CEO Succession: Lessons From the Trenches [Hardcover]

Corporate titans and politicians who would like to be statesmen ought to read this book and heed the lessons offered.

Even the companies that work in this area can be unprepared. A young CEO may suddenly jump to another company (as Ray Gilmartin did from Becton Dickinson to Merck), die unexpectedly of a heart attack (as Jerry Junkins did at Texas Instruments), or fail to perform to the board's expectations (as has happened to many companies). Couple that with the fact that irresistible forces may mean that the style that worked well in the past won't wash any more, and apparent succession preparation can equal being totally clueless.

The authors are headhunters with Spencer Stuart and share what they learned in interviews during 1996 and 1997 at Met Life, Caterpillar, Hewlett-Packard, Mobil, Continental Grain, SmithKline Beecham, Delta, Mellon Bank, Bestfoods, Foster Wheeler, Hercules, and GTE. They also interspace other examples. One of the difficulties with a book like this is that things don't always turn out as they seem. A lot of praise in the book goes into Coca-Cola's preparation for the unexpected death of Roberto Goizueta. Douglas Ivester is quickly invested, which is where the book ends. But we know that he also was almost as quickly divested as he turned out to be a poor replacement. This replacing CEOs is a tough business. As irresistible forces become stronger and more volatile, replacements will probably occur even more frequently.

The book concludes that 10 key practices are required: Have a strong, involved board; continually expose the top management team to the board; encourage the next generation of CEO prospects to get early experience with outside boards, the media, and the financial community; create an active executive or operating committee so more executives get exposure to an overview of the company, its strategy and issues; do succession planning on an on-going, real-time basis; take as much human drama out of the process as possible (it's especially hard on number twos); tie some of the CEO's compensation to succession planning and progress; have the directors be paid in stock and make additional investments in the company's shares; calibrate the internal candidates with external ones; and develop a culture that encourages succession (a la Built to Last).

So much for the summary. Here are the problems. Although this book purports to be a best practice book, it does not investigate enough companies to succeed. This is actually a limited survey of practices, with picking out some that seem to work better. To be accurate, such a survey would have had to consider in equivalent detail at least 400 companies. A handful won't cut it.

Second, they have to measure of success in succession. They obviously like some better than others. Without some success measure, you cannot pick out best practices.

Third, the book plugs a service that appears to be from Spencer Stuart in callibrating internal and external candidates. To me, that made the book read like a virtual ad rather than a book about management practices.

Fourth, the audience spoken to was mostly boards and CEOs. There are a lot of other stakeholders out there, like customers, employees, suppliers, distributors, and the communities the companies serve. Shouldn't their reaction be considered in deciding which successions work well and which do not?

I could go on, but you get the idea. The authors needed someone to help them design a methodology before they started. Without one, they have produced a book, and some of what it says seems to make sense. With an appropriate methodology, I am sure they could have produced a much better book.

If you want more information on the subject, your best source in my opinion is to read the case studies in Directors & Boards, a magazine devoted to corporate governance. The material I have read in that magazine is consistently superior to what is in this book.

Good luck in overcoming your disbelief stall that people who recruit CEOs should know how to determine best practices in the area of CEO succession.