In or Out? The art of succession planning

There is much discussion in the news at the moment about Microsoft’s appointment of Satya Nadella as CEO. Is this the case of exceptional succession planning? Or a safe choice which allows Bill Gates to effectively maintain control? Did Microsoft need an external appointment to “shake it up” or did it make the right choice with an internal appointment to “keep her steady.” Partly it comes down to your perception of Microsoft’s business performance.

So what can our businesses learn from the Microsoft appointment?

 1. You can’t please everyone all of the time

Being the CEO is a difficult job, you are accountable to more stakeholders than perhaps any other position in the company. Each of those stakeholders (employees, shareholders, customers, even suppliers, perhaps regulatory authorities) have an opinion about what the business needs and who would be best to deliver it. The decision to choose a dynamic, creative, risk taking leader versus a thoughtful collaborator with their finger on the financial pulse; to select a candidate with a cost cutting reputation versus one who focuses on investment and growth is not simple or clear cut.

It’s very difficult to select a CEO that meets the needs of the business, since those needs change over time in reaction to customer requirements, competitor strategies, economic trading conditions, regulatory changes and so on. The focus should be to try and select a leader that is flexible and adaptable.  Supporting the new CEO in the face of unwarranted criticism (let’s face it, they haven’t actually had the opportunity to get anything wrong yet) is critical to the success of the appointment.

2. Internal appointments give you time

Given the complexities of the CEO role, one advantage of an internal appointment is the time you can take to make that selection. The process can last months, even years. The candidates can be placed in a huge variety of different situations: running internal projects, closing down divisions, challenged with promoting innovation in a dormant business unit. They can be stretched and challenged in terms of press engagements, collaborative working, decision making, team building and achieving financial objectives.

Internal appointments can be subject to 360 degree reviews, seeking opinion on anything from leadership style, team working, commercial acumen, to matters like dealing with stress. Reviews can be conducted with direct reports, peers, employees from other teams and crucially the rest of the board members. Such in-depth analysis can help to provide a full picture of the skills and capabilities of any individual over a sustained period of time.
All these activities give a far greater indication of CEO success than a series of lengthy interviews and a cursory review of previous performance.

3. It’s easier for an external appointment to affect change quickly

New people start with a new agenda; they have the advantage of perspective and can spend a considerable amount of time, perhaps up to 12 months, reviewing, analysing and understanding the business and its people. They are given the space and time to determine the best strategies yet once those strategies are communicated it’s often easier to gather momentum behind the change, after all people have been expecting “something to happen” for a year.

Conversely internal appointments are often expected to have the answer right away, and when they don’t there can be an incredible amount of impatience. Then when a direction is communicated, it can be hard to move the status quo.

Each business is different, with different needs and a different set of stakeholders. For some, it will be an owner manager selecting the next generation, for others it will involve a corporate board, a private equity company or a group of Bayesian shareholders. For all succession should be a considered decision, taken over a sustained period of time and definitely built into the strategy of any business.

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