Business

The challenges of change at the top

  • 6 November 2012
  • From the section Business

There is a moment in the career of every chief executive (CEO) they dread more than any other - the day when they have to hand over to someone else. Yet planning for that day is one of the most important tasks a CEO has to undertake.

In an ideal world, handovers from one leader to another would be smooth, with minimal impact on the business and its stakeholders.

But often events conspire to disrupt the best-laid plans. Illness, shareholder discontent, a boardroom coup or a host of other factors may turn an apparently straightforward transition into a challenging one.

Sometimes a CEO may prove to be a very difficult act to follow. At technology giant Apple, visionary co-founder Steve Jobs resigned in August 2011, to be replaced by Tim Cook. Mr Jobs died just a couple of months later.

While his ill health meant his death was expected, the news was received with shock and Apple shares dived. Mr Jobs, perhaps more than any other business leader of modern times, was seen as indistinguishable from his company.

Fresh thinking

Planning for transition can be tricky for many CEOs because, as management coach Steve Tappin explains, "the most difficult decision for a majority of chief executives is deciding when to step down".

But even when a CEO is able to have real involvement with succession planning, there can be a temptation to look for someone who will steer the company along the same course as the one set by the outgoing boss.

For the past 12 years, Joe Plumeri has led Willis, an insurance broker based in the City of London. He has had a profound impact on the business, taking the firm public in 2001 and expanding overseas. Mr Plumeri is leaving his post soon but will remain as non-executive chairman when Dominic Casserley takes over in January 2013.

Mr Plumeri says fresh thinking can rejuvenate a company: "The way you do things might have been great for this period but the next period requires maybe a different kind of a person with a different sense of vision and a different mentality about things," he says.

It is also important to let the next generation have freedom to operate, according to Brent Hoberman, who co-founded Lastminute.com with Martha Lane Fox in the late 1990s.

He went on to found or invest in a number of other ventures, such as the online interior design business, mydeco.com.

Mr Hoberman is now at the stage of making the transition from running a company day to day as CEO, to the more supervisory and advisory role of chairman. He recognises the importance of giving space to those who are now running his companies.

"I don't go to management meetings anymore which I did at the very beginning, for example, because I guess it's harder when I'm there," he says.

Image caption Brent Hoberman says he has to give space to those now running his company

Some CEOs are also the founders of the business and this can influence planning for the future.

Online publishing company Blurb is currently going into a high-growth phase. Its founder and CEO, Eileen Gittins, says this makes succession planning a necessity.

If the company is purchased or goes public, the new owners may want to bring in new top management quickly, either from within or outside the business, she says.

"It's one of the reasons I'm building the bench strength now."

In China there is a strong tradition of family succession, but this is not something all entrepreneurs there subscribe to.

Xia Hua, the founder of Beijing-based fashion company Eve, thinks her daughter should be free to make her own choices.

"I don't think I should force her down one track, therefore I don't expect her to succeed me in the business," says Xia Hua.

Family culture

Liu Chuanzhi, who founded the huge conglomerate Legend Holdings in China in the early 1980s, has no family succession planned either.

But replicating a family culture within the business is important, he says.

"I want to turn it into a family-owned company without a family, so that the company can survive like a family even though no blood relationship exists."

He sees this as the key expanding his business, which includes PC maker Lenovo, into one of the top dozen in the world. Knowing it will probably be his successors who carry this dream forward, he has been planning for his replacement for years.

He believes in finding the right talent and testing them to make sure they are the right person for the job.

"People that I trust on a big stage have actually been verified again and again," he says.

Talented people are obviously vital to a company's future, but finding them and trusting them may not always be a straightforward process, Steve Tappin says.

"The best CEOs recognise talent has to be an ongoing priority and that talent is the fuel for medium and long-term success of the business."