How To Pick The “New-Guy”


This article sheds light on an issue that is extremely critical to both the short-term and the long-term successes and failures of a company, as well as its strategy: Namely, the appointment of a successor to the CEO.  As the article states,

“With so much hanging on successful leadership, you might expect boards to be experts at picking the perfect candidate to pilot their companies. Recent chief executive shake-outs at BP, Nokia and LG Electronics suggest otherwise.”

There are always questions and uncertainty whenever a leader leaves or is replaced and his or her successor is brought in.

The decision-makers always have their own ideas about who, with what qualifications and from where, the successor should come next. There are those, such as McDonalds, who have a

“..long-standing policy of developing future leaders..”

McDonalds is an example of how companies can prepare for this transition and make it as seamless as possible. Another approach is the way Proctor & Gamble and General Electric have chosen to appoint a successor.

In their model, a competitive environment is created in order to determine the best suitor based on the necessary qualities determined by the company board. This approach is obviously done internally.

The third approach mentioned in the article is really just a hybrid of the second approach. It states that you search for the required qualities inside as well as looking at your compaetitors to see whether or not their are training, one or more, better leaders than you are. In that case, you would try to pry him or her away from that company and have them work for you. Sort of in the way it was done in the General Electric example, where the two possible successors who did not get the job, went on to lead other companies. Another example of this would be Unilever, who had a list of internal successors yet still chose to go the external route simply because

“We had three outstanding internal candidates. But Paul was better, so he got the job,” says Sandy Ogg, chief human resour ces officer.”

The article lists 4 major points to remember for “picking future winners.”

●Don’t put all your eggs in one basket.
No single chief executive is right for all situations, says Mr Goodyear. Developing several contenders improves the opportunities for picking the right person.

●Avoid cloning.
Dominant CEOs, like controlling parents, can stunt their successors’ development, says Prof Bower.

To foster leaders with independence of mind, who will question existing practice, send high-potential executives out from headquarters to develop their skills in the field.

●Know the market.
“Even if you don’t hire externally, it’s important to have a view on outside talent,” says Prof Ben-Hur.

Unilever employs an agency to benchmark the skills of its potential leaders against the world’s top talent – then works with them on overcoming their weak points. “We want to be better than our best competition,” says Mr Ogg.

●Don’t trash your legacy.
CEOs who dodge succession may be setting their businesses up to fail. Procter & Gamble “drills it into” people that their successor’s success is their legacy, and uses compensation to drive the message home.

When A.G. Lafley left, his entire retirement package was in company shares – and, thus, directly linked to P&G’s future performance.

It is interesting to learn that the topic of successors is on one hand such a vital part of major companies lives, and yet they have such a hard time determining the right person, with the right skill sets for the appropriate time. It seems as though it is a very risky proposition that brings with it very little recognition.

A new chairman receives the praise when it goes well and the blame when it doesn’t, yet the persons responsible for putting him or her in that position are rarely given the credit nor the blame.

Would transparency in the hiring process of chairmen and leaders lead to more thorough preparation and more responsible hirings and decisions?

(All quotations as well as the “Picking Future Winners” were taken from the article “Choose tomorrow’s leader today” By Alicia Clegg on FT.com)

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Comments
3 Responses to “How To Pick The “New-Guy””
  1. katjo2010 says:

    Thank you for this interesting post.
    I agree with you: it surprises me as well, that succession management is so nontransparent and that companies have such a hard time determining the right person.
    From my internship experience in strategic HR, I can only endorse this impression. I think, transparency will definitely help! But maybe it is even more important to consider strategic planning processes and the identification of key positions. Sometimes the implementation of a software system might be helpful to increase transparency and reduce administrative efforts. (See this interesting blog post for more information)
    Anyway, very exiting topic to keep in mind and write about, because there will be development in the area of succession management in the future.

  2. Izzy says:

    Hey diiasg, I liked your post very much, though I wish you had included more sources of where you found all this interesting information. I picked up this topic again in one of my posts (See here) and tried to find explanations for who’s suitable for which company.

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  1. […] pick up a topic again that was posted here before under a different point of view by diiasg: How to pick the new guy. The question is „Who’s going to be the new boss?“ and that is a very delicate one. […]



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