SUCCESSION PLANNING FOR FAMILY BUSINESSES OR GIANT PUBLIC CORPORATIONS

Posted in Letting go of the reins, orderly transfer of executive management, poor succession planning creates concern, succession planning avoids a crisis on February 1st, 2011 by mnayor

Sadly Steven Jobs has taken another leave of absence from Apple for health reasons. Everyone wishes him well and hopes that he deals with his issues quickly and successfully Timothy Cook, the COO has been left in charge. Stockholders and other important stakeholders are concerned about the future of the company.

Many corporations have anonymous management with revolving doors. Executives change. Styles change. Some executive suites are inspirational. Others are lackluster. Some companies seem to be driven more by their middle managements than by their top earners. One might even say that about governments. Leaders come and go, but the core management often goes on regardless of who is at the top.

This is not true of Apple. Steve Jobs is the personification of this, the second-largest company in the U.S. (in market capitalization), and by all accounts, rightly so. Key persons or a key person sometimes are a company. We see this most often in privately-held family businesses, especially when the founder dies and his children are not heirs apparent, either because they are unqualified or not interested. We also see it in some partnerships when one partner is the visible soul of a company while the other(s) are strictly behind-the-scenes. In some cases the companies are perfectly capable of continuing, oftentimes even more competent and competitive than under their old regimes.

Yet succession planning is often an orphan and gets paid little attention. Such benign neglect can lead to a crisis in at least two ways. First, clearly some companies don’t address the issue at all. The “old man” figures he can go on forever or can find someone to take over “when it’s time”. This mentality of course has the makings of a disaster, not just a crisis. In situations involving private companies, widows sell for ten cents on the dollar, or a manager takes the customer lists and several employees and runs for the door. In a public company, an executive may be anointed as interim CEO, or a search committee is formulated by the board and mistakes in choice are often made.

But let’s assume that enlightened management has a successor lined up. We have all seen these best laid plans fall apart. The successor bolts. The successor and the current CEO have a falling out. The current CEO is not quite ready to cede authority and control. Some new potential executive is noticed. Many things can upset a plan. Which leads to the second way poor succession planning can create a crisis, and why Apple may be a good example.

Succession planning requires acknowledgement of new blood and publicity so that the public and stakeholders can get comfortable with new names and faces. The old guard must not hesitate to hand over the reins and leave the stage. It may be a one year plan. It may be a five year plan. But unless there are compelling reasons to delay, the plan must be followed. In the interim, the new person must be given face time and confidence must be built.

Steve Jobs’ announcements have created a great deal of speculation about Apple. In 2004 he had surgery for pancreatic cancer. Upon his return, grooming a successor or successors should have begun. That may have happened. But just as important, those new faces should have been given more exposure. Others should have become voices for Apple as well as Steve Jobs. The public should have begun to recognize a Tim Cook or someone else so that Apple would be seen as a continuing entity with competent and creative people at or near the helm. Instead the public continues to speculate about what happens to Apple without Jobs.

Steve should and will relinquish his hold on Apple one day soon and when that day comes the public should be comfortable with its new leader, and the company’s continued capacity for technological innovation. Perhaps Apple should take a page from Google’s recently announced management shake-up which will see its dominant chief executive, Eric E. Schmidt bumped up to executive chairman, and co-founder Larry Page become chief executive in a couple of months. No matter what the reason, Google’s change is a clear indication that it is planning for the future.

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