Join the Money Matters Email List
Receive email alerts any time a new podcast episode is released!
Leadership Succession Planning
The Walt Disney Company’s board of directors surprised markets in recent weeks by announcing the replacement of current Chairman and CEO Bob Chapek with former beloved CEO Bob Iger. This news followed the company’s earnings report, disclosing losses that continue to widen at Disney +’s streaming service. Iger was CEO for 15 years, and he was part of several pretty successful endeavors including the acquisition of Lucas Films and Marvel Entertainment. He also helped launch Disney+ just before the pandemic. He is respected among many Disney insiders and outsiders, and the market has been cheering his return. What is interesting, however, is as great a leader that Iger seems to be, he wasn’t able to accomplish the most difficult of leadership maneuvers – successful succession planning. You see, he is the one who identified Bob Chapek as his successor. Well today’s podcast is going to discuss why succession planning is so difficult and give you some ideas on how to do it better in whatever leadership context you find yourself.
Iger wasn’t the only high-profile CEO to get it wrong on leadership succession. Many of you are probably familiar with the name Jack Welch, former CEO of General Electric. Welch is regarded by many as one of the most successful corporate leaders in a generation, but one of his most widely regarded failures was his choosing of Jeff Immelt as his successor. Immelt wasn’t able to maintain GE’s dominance and he was allegedly asked to leave the company as its financial performance continued to deteriorate back in 2017. But it’s not just high-profile CEO’s that seem to struggle with succession planning. I’ve also seen several up close and personal examples of tremendous leaders who seemed to get everything right – except that succession planning component. This leads me to believe that succession planning is one of the most difficult leadership maneuvers that exists. So here are some tips on helping succession planning succeed.
First of all, the current leader must identify and groom potential future leaders well in advance. Succession planning is not something that can be done within two-week’s notice. Training someone particularly for the unique role of CEO can take years. There needs to be observing that allows future leaders to see how current leaders think and make decisions. There needs to be “shadow boxing” where future leaders have the chance to practice making hypothetical decisions before the stakes are high. There must also be transfer of responsibility in small doses to see how future leaders will perform at a basic level before they are asked to take on responsibility at a large level. But this rarely happens. In the banking industry it is not uncommon to have a current leader who is actually threatened by the thought of grooming potential successors. But the greatest leaders have confidence in their own abilities and conviction for the need to train up another generation of leaders. Here’s a very practical tip if you are a current leader of your organization. When one of your potential future leaders brings you a problem, ask them for their recommendation for a solution rather than making the decision yourself. First of all, they may have an idea that you’ve not considered. Secondly, it allows that future leaders to learn how to think for themselves. So don’t wait until you get a negative health diagnosis to start succession planning. It should always be in the back of a leader’s mind. The best leaders constantly train future leaders.
Secondly, the current leader must know when it is time to pass the baton. This is perhaps the hardest reality for great leaders to grasp. Just as it must be hard for Tom Brady, one of the greatest quarterbacks of all time, to know when it’s time to hang it up, successful leaders struggle accepting that there will come a time when they need to pass the baton. What a wonderful blessing it would be for a leader to have the luxury of a long runway to accomplish this, rather than having to be forced into a quick transition. Those leaders that can see a transition point down the road, a hand-off moment, have a much better chance at making sure the baton isn’t dropped. What markers identify it’s time to make the handoff? One is waning enjoyment. If a leader is losing enjoyment in what they do, they won’t be successful in their role for long. Another is waning capability. At some point all of us will see our mental sharpness losing its edge, our decisions becoming less decisive and effective. These are signs that we might ought to consider an offramp. No leader wants to have people in their organization losing confidence in their leadership. Great leaders already have a flexible plan in place to make a transition before this happens.
Next, the current leader must clarify their succession planning role with constituents. In some organizations the current chief leader will choose their successor. But in other organizations that have boards, the board will choose the future leader. A frank and honest conversation needs to take place between these constituents to make sure those who need to know are on the same page. Roles and expectations need to be defined. If trust has been built by the leader, then this process can be complimentary rather than combative. So often boards and CEO’s can get cross ways with each other. But proactively having these conversations in advance can help limit misunderstandings and help everyone at the table know their role in future leadership transition that are inevitably going to take place.
Number 4: current leaders must be open to a different style with next leader. So often current leaders are turned off by future leaders not being made in the same mold as they are. Perhaps the current leader is a people person and the identified heir apparent is a paper person. This is not a bad thing, in and of itself. The CEO role may look different for the next leader, but so long as they have the skills necessary to do the work well, a different personality does not mean the organization won’t run well. To underscore this, let’s take a look at a leadership transition that defied the odds – Apple. Steve Jobs was a product guy. His ideas were legendary; his vision, unparalleled; his demands, almost impossible to meet. Upon the deterioration of his health, he recommended Tim Cook to the board as his successor. Cook was not a product guy – he was an operations guy and a master at supply chain management. Jobs could have had the mindset that Apple needed a leader made in his image, but he understood that what Apple needed for this next chapter of its life might be different from what it needed while Jobs was at the helm. Cook has been very successful, and part of the reason is that Jobs understood that different leaders have different strengths – and that’s okay.
Finally, the current leader must be available but not involved without invitation. One of the accusations that Chapek had of Iger at Disney is that Iger really never left. There seemed to be tension between the two because the shadow of Iger appeared to loom large. Once a leader has passed the baton, they must make themselves available to be a cheerleader and advisor for the next leader, but they must not force themselves into that role. Former leaders can be a huge help, or they can be a huge hinderance. So maintaining a willingness to assist, without the assumption that they will assist can set up the next leader to thrive and run the race in their own way and at their own pace.
Perhaps you run a small business, and you want some ideas on succession planning. At MBC/Foundation Bank, we do more than lend money – we provide solutions. If you are looking for a true financial partner, start your financial conversation with us today. If you’ve found this podcast helpful personally, we hope you’ll subscribe to it in your favorite podcast app and share it on social media. Until our next Podcast, God bless you.
-President Chad P. Wilson, CFP
Today’s episode of “Money Matters” was written and recorded by President Chad P. Wilson of McKenzie Banking Company / Foundation Bank on December 13, 2022. This episode does not constitute financial advice. Please consult a financial professional to discuss your specific needs. MBC/Foundation Bank is an Equal Housing Lender, Member FDIC.