Business Strategies Blog

 from the experts at Corporate Performance Strategies

Effective Succession Planning Helps Companies Build Shareholder Value

15 May 2012 Dave Brookmire

Recently, there have been numerous instances where companies have decreased shareholder value with poor succession planning and increased value with well-planned and deliberate actions. Shareholders and the public become nervous when there is change at the top, and this is reflected in share price volatility. For example, shareholders from Yahoo were demanding CEO Scott Thompson resign due to falsification of his educational credentials and he announced his resignation yesterday. In 2009 Yahoo had a very public firing with Carol Bartz, their former CEO.

Companies need to be prepared at all times to have a “ready-now” successor in place for emergencies. Insiders who ascend to the CEO position are more successful than outsiders according to Joseph Bower. However, most companies do not have people ready to move up into senior roles, especially CEO. Some surveys show as little as 35% of companies have adequate succession planning in place. In order to protect your company’s shareholder value, here are some best practices to ensure an effective succession plan is in place:

Business Alignment – Succession plans must support the business requirements.

• Linking the succession plan to the business imperatives is essential. It’s not enough to plan for the CEO role as it exists today. Companies need to outline the competencies required for the next 3-5 years to be sure the new CEO is able to handle the strategic opportunities.

• CEO presence and involvement is essential to success. CEOs should spend personal time coaching their direct reports and especially any high potential successors.

HR Functional Excellence – Great HR systems in place to drive effective succession planning.

• Broadcasting leadership competencies are very helpful for leaders to better understand the requirements and expectations for their success.

• Multi-faceted assessments using inside and outside experts helps identify where the leaders have strengths and where they fall short of expectations.

• Employee input is more popular now to the process. So many times leaders have rejected the chosen career path designated by the company due to personal and financial costs from moving all over the globe to get the necessary experiences.

• Rigorous management of performance and potential separates the great companies with leaders. The famous “nine box” approach when used properly really does identify the leaders with high potential and the ability to move up in the organization.

Implementation – It’s not enough to have alignment and excellence, effective implementation is required.

• Multiple methods of leadership development are best. The 70%/20%/10% formula for development is essential. We know from years of research that the best way to develop leaders is on the job and through experiences (70%).

• Measure leader results and track these to be sure that they are producing the outcomes required to succeed. A balanced scorecard including financial, people, customer, and operational metrics is essential to success and communicates to leaders what is most important.

• Accountability – Quarterly and semi-annual CEO reviews of progress helps show the organization what’s important. People do what the CEO spend time monitoring.

• Track key metrics for success of the succession planning process. Multiple metrics are used for outcomes (e.g., back-up in place for key roles) to process (e.g., development plans in place for high potentials).

Using these best practices will help create robust succession plans that can make the difference in increasing or decreasing shareholder value when the CEO changes, even unexpectedly.

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Discover Your Blind Spots with Direct Feedback

16 April 2012 Dave Brookmire

The Wall Street Journal published an article online entitled, “What’s in Your Blind Spot?”  (http://on.wsj.com/J1XwdN). Several examples were cited about successful leaders who had become frustrated with their career stalling and needed some help getting “unstuck.”  What helped these leaders get promoted and deliver higher results was candid and direct feedback about their leadership from bosses, peers and employees. This feedback was channeled into effective development plans with specific actions to overcome their blind spots, thus leading them to promotions and career success.

For leaders at the top of any organization, feedback is a rarity. Executives seldom get feedback about their leadership style, annoying behaviors, personality quirks, or other actions that make it challenging for their team members to be successful.  While debriefing a leader I had been coaching, he expressed that what he most liked about the coaching process was receiving unbiased and direct feedback. When he got the feedback, he was able to address the blind spots in his leadership and make successful improvements in just 3 months.

Current corporate news are full of stories about CEOs who are terminated or resign due in part to performance issues, errors in judgment and other potential blind spots. The costs of these high-profile departures to shareholders have been documented to be tens of millions of dollars. Mark Hurd, former HP CEO in 2011, and Brian Dunn, former Best Buy CEO in 2012, were terminated due to poor judgment about their personal behaviors.  Another example of an ex-CEO with a blind spot is Jeff Kindler, who was let go from Pfizer after a mutiny of senior leaders.  Jeff’s leadership issues (bullying, intimidation, etc.) seemed to go on for years without any required change. When I read these career epitaphs, I always wonder if they were getting unbiased and objective feedback about their leadership issues and blind spots. My guess is nobody had the courage to confront them and as a result, shareholders ended up suffering the most.

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No News Is Not Always Good News: Lessons In Leadership from Gen X and Y leaders

13 March 2012 Dave Brookmire

One of the biggest differences among the generations of leaders is the desire for on-going leadership development and frequent feedback. The new generation of leaders had continuous feedback through technology, collaboration, and parenting, and expect this to continue on the job. The most successful leaders across the generations have learned something very skillful they deploy just about every day. They understand that increasing their self-awareness is essential to meeting their stakeholders’ expectations and improving their leadership performance. When leaders fail, a key contributing factor is often a lack of self-awareness, or the misunderstanding and acceptance of how they are perceived by their stakeholders.

There are four valuable lessons we have learned from working with hundreds of successful and some unsuccessful leaders over the years that I’d like to pass on to our readers for your benefit. By following these four easy steps you will be on your way to achieving higher levels of leadership development and leadership performance.

  1. Great leaders seek to identify their blindspots or leadership qualities they are underperforming and may be unaware of this perception by their key stakeholders. Blindspots are very difficult to improve when the leader rates him/herself much higher than their stakeholders evaluations. Robert Hogan identified 11 potential derailers when leaders are particularly stressed often referred to as over-used strengths. For example, derailers we often encounter are leaders being highly Diligent. So, when these leaders have their results on the line, they take control and do things themselves. The problem is that over time their teams do not feel empowered and are not being developed toward their own goals. A leader can quickly be perceived as a “micromanager,” and have severe morale, productivity, and retention challenges. Our assessments identify a leader’s blindspots.
  2. Great leaders recognize that perception is reality. How others see them is what really matters the most, so that they better understand their stakeholders’ expectations and how their leadership is effecting followers. Even though this reality is sometimes harsh, unkind, and difficult to accept, great leaders have learned to confront their own reality. How we help leaders understand their perceptions is with thorough leadership assessments, including personality assessments and 360 degree feedback. Using this approach the leader can better understand how they are perceived by their stakeholder groups (i.e., direct reports, peers, manager, etc.). We have had various degrees of reactions to the 360 degree feedback ranging from elation to shock. In most cases, “no news is not always good news!” Often times the leader’s boss, peers, or direct reports provide some very telling feedback that indicate blindspots for intensive leadership coaching and development.
  3. Great leaders don’t wait for feedback since most people will help when asked. We advise our clients to create a network of supporters – that are representative of their stakeholder groups and that periodically provide direct feedback and suggestions for improvements. This is particularly helpful in CEO growth and development since very few people have the platform to provide unsolicited upward feedback!
  4. Great leaders don’t wait to be trained to receive feedback, so anyone can do this immediately. Pick an area that you want to improve and be as specific as possible, and ask for feedback and suggestions for the future. Thank the feedback provider for giving you this gift.

Be sure to start your development network by seeking leadership feedback today. It’s a great and cost-effective method for improving leadership development skills and leadership effectiveness.

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