Succession planning powerpoint
Transcript of Succession planning powerpoint
SUCCESSION PLANNINGAMY SMITH, VON BELL, DUSTIN BANK, JOSH KING
SUCCESSION PLANNING
• What is it?
• Why is it important?
• What is the role of the board?
• Examples of well executed and not so well executed strategies
WHAT IS SUCCESSION PLANNING?AMY SMITH
SUCCESSION PLANNING
A process used by an organization to recruit and develop employees to potentially fill key roles within the company.
• Greater number of employees able to “answer the call”
• Allows a board/company to know the skills sets they need to keep company on track
• Allows a board/company to know if they LACK internal candidates
• Allows a board to know what changes they may want to make with a new CEO.
THE BAD
WHAT IT SHOULD BE LIKE…
THE VERY BAD
SUCCESSION PLANNING……….THE CONS
WHY IT MATTERS
Without adequate succession planning organizations can be time bombs waiting to explode when top executives or CEOs leave…………..what can
happen?
• Places the organization at risk
• Misaligned strategy and objectives
• Negative Environment Effect
• Decrease in financial profits
• Difficulty finding lenders
WHY IT MATTERSVON BELL
SUCCESSION PLANNING…….THE PROS
Organizations who identify and develop internal talent for leadership roles in the event current leaders leave……..how can it help?
• Minimizes risk for the organization
• Provides continuous leadership
• Improves Organization Culture /Employee Morale
• Increases organization value
WHY IT MATTERS
Prevents Succession
Crisis
Improves Employee
Retention Rate
Allows Continuous Growth
Provides Leadership
Stability
HOW SUCCESSION PLANNING ADDS VALUE
ROLE OF THE BOARDDUSTIN BANK
THE BOARD’S ROLE
PRIMARY RESPONSIBILITIES:
• Change or Status Quo?• Objectivity• Own the succession process
SELECTING INTERNALLY
• Only if the board is pleased with performance
• Work with CEO to identify candidates and
plan strategy
• Constantly “groom” and evaluate
internal candidates for succession
SELECTING EXTERNALLY
• Only if the board determines the need for change
• Identify candidates matching the needs, goals and personality of the company
• Carefully weigh the pros and cons of
using a headhunter
A LONG-TERM APPROACH
• Take as much time as necessary to “court” prospective successors
• Continual reassessment of succession strategy
• Use a “forward-looking… living document” to profile the ideal CEO (Miles, 2009)
SUDDEN NEED FOR A CEO!
This should never catch the board off-guard
EVALUATING NEW CEO
• Interests of the new CEO and the company must be aligned
•Mutually agreed upon goals/standards/timeframes
• Board should “onboard” the successor
REAL WORLD EXAMPLESJOSH KING
GE AND JACK WELCH
• 3 way race-• Bob Nardelli• James McNerney• Jeffrey Immelt*
Named #17 worst American CEO’s of all time by Conde Naste portfolio.com magazine
Left GE for 3M, then Boeing in 2005
JEFFREY IMMELT AND GE
3/1/2009 Down 34.99%
JEFFREY IMMELT AND GE
• 3/1/2009 – Rating scare from Egan-Jones combined with dividend cut
• Actions are his own- GE Finance, GE Appliance Division**
• Taking GE in a different direction
• Mixed reactions on his performance to date
• Note- Somewhat unrelated to succession from Jack Welch
DAVID FARR AND EMERSON ELECTRIC
• Smaller, less high profile than GE
• 43 unbroken years of earnings gains- Slow growth
• 8 Internal candidates vetted over 4 years
• Wall Street reaction- meh
• Criticisms
• No top line growth
• Closely aligned with the overall economy
• “Highly-Cyclical Industrial Company” (Hoerth, 2016)
EMERSON ELECTRIC
Up 31.33%
HP AND THE REVOLVING DOOR
• CEO Lewis Platt – 1992 - 1999
• CEO Carly Fiorina – 1999 – 2005
• CEO Mark Hurd - 2005 – 2010
• CEO Leo Apotheker - 2010 – 2011 (11 months) • ($30 Billion Loss in Market Capitalization)
• CEO Meg Whitman- 2011 – current* As of 1/14/2016
HP UNDER LEWIS PLATT
700% growth in stock price
HP UNDER CARLY FIORINA
16% decrease in stock price
HP UNDER MARK HURD
37% increase in stock price
HP UNDER LEO APOTHEKER
50% decrease in stock price
HP UNDER MEG WHITMAN
42% decrease in stock price
THREE WAY RACE
73% growth in stock price
PARTING THOUGHT
According to a recent study by Strategy&, companies that are forced to replace their
CEO through poor planning forgo on average $1.8 billion in shareholder value,
compared with those that implement leadership changes through a planned CEO
succession process.
WORKS CITED
Adams, S. “Dilbert,” Comic strip, 1/20/05 and 1/21/05: print
Berman, P. “Emerson Changes Its Spots,” Forbes Magazine, 12/24/2001, p 66-68
Bower, J. “Solve the succession crisis by growing inside outside leaders,” Harvard Business Review, November 2007, p. 91-96
Carr, Marie, & Cathryn Marsh, Emily Dunn, Kristen Grigorescu (September, 2015). Building the bench: Strategic planning for CEO and executive succession. PwC (A publication of PwC’s Financial Services Institute). Retrieved on January 12, 2016, from http://www.pwc.com/us/en/corporate-governance/management-succession.html.
Colley, Jr., John L., and Jacqueline L. Doyle, George W. Logan, Wallace Stettinius (2003). Corporate Governance (p.60). New York, NY: McGraw-Hill Companies, Inc.
Conde Naste. “Portfolio’s Worst American CEOs of All Time,” CNBC.com; Accessed 1/13/2016 http://www.cnbc.com/2009/04/30/Portfolios-Worst-American-CEOs-of-All-Time.html?slide=5
Egan-Jones Ratings Company, “General Electric- GE,” Accessed 1/14/2016; http://www.eganjonescsca.com/reports/GE/
Hoerth, C. “Emerson Electric Looks Great: Here’s Why I’m Avoiding It,” The Street, 1/13/2016
WORKS CITED CONT’D
Miles, Stephen A. (July 31, 2009). Succession Planning: How To Do It Right. Forbes. Retrieved on January 12, 2016, from http://www.forbes.com/2009/07/31/succession-planning-right-leadership-governance-ceos.html.
Ogden, Dayton, & John Wood (March 25, 2008). Succession Planning: A Board Imperative. Bloomberg Business. Retrieved on January 12, 2016, from http://www.bloomberg.com/bw/stories/2008-03-25/succession-planning-a-board-imperativebusinessweek-business-news-stock-market-and-financial-advice.
Strategy&, “2014 study of CEO.s governance, and success & The value of getting CEO succession right,” April 14, 2015
Yahoo Finance, Stock Quotes and Company Performance. Accessed 1/14/2016 and 1/15/2016 http://finance.yahoo.com/echarts?s=GE+Interactive#{"useLogScale":true,"customRangeStart":946706400,"customRangeEnd":1451541600,"range":"custom","allowChartStacking":true}