Although quite different, the two companies have several things in common: both are in the CHF 2bn revenue range and both have achieved incredible performance over the last decade. Both are led by charismatic CEOs who have been the architects of their success. Most importantly, both CEOs also act as chairmen.
Although these individuals have different personalities and professional backgrounds, the two of them are organizing their succession in such a way that they both intend to relinquish their CEO role in the coming two years and continue as chairman only.
These two individuals have another feature in common: they are under no pressure to change. Now that their dual role is getting more complex and more exposed, they are ready and genuinely willing to voluntarily make the change. During our meetings, each CEO looked back on their lives and clearly summarized the key ingredients of their companies’ success, which included their own operational involvement. Beyond a legitimately high level of confidence in the future of the operation, they shared concerns about their succession. The benefit of hindsight helped them admit that they probably could have done better in grooming potential CEO successors. The first CEO is proud to say that there was indeed an identified potential “heir” in the organization and the person in question knew it. The challenge is now to manage his aspirations and to make sure he will live up to expectations. The second CEO is unambiguous: no one in the present structure is up to taking over the top leadership role, despite the fact that (or because) the organization is very stable, staffed as it is with a team of solid, loyal and reliable middle managers.
In both cases there is no need to “rock the boat”: one identified successor, on the one hand, and a robust well-oiled organization, on the other, ensure that the critical process of searching for a successor can take place without a sense of urgency or pressure.
Both CEOs say that the risk in such a process is neither identifying the wrong candidate nor promoting the wrong successor — search providers have sound methodologies to help secure a good decision. The real issue, in their view, is their own ability to forego their personal operational involvement. One says: “At 50, I feel young enough to deliver in terms of high quality operations, and not old enough to be a chairman”. They both acknowledge that their attitude with a successor in place might have a negative effect in terms of operational interference. In this sense, they see a danger that they will be CEO’s acting as chairmen, not (yet) able to operate as executive chairmen in the strict governance sense of the word.
Credibility is crucial to operate professionally. But credibility has any facets. The first one is the simplest and most obvious: it is related to either academic qualification and technical skills, usually referred to as “expertise”. In most cases expertise is spontaneously perceived and easily evaluated. In a more complex
environment, where communication is an important factor, credibility is more about personal characteristics, such as gravitas, presence, authority, diplomacy, rhetoric, and more importantly the
capacity to identify, select and make people work together.
The chairman’s role is no exception to this. While the credibility of the chairman is demonstrated by his or her ability to select the best people needed to run the company, his or her level of excellence is determined by the ability to steer these high-level contributors in a more indirect way. A chairman does not have to be the CEO of the enterprise to establish his credibility. Combining the roles may, in some instances, reassure investors, shareholders, employers or customers, but should only be seen as a transitory option and not an instituted given.
Working with these two CEO’s (and acting chairmen) on their succession presents a particular kind of challenge : they must change the paradigm of their past success — a big leap for people who have gained widespread esteem and respect. It is understandably difficult for them to accept the fact that their identity as chairman will only emerge when they let go of their involvement as CEO. The chairman’s excellence unfolds over a timescale that spans beyond the CEO’s immediate concern over quarterly performance. With the chairmanship, their function has shifted from being results-oriented to focusing on the longevity of
the enterprise.
Article reviewed 3 October 2007