Transitions at the Top. Ciampa Dan
Klapstein (Availity), Alan Lacy (Sears), Greg Lee ( Whirlpool), Ken Leibler (Liberty Financial), Ken Love (Kimball Hill), Fiona Luck (XL Capital), Hank McKinnell (Pfizer), Mel Ming (Sesame Workshop), Brian O'Hara (XL Capital), Marc Oken (Bank of America), Michael Rice (Prudential), Bill Sigmund (GlaxoSmithKline), Tim Schwertfeger (Nuveen), Steve Tregay (FORMA Therapeutics), Mary Wadlinger (FORMA Therapeutics), and Andy Zopp (Exelon).
David would like to thank the following for their input, ideas, and support: Angela Lane, Tim Richmond, Kristen Weirick (AbbVie), Deanna Fidler (Aetna), Chris Blake, Sean Carroll, Martine DeFazio, Ahmed Fahour (Australia Post), Shari Ballard, Hubert Joly (Best Buy), Jean-Luc Duchemin (Carlson-Wagonlit Travel), Frank Appel, Roger Crook, Jürgen Gerdes, Rolf-Dirc Roitzheim, Larry Rosen, Ken Allen, Nicole Cipa, (Deutsche Post DHL), Bina Chaurasia, Selina Millstam, Arturo Poire, Hans Vestberg (Ericsson), Kevin Wilde (General Mills), Mindy Grossman (HSN), Matt Schuyler, Chris Nassettta (Hilton), Ken Meyers (Hospira), Tim Huval, Roger Cude (Humana), Sharon Brady (ITW), Jamie Dimon, Carlo Frappolli (JPMorgan Chase), Craig Buffie, Brian Fishel, Beth Mooney (KeyBank), Todd Fisher, Henry Kravis, Joan Lavin, Marc Lipschultz (KKR), Kate Guthrie, Ulf Bengtsson (Lloyd's), Lucien Alzari, Vincent Clerc, Ricardo Sookdeo (Maersk), Patty McPhee, Carol Surface, Matt Walter (Medtronic), Dottie Brienza (Merck), Vicki Lostetter (Microsoft), Annie Brown, Cameron Clyne, Louise Harvey-Wills, Anthony Healy, Rosemary Rogers, Andrew Thorburn (National Australia Bank), David Ayre, Monique Matheson, Mark Parker, Mike Tarbell (Nike), Carolynn Cameron, Peter Fasolo, Alex Gorsky, Mary Lauria, Mike Ullman, Bill Weldon (JnN), Allan Church (Pepsi), Gordon Ballantyne, Tracey Gavegan, Catherine Livingstone, Katherine Paroz, Andy Penn, David Thodey (Telstra), Susan Chambers (Walmart), Paul Brown (Arby's), and Tad Walker (PartnerRe).
Some people who deserve special thanks took the time over the past couple of years to be sounding boards as we were refining our thoughts and trying to put years of experience in a readable form. For Dan, they are: Rick Anicetti, Greg Crecos, Mike Esposito, Gayl Mileszko, Jeff Miller, Colleen Reitan, Sally Sterling, and Liza Wright. For David, they are the outstanding team at Pivot Leadership, including Cade Cowan, Dennis Baltzley, Ron Meeks, Órla NicDomhnaill, Andrew Pek, Stacey Philpot, Derek Thompson, Alison Tisdall, Michael Van Impe, Albertina Vaughn, Rich Wetzler, all of the Pivot Principals and Associates, the Pivot Board of Advisers, Peter Cairo, David Miller, Jim Shanley, Janet Spencer; and our new colleagues from Korn Ferry: Gary Burnison, Kevin Cashman, Stu Crandell, RJ Heckman, Lewis Rusen, Brian Suh; and Dennis Casey with whom we are now teaming to better serve Boards, CEOs, and new leaders in the future. Candid feedback and support is always provided by Inger Buus, Mickey Connolly, Jill Connor, Barbara Elsberg, Richard Finn, Jackie Gittins, Neil Johnston, David Lange, Jim Motroni, Sonja Muller, Terry O'Connor, Adam Ortiz, Colin Pidd, Doug Ready, Steve Rhinesmith, and Antoine Tirard.
We also had the benefit of strong editorial support and administrative help. John Butman helped in preparing early materials for publisher proposals, and Bill Birchard helped us with shaping our case studies to emphasize the complexity of the transition process. Neda Talebzadeah and Anna Weiss provided important and useful research help. Luisa de Castro was always there when needed, as usual, and thanks to Kevin Tang for his help. Linda Zukauskas was indispensable in both researching and preparing the manuscript through many drafts. On the Pivot Leadership team, Anesu Mandisodza and Joni Preece helped with the interviews and data analysis, and Brenda Fogelman has always been able to quietly and competently make things happen, from the beginning.
Introduction
This is a book about transitions at the top of organizations. Like other books on this topic, it offers an answer to why the success rate is so low of those who have been hired or promoted into senior leadership positions and suggests ways to increase the probability of success. But, unlike others that have been published, this book deals with an aspect of transitions at the top that has been ignored. This will be, as far as we know, the first book to focus attention exclusively on the role of the organization and all of the key people involved with senior leader transitions, including the various individuals involved, systems, and processes. It delves deeply into what directors, the CEO, the head of human resources, and the other senior managers must do individually and collectively to best ensure the handoff from an incumbent leader to the one who will step in to replace her in a planned transition. In particular, it details:
● How the board should manage its accountability for overall continuity of leadership
● How the incumbent CEO should direct the entire sequence of activities that lead to a handoff of authority, ensure all pieces of the puzzle fit together, and ensure his successor has the best chance to succeed while handling the necessary task of his own exit
● How the chief human resources officer (CHRO) should coordinate the various steps of the search process and the transition process while also providing the staffing and counsel to the CEO necessary for a smooth, successful handoff, all while navigating the sometimes delicate position as the person in between the relationship of the CEO and board
● How senior managers who report to the CEO (and will to his successor), can best prepare themselves and prepare their divisions or functions for the changes that come from a transition at the top while also providing important help to the new leader
We combine more than 80 years of experience in working with and experiencing ourselves the planning and executing of senior-level transitions and the organizational changes they cause. We have seen firsthand the investment of effort, time, and money that companies make in searching for a new CEO, assessing candidates, debating choices, planning for various outcomes, making an offer, negotiating terms, and finally securing the commitment of a new leader. But, too often, once an offer is accepted, little else is done to ensure the investment in search and selection yields a return. Those involved believe the job is complete and return to their normal duties, leaving the new leader and the organization she has taken over on their own, unprepared to deal with the challenges of authority and organizational change that any transition brings. There has been little research and few books or articles about the steps that directors, CEOs, CHROs, and other stakeholders should take to ensure the new leader has the best chance of success. Most of what has been written has guided new leaders rather than the organizations they join. Dan co-authored a seminal book in this area (Right from the Start) and has advised on successful transitions since managing his own succession in the mid-1990s. He has the experience (rare in the advice business) of having been a designated successor, and then, after being chairman and CEO for a dozen years, hiring his successor and, over a planned 18-month transition, managing his own CEO handoff. David, a former CHRO of Honeywell, is now chairman and CEO of Pivot Leadership. He also works with boards and CEOs on talent and development strategies, including succession. Pivot Leadership works with companies around the world to execute strategy, become aligned, and adapt to change, including onboarding new leaders through executive development programs.
The Transition Challenge
As we said in the Preface, we believe a book on the company's role in transitions is needed because failed transitions represent an urgent problem that has received too little attention and that must be solved. The costs of transition failure are very significant…not only financially but also in career impact and company reputation. It is time to address this problem because the record of success of CEO transitions is dismal and it is getting worse.
According to one study, 15.3 percent of CEOs left the 2,500 largest global public companies in 2005, and 70 percent more than just a decade earlier.2 The turnover range for chief executives of large North American corporations hovered around 10–11 percent in the mid-to-late 1990s, and then shot up to an average of 14 percent between 2000 and 2007.3 Only 269 SEC-reported companies had to manage a CEO transition in 1999; in 2008, 1,484 companies managed a CEO transition.4 In 2003, the Harvard Business School estimated a 40–60 percent failure rate of U.S. executives.5
Almost half of CEO departures are forced by the board (it was 46 % in 2008, for example).
C. Lucier, P. Kocourek, and R. Habbell, “CEO Succession 2005: The Crest of the Wave,” Strategy+Business, May 30, 2006, accessed November 13, 2014, http://www.strategy-business.com/article/06210?pg=all
N. Stoddard and C. Wycoff, “The Cost of CEO Failure,”
J.C. Wilcox, J. Eichbaum, and M. Tonello, “The Role of the Board in Turbulent Times: CEO Succession Planning,” The Conference Board, August 2009, accessed January 13, 2015, https://www.conference-board.org/publications/publicationdetail.cfm?publicationid=1681
Ray B. Williams, “CEO Failures: How On-Boarding Can Help,”