Business history is full of intriguing successions. Howard Schultz returned as Starbucks CEO after the company slumped in his absence. Tim Cook, to mixed reviews so far, has followed Steve Jobs at Apple. Less famous but no less fascinating, former Corning CEO Jamie Houghton returned to Corning "when it was clear his successors had lost sight of the profitable path he had pioneered," notes author and leadership expert James O'Toole in a successions article on strategy+business.
What does all of this mean for today's leaders, when overseeing or participating in a CEO succession? In a sentence: Successions are difficult. Compounding the difficulty is the obvious fact that no two are alike. Which is why I really appreciated a recent post on the topic by Himanushu Saxena, who heads Strategy Alignment & Leadership Management at Tata Consultancy Services' BPS, and Vijay Govindarajan, a professor at Dartmouth's Tuck School of Business. The post, which appeared on IEDP.com, listed the biggest dilemmas that new CEO usually confront. Here are three of them:
1. Managing a new pecking order. A new CEO inevitably has to handle the trickle-down effects of the organization's new power dynamics. This is one reason new leaders should disregard whatever temptations they may feel to make big changes in their first 100 days. "For example, both [Lou] Gerstner at IBM and [Jim] McNerney at 3M (and Boeing) chose not to make many changes in strategy in the early part of their tenures," observes an article on executive transitions in the MIT Sloan Management Review. "This patient approach not only gave them the time to gain expertise about several aspects of their businesses but also helped them gain the power base and social and political capital to make massive changes a few years later."
Saxena and Govindarajan agree with Gerstner and McNerney's take-it-slowly methods. "What will come in handy here is not [the new CEO's] knowledge or intellect but the art of building federations through influencing, iterating and interacting, in a meaningful manner," they write. "It is about giving respect at altogether different level, before seeking to earn the respect of various stakeholders."
2. Create a new legacy or build on the heritage. In many cases, as with Schultz at Starbucks, the latter enables the former or vice versa. Schultz returned as CEO in 2008 after seven years as chairman. Shortly after he returned, he closed all 7,100 US stores for three hours. The reason? To retrain the staff, en masse, on the proper way to make an espresso.
While the rudiments of drink-making are crucial for baristas, the emphasis on training was also symbolic. It was Schultz's way of telling the staff that their talents and the art of kick-ass customer service still mattered. Here's how the New York Times described one of the three-hour training sessions:
The group, many of them earnest young employees who seemed dedicated to learning their lessons, watched a videotaped message from Mr. Schultz. The head and shoulders of the barista in chief filled the screen. "This is not about training," he said to his employees, looking somewhat somber. "This is about the love and compassion and commitment that we all need to have for the customer."
The store's employees--dressed alike in black tops, green aprons and Starbucks caps--watched the screen carefully, some nodding in agreement. Mr. Schultz reiterated points from a well-publicized memorandum he wrote in February 2007. In it, Mr. Schultz bemoaned the "watering down" of the Starbucks experience, blaming the expediencies of rapid growth for removing "much of the romance and theater" from the ubiquitous stores.
You know the rest of the story. Schultz led Starbucks' historical comeback, chronicling the journey in Onward, his memoir of the turnaround. "Every enterprise has a memory," Schultz told Inc.'s Bobbie Gossage. "And that memory is imprinted with a history and a way of doing business. As leaders, we have to make sure that we're attracting the right people and that the values of the company are being upheld."
For Saxena and Govindarajan, what's important is flexibility: Honoring the past, but not to the point of an unwillingness to change. "What will serve [the new CEO] well is his ability strike a balance between timeless and timely," they write.
3. Being the face of the organization. "Stakeholders want to know, hear and see the face with whom the buck stops now," write Saxena and Govindarajan. "[The new CEO] has now moved into a role wherein he is always sending out a message, even when he is not."
The peril here is that new CEOs often don't realize how employees and shareholders and millions of dollars are hinging on every public word that they utter.
Venture capitalist Seth Levine calls this the "CEO Megaphone" Effect. It basically means that when CEOs speak, their words get unduly amplified because of their lofty standing in the organization. For CEOs--and really, for all leaders--the upshot is the need to watch what you say (and to whom you say it). You might be speaking off the cuff. You might be throwing creative, big-picture ideas against the wall. But your employees might take your words for gospel since you are, after all, the boss.
One way to avoid the pittfalls of the "CEO Megaphone" is to keep quiet. But another, note Saxena and Govindarajan, is training. "There is not enough grooming on this," they lament. "Unfortunately divorcing or delegating this responsibility does not help. Effective grooming on this aspect must begin well before someone comes into the reckoning for being the next CEO."
You can find the rest of Saxena and Govindarajan's helpful list on IEDP.com.