ENDING THE CEO SUCESSION CRISIS

By Ram Charan

CONTENTS
Biography of Dr.Ram Charan Abstract Troubles How to succeed at succession? Conclusion

Biography of Dr.Ram Charan

Dr. Charan's introduction to business came early while working in the family shoe shop in the small Indian town where 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 doctorate degrees 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 high distinction and was a Baker Scholar. After receiving his doctorate degree, he served on the Harvard Business School faculty

 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

Essence of the topic

The CEO succession process is broken. Many companies have no meaningful succession plans, and few of the ones that do are 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 day over years

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 directors are considering outside candidates, suggest that they not recruiters drive the search process by defining specific requirements and vetting candidates

As perennial performance powerhouses such as GE and Colgate-Palmolive demonstrate, nothing affects a company's future more than CEO succession. Start investing time and energy in your firm's succession planning today. The call for a new leader could come as soon as tomorrow

Troubles?
With Outsiders:
External candidates are in most cases a greater risk because directors 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 outsider outs 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

 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 they considered external candidates irresistibly appealing. Rather, 45% of all respondents judged that it would take too long or be too expensive to develop successors internally.

With Recruiters:
Executive recruiters are honest and highly professional. Still, they can wield disproportionate influence in CEO succession decisions. 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 keeping requirements broad enough to cast the widest talent net possible.

How to succeed at succession?

Bolster Internal Leadership Development:
Very few company's leaders will ever be qualified to run the firm. 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 not configured 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 no experience 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

Insist on Board Involvement

Company 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 stars inviting them to board meetings and dinners, talking with them informally, and observing them in the natural habitats of their business operations

Put Directors not recruiters in charge

Without 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

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

By, Sunil Adhikari