Ending the Ceo

8/3/2019 Ending the Ceo

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ENDING THE CEO

SUCESSIONCRISIS

By Ram Charan


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CONTENTS

Biography of Dr.Ram Charan

Abstract

Troubles

How to succeed at succession?

Conclusion


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Biography of Dr.Ram Charan

Dr. Charan's introduction to business came early while

working in the family shoe shop in the small Indian townwhere he was raised. He earned an engineering degree in India

and soon after took a job in Australia and then in Hawaii.

When his talent for business was discovered, Dr. Charan was

encouraged to pursue it. He earned MBA and doctoratedegrees from Harvard Business School

When his talent for business was discovered, Dr. Charan was

encouraged to pure it. He earned MBA and doctorate degrees

from Harvard Business School, where he graduated with highdistinction and was a Baker Scholar. After receiving his

doctorate degree, he served on the Harvard Business School

faculty


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Dr.Ram Charan is a highly sought after business advisor and

speaker famous among senior executives for his uncanny

ability to solve their toughest business problems For more than thirty-five years, Dr. Charan has worked behind

the scenes with top executives at some of the world's most

successful companies

GE, Verizon, Novartis, DuPont, Thomson Corporation,Honeywell, KLM, Bank of America, and MeadWestvaco. He

has shared his insights with many others through teaching and

writing

Boards, CEOs, and senior-most human resource executives

often seek his advice on talent planning and key hires


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Essence of the topic

The CEO succession process is broken. Many companies have

no meaningful succession plans, and few of the ones that doare happy with them

CEO tenure is shrinking in fact, two out of five CEOs fail in

their first 18 months

The problems extend to every aspect of CEO succession:internal development programs, board supervision, and outside

recruitment.

Choosing a CEO should be not one decision but an amalgam

of thousands of decisions made by many people every dayover years


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How to find a CEO who will serve your

company long and well?

Develop a deep pool of internal candidates and keep it well

stocked through a solid leadership development program.

Ensure that the board devotes sufficient time to CEO

succession identifying promising candidates early in their

careers and getting to know them personally. And if directorsare considering outside candidates, suggest that they not

recruiters drive the search process by defining specific

requirements and vetting candidates


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As perennial performance powerhouses such as GE andColgate-Palmolive demonstrate, nothing affects a company's

future more than CEO succession. Start investing time andenergy in your firm's succession planning today. The call for a

new leader could come as soon as tomorrow


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Troubles?With Outsiders:

External candidates are in most cases a greater risk becausedirectors and top management cannot know them as well as

they know their own people

CEO selection is something of a batting average: Companies

will not hit successfully every time. More consecutive outsiderouts can have a devastating effect on employees, partners, and

strategic position. New leaders import new teams and

management styles

In North America, 55% of outside CEOs who departed

in 2003 were forced to resign by their boards, compared with

34% of insiders, Booz Allen reports. In Europe, 70% of

departing outsiders got the boot, compared with 55% of

insiders


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With Insiders: Boards must remember that just as outsiders are not uniformly

bad choices, insiders are not uniformly good ones. In certain

situations, internal candidates actually present the greater risk.With CEO development Many organizations do a decent job nurturing middle

managers, but meaningful leadership development stops well

below the apex. The problem manifests itself as a dearth of

senior managers, for which companies must increasingly shop

in other neighbourhoods. Almost half of respondents to the

CLC survey had hired a third or more of their senior executive

teams from outside, but only 22% of those did so because theyconsidered external candidates irresistibly appealing. Rather,

45% of all respondents judged that it would take too long or be

too expensive to develop successors internally.


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With Recruiters:

Executive recruiters are honest and highly professional. Still,

they can wield disproportionate influence in CEO successiondecisions. One reason is concentration. Just three recruiters

control some 80% of the Fortune 100 CEO search market (a

single firm claims fully 60% of it), and one or two people

within those companies direct the most important searches.

At the same time, board members' inexperience and

consequent inability to precisely define their needs makes

recruiters' task difficult. Recruiters must satisfy their clients

yet also manage them, helping the search committee to get so

they can extract the criteria they need while keepingrequirements broad enough to cast the widest talent net

possible.


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How to succeed at succession?Bolster Internal Leadership Development:

Very few company's leaders will ever be qualified to run thefirm. Spot promising candidates early then nurture them with

the right on-the-job experiences. Move candidates through

positions requiring responsibility for steadily larger, more

complex Practice & Learning centres. If company's notconfigured to provide such opportunities, create jobs large

projects, small internal organizations that exercise a

candidate's Practice & Learning muscle

Though brilliant and articulate, the candidate has noexperience running big businesses in general or this type of

business in particular. The board is considering creating a

deputy position in its largest division for him and making the

current division head his coach granting the coach a bonus if

he ensures his successor's success


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Insist on Board InvolvementCompany find a strong CEO successor, board must spend less

time monitoring financial performance and more time planning

for CEO succession and managing searches. The board should

dedicate at minimum two sessions a year to hashing over at

least five CEO candidates devoting at least 15% of board time

to succession.

Directors should also personally get to know rising starsinviting them to board meetings and dinners, talking with them

informally, and observing them in the natural habitats of their

business operations


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Put Directors not recruiters in chargeWithout effective direction from the board, recruiters approach

searches looking for generic qualities such as character, vision,

and relationship, team-building, and change management

abilities. To guide recruiters, directors must

Articulate three or four non-negotiable aspects of talent,

know-how, and experience

Conduct due diligence on outside candidates


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Conclusion

THE ROLE OF CURRENT CEO PLAYS VITAL ROLE TO

FIND HIS SUCCESSOR

MAKE SUCCESSION PLANNING A

PRIORITY, AT ALL LEVELS OF THE

ORGANIZATION

BE CLEAR AND FLEXIBLE ABOUT WHAT YOU NEED


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By,Sunil Adhikari

Ending the Ceo

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