan is a delusion. And then give them the information they need to carry out their fiduciary responsibility as board members.

Matti Lievonen (Neste Oil): The changes we have undergone have been very substantial; they would not have been possible without the guidance and unwavering support of the board. The board is also incredibly important as a sounding board. Without a fully trust-based relationship with them, it simply wouldn’t work.

3. Find the Right Pace of Change

Only the CEO can set the pace for change within a company: defining which changes must take place quickly and which will take time. Every CEO faces a learning curve; making premature pronouncements about forthcoming changes to the company’s business model, culture, and cost structure will create problems for you down the road. But moving too slowly can undermine essential momentum and provide competitors with an opportunity to pull ahead. Setting the pace is thus a judgment call that requires understanding how quickly your customers, competitors, and people can absorb and adapt to the new way of doing business.

In particular, as a CEO, you need to avoid setting unrealistic expectations about what can be achieved in your first 100 days. The first 100 days of your tenure will be important, as any honeymoon period might be, but your most critical initiatives will play out over the course of several years, depending on the goals and pace that you maintain.

 
 
 
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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.