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December 21, 2009 - Agenda

Succession Planning Lessons from the Gridiron

Nathan Bennett and Stephen A. Miles

From the gridiron to the boardroom, it has been a re- markable month of leadership succession crises. In football, Charlie Weis was unceremoniously and unsurprisingly fired from his position as the head football coach at the University of Notre Dame. Just a few short years ago, and only halfway through Weis’ first season as head coach, the school extended his guaranteed contract for 10 years — at a reported cost of nearly $40 million. As a result, the decision to fire Weis became a very expensive one.

If the Notre Dame situation is the result of too much love, then the recent events at Florida State University may be the result of too little. The iconic Bobby Bowden was ef- fectively forced out this month through a requirement that his return could occur only if he accepted a reduced role in football operations. Officials did not even bother to make public comment on the move, even though Bowden served as head coach at FSU for 34 years. Although the program has struggled recently, many observers felt Bowden had earned the right to “go out on his own terms.”

This in itself provokes some interesting questions about leadership succession: Does any executive ever earn the right to go out on his or her own terms? Can a board fall too much in love with a CEO too soon?

These gridiron exits provide a corollary to CEO exits, both unplanned and planned. At Bank of America, contenders to succeed Ken Lewis have been at odds with the board over their suggestion to break up the bank. Lewis announced — after it became clear a successor was not ready — that he was willing to continue in order to help the board as it failed to meet its own deadlines for the succession. (That all ended last Wednesday with the an- nouncement that internal candidate Brian Moynihan would lead the firm.) The bank’s board was in a tough position, arguably of its own making. Whether caught off-guard or not by Lewis’ decision to step down, it appears evident that there was no robust succession planning process under way.

Compare this to the news this week from McDonald’s. Ralph Alvarez, McDonald’s president and heir apparent to CEO Jim Skinner, unexpectedly announced that he would retire for health reasons. But analysts have noted that the bench of talent at McDonald’s is deep. As a result, the threat posed by Alvarez’s departure is minimal.

From these examples, it is worth remembering broadly the way a “best practice” approach to succession planning should look. Boards must pay more serious attention to who is appointed to serve as chair and as members of the succession committee. Practice is important, and it is best that the chair, and hopefully some committee members, have experience in succession planning, selection and on-boarding of a new CEO. The committee should continually engage in efforts to understand and refine a profile of the skills and experiences the next CEO will need in a future environment. And the committee needs to regularly ensure that internal succession candidates spend adequate time with all board members. Directors also need to keep in mind the following:

  • It’s not personal — it’s business. A beloved CEO can’t be viewed as absolving the board of succession planning. The fact that the board is responsibly filling their most important obligation must not be perceived as a slight or a threat to the incumbent. Boards must take the personality out of the equation and focus on the company’s long-term viability.
  • Timing is everything. An announced heir has legitimate claims to board access and to spending time with shareholders, analysts, important customers and suppliers. Each of these groups will see the executive in a different light when they know they are dealing with the heir apparent. On the other hand, when the heir is left on the bench for too long, the awkwardness created for the CEO is too much.
  • Don’t be distracted by celebrity. Finally, when boards focus first on a successor’s name recognition, they put themselves in a tough spot. Remember that the first test in considering candidates must be alignment on strategy: Does this candidate promise to deliver on the core strategic goals for our company?

Of course, the board’s work doesn’t end when the CEO says yes. As we have seen in recent crises caused by its absence, the plan for on-boarding, coaching and develop- ing the new chief executive also needs to be owned by the board, and should include formal evaluations at least in the sixth and 12th month. And of course, with the appointment of a new CEO comes the beginning of the search for the next.