In the C-suite, the need to develop and implement a plan for leadership succession is one of the most frequently discussed topics. Yet according to this author, the overwhelming majority of companies have done little about it. Executives who think they can wait will learn why implementing a plan right now can save their company — and their job.
“A person who does not worry about the future will shortly have worries about the present”
Ancient Chinese Proverb
Who would have thought that an announcement of leadership succession could actually move markets? Yet on December 21, 2010 The Wall Street Journal reported that, “…3M rose 97 cents, or 1.1 percent to 87.34 following reports that the company is working with Chief Executive George Buckley on a succession plan.” Actually, the board of directors had been working with the CEO on this issue for more than a year, in anticipation of Buckley’s retirement in February 2012, when he will reach his 65th birthday (Hagerty & Tita, 2010).
Moreover, the tenure of the prior CEO seems to impact the early years of the successor’s tenure. Specifically, a lengthy tenure of the prior CEO leads to inertia, making it difficult for the successor to initiate strategic change. Conversely, if a departing CEO’s tenure is too short, the firm may not have recovered sufficiently from the disruption of the previous succession. In other words, there is an inverted U-shaped relationship between the tenure of the departing CEO and post-succession firm performance.
Reprint from Ivey Business Journal
[© Reprinted and used by permission of the Ivey Business School]