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Why Boards Need To Prepare Better For The Departure Of Their CEOs

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Even by its own standards the English Premier League manager merry-go-round has been spinning especially quickly this season, and this has already attracted coverage here. More than half the 20 football clubs in the league have had their present incumbent in post for under a year, with some having gone through more than one change in that time. Tellingly, only a handful of those in place were appointed in the gap between seasons, inevitably limiting the time to prepare for a new group of games and suggesting a lack of long-term planning.

The EPL is not unique in its tendency to switch managers at regular intervals. In most of the European leagues managers are constantly aware that they must continue to produce results or face the sack. This is partly a result of the way the leagues are organized. Players may only be bought and sold within “transfer windows” — typically in the summer between seasons and at the rough mid-point in January — but managers can be changed whenever the owners decide things are not going as they would wish.

But it must also be — at least to a certain extent — down to the unscientific way in which managers, particularly those deemed to be “stars,” are appointed. Once a vacancy appears, the press reports on a “shortlist” based on a mixture of who might be available and who the owners are deemed to think would be suitable. Then, in pretty short order, there are rumours of the favoured choice. And, pretty suddenly, that is that. The choice is made, accompanied by the usual platitudes about shared goals, long-term aims etc.

There rarely seems to be much of what might be termed an interview process. It all looks highly reminiscent of the bad old days of British industry, when a small coterie of executives — the “old boy’s club” — moved from top job to top job regardless of their lack of success in their previous roles. In this case, the old boys receiving the nod have, particularly lately, often been former star players, such as Steven Gerrard and Frank Lampard. Unfortunately, in many cases they only prove the old adage that having been a great player is no guarantee of success as a coach. This is not surprising because somebody blessed with natural flair is not necessarily going to be able to bring out the best in others who might perhaps not share the same talent. Look at many of the most successful coaches and they have often not been particularly successful as players, either though early injury or simply lack of the special abilities required. Instead, they have spent years honing their coaching skills, often away from the limelight that surrounds the top clubs.

The pool of great coaches is therefore relatively small, meaning that those in this group soon understand their own worth and know that even if they fall out with one club another will soon come knocking because of their “star quality.” This is why football pundits suggest it is unrealistic to expect them to present their credentials and set out their strategies to prospective employers. They need to be wooed, they say.

This may be true. But it does not mean that club owners and boards cannot also be a bit more systematic about the process. When new managers are appointed within days of their predecessors’ departure it is clear that — unless the appointment is the culmination of some long-tern plan — insufficient work is being done. Those doing the selecting should spend more time interviewing star candidates and asking them how they would stem the poor run of results or get the best from an under-performing star player. They should invite those in the running to meet the players and other staff so that they can acquire a better understanding of the problems and gain some insights into what the solutions might be. The directors might also learn whether the prospective hire is intimidated by the egos in the team or has the personality to make tough selection decisions. Such an approach might also make owners and directors more accountable rather than enable them to stand back and blame the dressing room or whatever. And it might produce a sense of a shared project

The problem does not just apply to football, of course. When the England men’s rugby union team was looking for a new coach to replace Eddie Jones there was only ever one name in the frame, and he duly got the job. Steve Borthwick might well turn out to be a great choice. But if he does not questions might understandably be asked about the process by which he won the position. More seriously, the problem is not confined to sports. Earlier this week, the Financial Times reported research from the executive search company Russell Reynolds Associates indicating a sharp rise in departures of chief executives from leading economies in the past year. As the study makes clear, this is not so surprising, given the challenges that companies have faced in recent years. And, provided the transition to new leaders is relatively smooth, this should not be too much of a problem. But there is plenty of evidence that, for all the talk of succession planning, organizations are constantly caught out when a leader leaves. Only last week, the consumer goods company Reckitt announced that, after an eight-month search, it was appointing an insider as its new chief executive.

There is nothing inherently wrong with promoting from within. In particular, it makes people feel that they can progress and provides continuity. But taking so long over making the decision does not look very professional and might create the impression that the person eventually chosen was some way short of the first choice, with all the ramifications that might bring.

The lack of attention paid by organisations to succession planning is a concern for Cheryl Stokes, chief executive of CNEXT, a U.S.-based network of business leaders created to enhance leadership development. She acknowledges that it is easy for businesses to “be caught up in the day-to day,” but she says she is “a big fan” of scenario planning and looking at “what ifs” on the basis that even the best-run organization can never know when a leader might decide to move on.

Stokes was previously a partner with the executive search firm Heidrick & Struggles and before that worked in corporate education at Duke University in North Carolina after a career in business. She says that, while she favors internal promotions, she also believes that in certain situations an external perspective is required. It is up to those making the decision to weigh up the pros and cons of each approach. “Part of the challenge is you have got to think of the future,” she said in a recent interview. Another key aspect that the board and those advising them need to address is the make-up of the rest of the executive team. They need to assess not just the potential CEO but also the team he or she is coming into and identify potential problems, Stokes added.

Put simply, given the scale of the challenges facing today’s businesses — whether in sports or elsewhere — it makes a lot of sense for organizations to be constantly assessing the make-up of their leadership groups, to ensure that they are equipped to do the job and are reflective of the societies in which they operate. This is important because it is not only expected but it is good for business to have diversity of thought.

This might look like one more job for already busy boards, but it needs attention. As Stokes says, “organizations are short-sighted if they don’t do succession planning.”

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