How to Do CEO Succession Planning Right

 -  4/17/12

Best Buy’s CEO unexpectedly resigned last week, leaving the struggling tech retailer to look for its next leader. While there isn’t a one-size-fits-all solution, here are proven strategies to get it right.

Best Buy’s CEO Brian Dunn resigned last week after some of his personal indiscretions came to light. Since then, the struggling tech retailer appointed an interim CEO and announced it would take the next six to nine months to screen internal and external candidates to find the right match.

In stark contrast, McDonald’s appointed three CEOs from within its ranks within a two-year period in the 2000s — and in each instance made the announcement almost immediately.

The differentiating factor in these scenarios is what Stephen Miles, vice chairman of executive search firm Heidrick & Struggles, describes as an operational succession plan.

“If you have an operational succession plan and you’ve developed internal candidates, you can announce usually the next day,” Miles said. “If you have to go to the external market or if you have to go outside and compare outside to inside; it’s somewhere in the four- to nine-month time frame.”

Internal vs. External
While there isn’t a one-size-fits-all solution to the quandary of unexpected CEO turnover, there are factors companies can take into consideration to make a more informed decision.

For instance, companies that are sailing along smoothly typically find a CEO internally, whereas the reverse is usually true if the company is in the midst of some type of transformation, Miles said.

High-profile examples of the latter include Lou Gerstner of IBM, Stephen Elop of Nokia and Alan Mulally of Ford — each of whom came from the outside when their respective organizations were undergoing transformational change.

“Oftentimes when a company does need to go through some level of significant change, the person from the outside can be more dispassionate — both about the people inside the organization and around the strategy — and make the difficult transformation decisions,” Miles said. He added that those who have been with the company all along might be unable to do this.

On the other end of the spectrum, examples of internally developed CEOs who’ve taken the reins of steady, healthy organizations are Kenneth Frazier of Merck & Co., Carlos Rodriguez of ADP and the highly publicized ascension of Tim Cook at Apple after Steve Jobs’ passing.

Article Keywords:   leadership development   CEO   board   succession planning  

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