Planning for the unexpected


Harry Stonecipher's resignation demonstrates how important it is for companies to be on top of succession planning. Because it a truism that the unexpected often happens.

In the wake of a second sudden resignation of a chief executive in 15 months, aerospoace giant Boeing must find a leader with high morals and proven skills and this needs to be done sooner rather than later.

Regardless of the reasons for leaving for this particular departure, CEOs today are unlikely to remain in office for as long as their predecessors.

Luc Vandesvelde was CEO of Marks & Spencer for just three years. Louis Camilleri held the top spot at Philip Morris for only two years, while Greg Dyke was Chair at the BBC for a similar period.

In fact over the past five years, around two-thirds of all major companies worldwide replaced their bosses and that CEO tenure has decreased sharply.

According to Martyn Sakol of organisational and behavioural specialists, ER Consultants, many companies still tend to look for CEO successors with extensive company experience within their own ranks.

So whilst many companies feel the need to change leaders more often, they still place a high value on executive continuity and stability.

"Because of the complex nature of corporations today, it is also not surprising that corporate boards prefer candidates to have come from inside the business because they tend to have market, product, technical, organisational and cultural knowledge that's required," Sakol said.

Apparently Boeing's CEO is likely to come from within the ranks as a shortlist of possible successors is drawn up. Since stability at the top needs to be maintained, speed is of the essence. But the question is whether a succession plan was already in place.

"In many cases, it is best that preparations for a new chief executive are conducted behind the scenes," said Will Dawkins of the Board Practice at international search firm Odgers Ray & Berndtson.

"General Electric ran an open process for the succession Jack Welch, but GE is rare."

"More often, saying anything about succession planning for a chief executive's job tends to weaken the incumbent and stir up unhelpful rivalry among would-be successors," he added.

"Moreover, timing, as in Boeing's case, can be unpredictable. The process must be rigorous and only visible when it has to be."

Whatever the choice of tactic to find the new CEO, agreement about the appointment will need to include shareholders as well as meet the regulatory requirements imposed by industry bodies, as well as legislation like Sarbanes-Oxley.

"Accountability for the most senior selection decisions now have to be justified on the grounds of externally benchmarked assessed capability and psychological profile, above and beyond track record, and interviews alone," Sakol said.