Book Excerpt: The Awkward Hard-Edges Of CEO Succession Planning

Excerpted from ‘Doodles On Leadership’, By R Gopalakrishnan, with permission from Rupa Publications.

All things change; nothing abides, Into the same river, one cannot step twice. —HERACLITUS

Agility and adaptability are buzzwords that define a company not only through periods of policy change and reform but also during the twists and turns of a leadership transition. Though there is considerable management writing as well as research on leadership succession planning, nothing much is known about predecessor planning. They are, I think, two halves of the same fruit. It takes thought and introspection to be and to behave like a good predecessor.

Those days are fast disappearing when CEOs could enjoy an affectionate retirement function, have their wonderful qualities and accomplishments enumerated, and continue some sort of an association with their beloved company— maybe as an advisor or non-executive director. Fifty years ago, it looked as though the good life could just carry on, but not anymore.

Why #EtTu? Et tu, Brute is a Latin phrase immortalized by William Shakespeare in his play, Julius Caesar, in which those words were uttered by the Roman dictator Julius Caesar to Brutus at the time of the former’s assassination— ‘You too, Brutus?’

I often wonder if an #EtTu movement is developing in the business world. Increasingly, investors and stakeholders desire that a successor deploy a fresh point of view to solve persistent issues—as would currently be expected from the CEOs of Infosys or Axis Bank. In fact, the track record of past CEOs could well be reopened and re-evaluated. I see signs of that movement in many companies, if not all, to reconsider and set right past decisions. This causes great angst among employees and observers—the predecessor or past CEO probably enjoys a halo, and is surely perceived to have done many great things, having retired with a God-like reputation—and now his or her past actions from several years ago are being reviewed in hindsight! Think of what is happening to Jack Welch (General Electric/GE) now, or Percy Barnevik (ABB), or what happened to Richard Wagoner (General Motors/GM) several years ago.

In #EtTu, investors want the successor to examine the blunders made during the tenure of the preceeding CEO, and make post facto judgements for action. This is not to write history; investors desire that the incoming CEO recognize the weaknesses and correct them at the earliest. Such an analysis and debate does not suit the ‘bhakts’ of the predecessor. For sure, there could be many frayed nerves. Such a review can spoil the predecessor’s peace of mind. Regulators, investors, analysts and employees may criticize the past leader’s tenure, sometimes castigate past leadership or, in extreme cases involving public matters, even bring the past leader to a court trial. A retired leader runs the risk of facing an #EtTu moment in the evening of his or her career, based on how events pan out and how successors view the past in current times.

For example, a seventy-year-old telecommunications IAS officer was pulled out of retirement to answer for decisions taken during his tenure over a decade earlier. So, too, was an IAS officer who worked as a coal mining administrator. A former bank chairman’s decisions were reviewed after a decade, because some loans that were given during his tenure went sour later. These being public subjects involving government officers, such incidents had a strong dollop of politics driving the actions.

There are instructive company examples in the private sector too. First, a case from my old company, Unilever. Just like Roger Federer and Novak Djokovic partnered in tennis doubles for Team Europe in 2018 and became the only European pair to lose the match, similarly, during the 1990s, Unilever had two competent and talented joint chairmen, heading the British and the Dutch subsidiaries. Individually, they were arguably the brightest chairmen ever. Yet this combination of two exceptional leaders produced substandard results for Unilever, causing a drastic restructuring of the way the company had been run for several decades. Things have worked out well for Unilever since then.

From 1998 till 2005, the Indian subsidiary of Unilever went through a rough patch, causing public reports and commentaries discussing whether a mess had been left for successors to clean up. The continuing leadership turmoil at P&G has provoked commentaries on the decisions and actions of previous CEOs and the legacy they left for their successors.

At GE, contemporary commentators hearken back to the fabled Jack Welch years to judge the legacies of inheritance and management. Writing in the Financial Times1 , John Gapper expressed his view, ‘John Flannery was handed the job of catching the falling knives from Mr Immelt’s era… GE is so fragile after nearly four decades of asset shuffling under Mr Immelt and his predecessor Jack Welch…’

In the emerging #EtTu movement in the corporate world, successors are trying to protect themselves from investor criticism without directly blaming their predecessors. The situation is delicate and the chances of getting it wrong are quite high. Much of the challenge is centred on the ambiguous relationship between an outgoing CEO and an incoming CEO. But this raises some important questions.

The Predecessor’s Thoughts On Upcoming Departure

Succession debuted on HBO on 3 June 2018, inspired by the succession tales at Rupert Murdoch’s former Twenty First Century Fox and Sumner Redstone’s Viacom. Good succession requires the choice of a successor, but equally, a gracefully departing predecessor, who looks forward to quiet anonymity or glory in another sphere. Successful leaders are easily persuaded by sycophants that competent successors are not available or not ready yet.

The harsh truth is that, in almost every case, it is the retiring leader who has made it so!

Two academics, James Champy and Nitin Nohria, wrote, ‘To feel threatened by one’s successor is a futile but remarkably common reaction to inevitable departure.’

At Hindustan Lever, Prakash Tandon took the top job in 1961. Thereafter, he was followed by Vasant Rajadhyaksha, T. Thomas, Ashok Ganguly, Susim Datta and several others till today. The distinctive aspect of each transition was that the succession included a clean exit of the predecessor from the affairs of the company.

Louis Begley’s novel, About Schmidt was made into an Academy Award-winning film in 2002, starring Jack Nicholson. Warren Schmidt retires from his managerial position in a life insurance company, but found it difficult to adjust to life thereafter. He visits his young successor periodically to offer advice and help, but his overtures are politely declined. Seeking meaning in life, he sponsored a Tanzanian child. He disapproves of his daughter’s choice of life partner. Despite his professional accomplishments, Schmidt begins to wonder whether he will be remembered for having made a difference to anyone.

Don’t we see too many Warren Schmidts in real life?

In the Mahabharata, the story of King Yayati is illustrative of this. He was a fine and successful king, who worked very hard for success. Due to certain events, he was cursed by a holy man to age prematurely. His reprieve from the curse was to persuade one of his sons, a future successor, to swap age with him. The youngest son agreed. King Yayati enjoyed the fruits of youth all over again. After spending all of his years, Yayati reflected on his life and experiences. It had taken Yayati a whole life to realize, ‘Not all the food, wealth and women of the world can appease a man of uncontrolled senses.’

In Leaving on Top: Graceful Exits for Leaders (2012), exMarine, teacher and author David Heenan stated that most leaders could be characterized into four existing types.

•‘Timeless wonders’ have great skills, are still relevant and have no reason to call it quits.

•‘Ageing despots’ are reluctant to leave.

•‘Comeback kids’ return to resurrect their company.

•‘Graceful exiters’ quit while still ahead, leaving behind a sterling reputation.

Heenan shared his five-point wisdom and exiting lessons for the predecessor: know your situation, take risks, build networks, continue to be curious, and use instinct to know when to walk away. The tendency to continue, to yearn for what one has left behind is not new.

On 25 May 2018, CNBC carried an article by Bill George, Harvard Senior Fellow.2 Knowing a bit about Unilever, I read the piece very carefully, ‘…Unilever has risen above the pack…everything traces to the leadership of Paul Polman for the past decade…turning a moribund company into a powerhouse.’ Without doubt, Paul Polman had a vision and an execution plan—kudos to him and his team. He also had the freedom to execute under the superintendence of the board. It takes many years to judge the success of a succession.

Former Unilever Chairman Mike Angus once said, ‘The success of my judgement of a CEO candidate is visible only when the chosen CEO’s successor is regarded as successful.’ Testing against that lofty standard, several successions show cracks.

R Gopalakrishnan is an author, speaker and a corporate advisor. He served as Chairman, Unilever Arabia; Managing Director, Brooke Bond Lipton; Vice-chairman, Hindustan Unilever; and Director, Tata Sons and several other Tata companies. He also serves as an independent director of Castrol India and Hemas Holdings PLC, Sri Lanka. He mentors a few startups and is actively engaged in both instructional and inspirational speaking.

The views expressed here are those of the author and do not necessarily represent the views of BloombergQuint or its editorial team.