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Succession Planning Session 1

Succession Part One
MASTERING THE MAKE-OR-BREAK PROCESS OF
LEADERSHIP TRANSITION
NOEL M. TICHY

First revision: Aug.01, 2018
Last revision: Oct.30, 2018

CHAPTER 1
GETTING IT WRONG: THE BROKEN CEO SUCCESSION PIPELINE

KEY ISSUES OF THE BROKEN CEO PIPELINE
TECHNICAL

Overreliance (excess dependence on..) on the mechanics of succession planning
Lack of human resource competence and capability

POLITICAL

Lack of CEO/board/HR alignment and balance of power
Inability to handle internal infighting of candidates

CULTURAL

Succession planning as a mechanical exercise
Dishonest succession planning process

The New Ball Game: CEOs Under thr Gun
Due to the Rise of the Activist Investor

The growing confidence and success of activist investors is from my point of view providing the investment and business communities with yet more confirmation that the fundamental laws of organizational dynamics and the unity of command still apply.
The reality of today's world is that activist investors have become a significant factor in the CEO succession sweepstakes, and for better or worse are likely to occupy such a role for the foreseeable future.

CEO Succession: The #1 Determinant of Organizational Performance

The Technical, Political, and Cultural (TPC)
Context of CEO Succession

I have arrived at three inescapable conclusions regarding CEO succession:
1. Successful CEO succession cannot and should not be conducted in a vacuum. It must be about the journey, not the destination; about process, not the plan.
2. There is no perfect, failproof process, but a plan is better than no plan.

Defining Success

The Sorry State of Succession Today

End the Feds
SEC (U.S. Securities and Exchange Commission) 's Division of Corporate Finance will issue to the company (which no succession planning and having a crisis):

One of the board's key functions is to provide for succession planning, so that the company is not adversely affected due to a vacancy in leadership. Recent events have underscored the importance of this board function to the governance of the corporation.
We now recognize that CEO succession planning raises a significant policy issue regarding the governance of the corporation that transcends the day-to-day business matter of managing the workforce.
We such, we have reviewed our position on CEO succession planning proposals and have determined to modify our tratment of such proposals. Going forward, we will take the view that a company generally may not rely on [the "ordinary course of business" guideline] to exclude a proposal that focuses on CEO succession planning.

The Failure Factors
Failure Factor #1: SPOT

Failure Factor #2: Failing the Beer Truck test - or Not Even Taking It

Failure Factor #3: The Domineering CEO Who Won't Let go

Failure Factor #4: Superstar Outsider Bias

Failure Factor #5: The Halo Effect

Failure Factor #6: Assessing CEO Candidates on Traits as Opposed to Experience

Failure Factor #7: In CEO Succession, Winner Takes All
Two most important jobs of the CEO 1. increasing the value of the assets they inherited when first taking power, and 2. picking a successor who did the same.

CHAPTER 2
CULTIVATING TRANSFORMATIONAL LEADERS ON THE INSIDE: THE THEORY OF THE CASE

A company's survival depends on its ability to develop independent leaders below the top who are capable of taking top command themselves, and to devise a system under which succession will be rational and by recognized merit rather than the result of a civil war within the institution and of force, fraud, or favoritism.

-- Peter Drucker,
Concept of the Corporation, 1946

CEO succession in any type of the organization -- from political to not-for-profit to business or military -- is the key determinate of orgaizational success.

-- Noel M. Tichy and Warren G. Bennis,
Judgment: How Wining Leaders Make Great Calls, 2007

TECHNICAL

Formulating the strategy for the organization.
Designing an organziation structure to support the strategy
Designing human resources systems to support strategy and structure

POLITICAL

Determining who has what power to set strategy
Distributing power in the organization structure, i.e., how centralized or decentralized
Managing the politics of succession planning

CULTURAL

Aligning the culture to support the strategy
Integrating subcultures in the organization
Using the human resource systems to shape and reinforce the desired culture.

@2007 from Judgment: How Winning Leaders Make Great Calls by Noel M. Tichy and Warren Bennis.

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