Naming a Successor – Bad Idea

A week ago I was betting that Apple‘s stock would either flop or sky rocket. It has moved very positively since then but not quite what I was projecting. My rational for it to sink was that Steve Jobs hasn’t been involved recently due to illness and no other major products have launched recently. I thought it might sky rocket because Jobs could come back early. Neither happened. recently ran a story called Who’s on Deck in Tech? and it about how many companies in the Tech industry have no named successor for their CEO. The story mostly revolves around Steve Jobs, but it’s worth considering.

Earlier this week shareholders of Bank of America voted to replace Ken Lewis as Chairman of the Board. They did not replace him as CEO. This vote signified the dissatisfaction the shareholders had with Lewis, but it also reflected a reality: no one is identified to fill his shoes as the leader of the company.

Many companies these days have no known number two leader. From a shareholder perspective, this is a bad thing. Having a leader waiting in the wings that is a known commodity is immensely valuable. You can expect consistency. But is it best for the company? I say no, it isn’t. Human Resource departments have a difficult time keeping top talent in the ranks. Many of these people have opportunities to lead other companies, so HR departments play on the psychology of success.

Hard working executives at top firms are paid pretty well. Income becomes less of a motivator and status takes over. But status is a funny thing. There are three ways to acquire the top level of status:

  1. Build a company from the ground up
  2. Climb the ladder at a firm and assume the CEO position
  3. Climb the ladder at a firm and move over to another company to lead it

Build a company from the ground up:
This is the Steve Jobs of Apple and Sergey Brin and Larry Page of Google type of status. These types of people are characterized as visionary. But they are also tied to the success of the company, so their status wanes with the ebbs and flows of the company. The two are intertwined.

Climb the ladder at a firm and assume the CEO position:
For most corporate workers, this is the greatest type of achievement. It means you outperformed so many of your peers and the Board of Directors recognizes you as the best of the best.

Climb the ladder at a firm and move over to another company to lead it:
This is an outstanding achievement, but it comes with the admission that you couldn’t do it at your prior firm. Ultimately, this is the riskiest choice because you have to reform the new company into what your vision is. Resistence is high.

As a HR director, I play on the competitiveness of the talent and allow them to stay in the race for the top position. As soon as that option closes a consistent turnover of a talent is likely. It’s like an apprenticeship. And continuity is way more valuable at these levels (unless you are Proctor and Gamble or GE or some other executive management factory).

Working Thoughts 4/30/08
Increasing Your Brain Power


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