The downfall of many countries and political leaders are attributable to poor leadership succession. Yugoslavia plunged into civil war with the demise of President Tito in 1980. Till then, he was all-powerful and had no intention of passing control to anybody. Former President Suharto tried to perpetuate his powers too by surrounding himself with weak subordinates. This brought about his downfall and the economic disaster in Indonesia when the Asian economic crisis hit in 1997.
Similarly, many once successful companies have failed because of poor succession planning. Many entrepreneurs want their children to succeed them and take over the reins in their businesses. However, their offspring may not be the best people to take over from them. In the long run, it is more beneficial to the company, the entrepreneur, and his children to employ the best professional manager or managers from outside to run the business. Hence, there is a saying: “The first generation builds the business, the second generation enjoys the prosperity and growth, the third generation brings about the downfall. "
There is a moral obligation to create a successful next generation. As the Chinese proverb says: “If you want happiness for a lifetime – help the next generation. " There is a fear and spirit of insecurity among some managers if their subordinates are better than they are. Such subordinates are deemed as threats, capable of rendering them redundant and eventually taking over their jobs in time to come. As a result, we often see managers stifling good subordinates and bringing in incompetent ones instead. To encourage succession planning, companies should introduce the policy that one is not promotable if one does not have a capable successor to take over one’s existing portfolio. Succession planning should also become an important part of the company’s performance appraisal measurement.
The late Roberto Goizuetta of Coca-Cola had very good succession planning too. He established at least four people who could run the company after he decided not to run it any more, and behind them are ten people who could fill their jobs. The Economist, October 25, 1997 reported: “ Roberto Goizueta will clearly be mourned at Coca-cola, the company he headed, but he might not be missed. Strangely enough, that would be one of the greatest compliments a departed chief executive could receive. "
One of the driving factors behind GE’s success is succession planning. If it were not for GE’s rigorous succession planning, Jack Welch might have never become GE’s eighth CEO. Both Reg Jones (GE’s seventh CEO) and Jack Welch started searching for their successors six years prior to their retirement and the board played an important role in the process. In November 2000, Welch finally named his successor, Jeff Immelt, the head of GE Medical Systems, who took over in September 2001. As a corollary to cloning your successes, one should not create clones of yourself. The problem with some companies is that the CEO denies that somebody who is like himself or herself to take over. If it is more of the same, then there is no renewal and transformation.
Welch said that Immelt should not do what he did but take the opportunity to reinvent the company, as Welch did when he became CEO. Months before his retirement, Welch suggested that the role of his successors would not be to blindly follow in his footsteps but to launch new initiatives and take GE to the next level: “My successor knows that his job is not to do what I did, but to take what I did as a launch pad to whole new ideas, new things…it is his game. "
Therefore, always remind your staff and yourself not to be fearful of working yourselves out of a job. There is always a better job waiting for you once you have done your present job well.
Dr Mike Teng (DBA, MBA, BEng, FIMechE, FIEE, CEng, PEng, FCMI, FCIM, SMCS) is the author of the best-selling business book “Corporate Turnaround: Nursing a sick company back to health", in 2002. In 2006, he authored another book entitled, “Corporate Wellness: 101 Principles in Turnaround and Transformation. " Dr Teng is widely recognized as a turnaround CEO in Asia by the news media. He has 27 years of experience in corporate responsibilities in the Asia Pacific region. Of these, he held Chief Executive Officer’s positions for 17 years in multi-national, local and publicly listed companies. He led in the successful turnaround of several troubled companies. He is currently the Managing Director of a business advisory firm, Corporate Turnaround Centre Pte Ltd, which assists companies on a fast track to financial performance. Dr Teng was the President of the Marketing Institute of Singapore (2000 – 2004), the national body representing some 5000 individual and corporate marketing professionals in Singapore