There are six key outcomes of an effective CEO succession:
- A board that is aligned on the strategy of the company and expectations of the new CEO
- An effective CEO in place with sufficient candidates in the pipeline (both internal and external)
- Well-managed and minimized risks associated with CEO transition
- Stakeholder consensus that the succession process is fair, well executed, and results in a good succession decision
- Highly talented people are retained – even those who were unsuccessful candidates
- Plans for a succession emergency are in place
The day the old man announced his decision to retire coincided with the most violent storms of that year. The board meeting, scheduled as always for 9am sharp, had to be postponed for a full hour to allow travelling members to find their way through the floods.
Rumour had it that this was the first time in his tenure that the chairman had had to delay the start of the meeting, an uncomfortable omen for board members, particularly since the agenda revealed absolutely nothing about the nature of the meeting. All standing items had been removed and replaced by one item, unambiguously labelled “Succession.”
Truth be told, there had been a few strange behaviours in recent weeks, with the chairman either in conference for days at a time, or even more unusually absent from his desk on an unexplained mission. More than one director shifted uncomfortably in his boots in case the succession applied to his own role, though the one female board member felt no such qualms.
Josie Henderson was also the newest and the youngest member, promoted to the traditionally masculine role of Director of Engineering Services on merit, having outshone all her male competitors. Some of the old school considered her appointment the thin end of the wedge and out of character for the old man. There were even whispers that he was having an affair with Josie, though few took those seriously.
In spite of the preponderance of naked misogyny among some members it was not merely her gender that worried them. Her age and lack of experience were indeed barriers to her career development, though there was no doubt that she had been fast-tracked from an early age. An excellent degree in mechanical and electrical engineering from a good university was followed by an apprenticeship with a leading competitor. Josie was laughed at, patronised and made the subject of many a lewd joke, but frequently proved even experienced engineers wrong – a sure way to guarantee your career would never progress in that organisation.
However, the old man had heard whispers, and when it came to the point where Josie had outgrown her junior role and being forced to make the tea, he stepped in and offered her a big promotion. She was given a succession of progressively larger and more complex projects to handle, but had thrived in each and won loyalty from engineers under her command. Within five years Josie was deputy director and applying for the senior post when her boss went to run a Middle Eastern engineering programme with major kudos and shedloads of money. The interviews were gruelling, but even the cynical Finance Director and grizzled Chief Executive were forced to admit that Josie had star quality.
The final interview was with the old man himself, founder of the company and without whose knowledge and consent nothing happened. In spite of more experienced competition, Josie was appointed and earmarked as a protege. She had more than held her own, but at 36 was the first to admit she was but a fledgling and still had much to learn about engineering, let alone running a company that devised and delivered international engineering projects. For Josie this board meeting merely meant another opportunity to listen and learn, contribute if she were asked to contribute but otherwise reflect on the rivalry between the heavyweight senior directors.
By the time the directors arrived in the boardroom, some still in dripping macs, Josie was already sitting in her customary place with a cup of coffee. Where most lived some distance from HQ and commuted in, Josie and her then fiancé Hugo took a decision to live locally to the firm, all the more so when it became apparent that she would be the main breadwinner in the relationship, Hugo being a career ICT teacher in the local comp. They had since got married and had a baby daughter, though Josie had gone back to work without delay and Hugo had stayed home. He enjoyed domesticity and would have been happy to play house-husband and father, at least in the short-term.
The one person notable by his absence was the old man, though his PA could be seen flitting around, arms stuffed with papers. It was not until all were seated and poised that she departed and closed the door – in contrast with her usual practice of keeping notes. The one paper she had left on the table was an attendance sheet, which was duly circulated and signed without comment.
At 10:10 on the dot, the other door to the room opened and the old man appeared, attired in his customary black suit, blue shirt and striped tie. This door was used solely by the old man, since it opened into his plush private office – a place where few were ever invited. He stood still for a moment, as if sizing up the mood in the room, then closed his personal door and sat at the head of the table.
Truth be told, meetings at the company were generally stiff, formal and decidedly old-fashioned, because that was how he liked them to run, a testament to his own background in large-scale engineering, where things ran efficiently and were built to last – and there was no doubt his leadership had a rock-steady quality that looked like it would last for ever. The company had grown from small beginnings over a period of 30 years to being at the pinnacle of its market.
The old man was certainly not a young, witnessed by grey hair and deep-seated lines within what might once have been called a handsome face; but his milky-blue eyes shone with passion and fervour that a conservative appearance concealed. He liked to encouraged the rumour that he had the energy of men half his age, and also that he was a fearsome non-nonsense taskmaster with an eye for detail. This may have been true, though Josie had always found him charming and a good listener. His questions were typically short and straight to the nub of the issue, which frankly was a welcome change from middle-managers talking all around the subject. Like her ultimate boss, Josie did not suffer fools gladly.
On this occasion though, Josie sensed an atmosphere of theatricality in how the meeting was operating. There being no preparation or papers released in advance, she, like the other members, knew something unusual was happening, though precisely what was unclear. Privately, most had guessed from the agenda item where this might be heading but chose to say nothing.
The old man looked steadily at each person in turn, commanding a hushed response.
“Good morning,” he began, “Thank you for battling through the storms. This meeting will be brief and to the point. There will be a number of changes in this organisation, with immediate effect. The first is that I shall be retiring as soon as the transfer of responsibilities is complete.”
He allowed the inevitable buzz of conversation to die down before continuing. All eyes turned back to the authoritative figure in black.
“When I retire, so will our esteemed Chief Executive, Albert Bridges, a man who has been with me almost since the beginning. I’m sure you’d like to join me in thanking Albert for his long and esteemed service for our company and wishing him a very long and happy retirement.”
Eyes turned to Bridges, a man known for his short temper and ability to hold grudges for years, decades even, though if this announcement formed the precursor to a vendetta Bridges did not allow it to show on his face. Only the throbbing vein in his neck conveyed any emotion.
The old man took out a plain sealed envelope from an inner pocket and placed it in front of Bridges, who ignored it and looked his mentor back straight in the eyes with a tortured expression. A short round of applause followed, then abruptly halted when it became clear that the chairman was far from finished, though he continued in a far chummier tone than most were expecting.
“Now, I’m sure you are all wondering about my plans for succession. This is not a topic we generally discuss at board meetings, but I can assure you that it has been at the forefront of my thinking for some time now. I may be retiring though my family and I will of course retain a modest shareholding in the company. Where most of our competitors have chosen to expand their capital base by going public, I have resisted this temptation and will continue to resist until the inevitable becomes reality, by which time I shall probably have passed on to a better world.”
He paused for effect and was rewarded with polite laughter.
“As you all know, my own son was tragically killed in a car accident some years ago, a matter of great regret for my wife Kathleen and myself. Thomas had the makings of a fine Chairman, but it was not to be. I do have two daughters, but both have their own lives and have declined the opportunity to join the company. I wish them well.”
His expression suggested otherwise, but he continued regardless.
“So my decision was simple: who could retain overall control of the company I built up from nothing, run the business smoothly, continue to expand and to make us all richer still?”
Dead silence had fallen in the room. With the presence of a great actor, the old man paused to take in the moment, and the anxious faces all around. The ambitious Finance Director, Malcolm Fitzroy, licked his lips slowly.
“All but one of you are minor shareholders, and it was important to me that the Chair and Chief Executive should be people I trust and who own a slice of the business. For that reason I have made a decision to gift a small bundle of shares to my most recent appointment and your new Chief Executive, Mrs Josie Henderson. I have every faith in Josie’s capabilities and am quite sure you will all give her your full backing.”
From his inside pocket he withdrew a second sealed envelope, placed it in front of Josie and shook her hand with a single crisp movement. Josie became conscious that her mouth hung open in astonishment. With trembling hand she wiped her eyes and stammered a reply as best she could.
“Thank you, Mr Chairman. Thank you….”
Josie stopped gushing and looked around the room at the hostile faces. For a moment it all dissolved and she could see her father smiling and nodding warmly. A lifetime’s ambition, but surely she was way too young… what if she screwed up this opportunity? What if she wasn’t up to the job? What if….
The old man held up his hand abruptly. For a moment the silence hung in the air, until the HR Director launched into full-blooded applause, followed half-heartedly by other members. Several pairs of eyes bore into Josie’s soul, such that she could almost feel them plotting vexatiously at that moment. She breathed deeply and smiled warmly at other members of the room.
“You are very welcome, Mrs Henderson. I wish you every success and hope that you will continue to consult me, as a friend of course. Now, there is one more appointment I have to make, and that is my replacement as Chairman of the Board.”
Fitzroy leaned forwards and folded his hands on the table in front of him.
“Now there are some who have sought my job for many years, I know that. I’d have to be blind and deaf not to know it.”
Pause for laughter.
“But choosing someone with the right qualities is not an easy task. In fact, it’s damned tricky because the right person must have a wide array of qualities, not least being the public face of our little company, someone who can lead you to greater successes by virtue of having the right contacts and know when to stay discreet, but also to help Mrs Henderson change company direction, where required. This is a dynamic market and we are increasingly looking over our shoulders to fast-moving newcomers in the market. We have to be ahead of the game, and to do that we need someone with energy and enthusiasm to support our able Chief Executive.
“So I need someone with charisma and fortitude, not the sort of characteristics you meet every day. Now, I have confidence that you are all exceptional at your jobs, but not that you possess the qualities I need. So after deliberating long and hard I decided to bring in a new chairman from a really quite unusual source….”
Another buzz went around the table. Fitzroy’s grip on the table tightened such that his knuckles were clearly whitened. He stood up abruptly and spoke in a voice struggling for politeness above the tension.
“Mr Chairman, as minority shareholders we are entitled to a vote on this matter, as per standing order…”
The old man smiled beneficently and held up the attendance sheet passed around earlier.
“Indeed you would be, Malcolm, though by signing this paper you waived your rights. Shame you don’t read documents you sign, but then the person with the right qualities would have done that.”
Indeed, it was true – there was some small print at the top that nobody had bothered to read.
“…and in any case this is not a properly constituted board meeting, as I’m sure you can quote from standing orders. This is my decision and it is final. Is that understood?”
Nobody dared speak at that moment, not even Fitzroy. If ever there was any doubt that this was, to coin a phrase, a very British coup, one where the sweet talking was accompanied by a stiletto between the shoulder blades, that moment left nobody present in any doubt.
The old man went on: “So with no more ado, I’d like you to meet your new chairman, Mr Simon Fry…”
He opened the door to his office and in walked a youngish man in a light grey suit and trendy horn-rimmed glasses; to the elder members of the fraternity he looked barely out of short pants. Had American slang been the order of the day he might have been called a nerd, quite unfitting for a dignified role. He looked quizzically around at the assembled board members, who greeted him with a sullen insubordination bordering on mutiny.
The old man greeted the newcomer like a bosom buddy, shaking his hand and offering a manly bear-hug. A quick glance back at the table elicited a reluctant round of applause.
“The floor is yours,” said the old man proudly. All eyes focused on the newcomer, who stood uncomfortably for a moment near the table, as if unsure what to do next. He pushed his glasses up his nose and peered out.
“Well, firstly I guess I should introduce myself. Please call me Simon, by the way.” His accent seemed hard to place, being somehow mid-Atlantic and certainly not exclusively British. As he talked he became progressively more confident.
“My history is in computer engineering. Initially I worked for a major player after my degree and PhD, innovating new products. When the board there didn’t want to know I formed my own company with a few university friends. We made circuit boards and other components at first, but that was small beer and we couldn’t compete with the large-scale competitors in the Far East. So we then turned to software engineering, particularly the small bits of embedded code within all manner of electrical appliances and devices, the sort you use every day without a thought.
“When that industry boomed we sold off the company for $300 million and used the money to innovate new companies. We built up our capital and began buying small companies with bright ideas. As this developed and more were resold, we bought progressively bigger companies, companies with unrealised potential for innovating new products and increasing wealth for all stock holders. I’m now principle shareholder and chairman in close on 50 companies. That potential is what I saw here, so I have been in contact with your senior officers about the opportunities for growth. Gentleman and lady, I am going to make damn sure you all get much wealthier and build your future together.”
“You mean for asset stripping?” Fitzroy said, barely beneath his breath. But the new guy had heard his comment.
“As a matter of fact, no. I’m investing a great deal of money into this company and look forward to mentoring your new CEO to help you build on past successes. I’m not a hedge fund or a shark. I build businesses. Every company I’ve been involved with has built it’s earnings, so you will all benefit as we develop strategies for the next 20, 30, 50 years, and to work with the portfolio of companies with whom I work, to build on the synergies and create new markets rather than competing in dying ones. Does that answer your question, Mr Fitzroy? Either you’re with us or you’re out.”
A grunt came from Fitzroy’s direction. The words spelled loss of control to a man of his generation but he had sufficient nous to realise when the argument was one he could not possible win.
As Simon continued to talk, his words increasingly laced with the language and jargon of international management, Josie felt increasingly discomfited. This was all moving too quickly for her. She had barely had time to take in the news that she had been appointed chief executive, let alone the notion of a chairman whose ideas were to transform this organisation even further beyond her limited experience. She was, after all, an engineer first and foremost, one capable of delivering results and pleasing clients, not an international wheeler-dealer with experience of reinventing companies from scratch.
If being paid a huge salary was all it was about she could probably go along with anything, but Josie took great pride in her work – maybe that was why she was selected.
Suddenly intrigued, she slid open the envelope before her. Inside were three pieces of paper: a certificate for 2,000 shares in the company, a cheque for a considerable sum of money (a “golden handshake”?), and a letter with terms and conditions of her new job role. She was to be given an initial three-year contract. Her salary was to be doubled and accompanied by a sizeable expenses allowance, one that clearly implied a great deal of international travel that had never been required of her predecessor.
A moment of realisation dawned in Josie’s head: this money was coming from Simon, not the old man. She had been hand-picked by consultation between the old man and the game player as an innocent ingenue who would do what she was told and would be driven by her ambitions. Clearly Fitzroy would not be easy to manipulate, but she could be bought off? That was the clear inference. Did she want to be a pawn in someone else’s games? Probably not, though she had effectively given a verbal acceptance. Could she refuse at this stage? Not without making waves, and in all probability her old job, as she had known it, would cease to exist.
The options were forward or departing, much as Bridges departed. His end was easier to foretell, given that he was already at retirement age and would have been dead set against what amounted to a takeover in all but name. Would her departure be noticed or was she replaceable? As a bright mind unsullied by the past she was evidently desirable to Simon, reminding him of where he came from?
“Excuse me,” she said, clearing her throat. The room turned to look at her, clearly the older members were still dubious about the idea of a woman in the boardroom at all, let alone as their CEO, and certainly did not welcome her voice.
“If I may ask a few questions?”
“By all means,” Simon grinned back at her, “After all, you will be running the company.”
“Not on my own though. Since this move is as much news to me as my own promotion, I need to clarify a few things. I don’t know what you have in mind for our company, but are you proposing we shift from our traditional base in public service engineering?”
“That’s down to you, but there are many directions this company could move.”
“And would that mean moving from our UK base, by any chance?”
Simon gave her a crafty sideways glance before continuing.
“That remains to be seen. I’m not going to predict the outcome, I just want results.”
“So our workforce here, the loyal engineers might find themselves with an option of moving or being replaced? In fact, would you say cost cutting and job cuts fall within your modus operandi with businesses you buy?”
“You said that, not me.”
“But it’s probably true if your goal is to work on – what was the word – synergies?”
A disgruntled noise arose from several board members. The traditional location of the business pushed their buttons; Fitzroy nodded vigorously, and even Bridges smiled inwardly.
“Moving on….” but something caught her eye. She paused and looked at the old man. He was seated, now slightly away from the table, his hand over his mouth and a deep frown registered on his brow. If he was happy with the development his manner and body language suggested otherwise. This was not his choice, and if anything seems totally out of character. Worse, it was selling out his legacy.
“I’m sorry, Josie, if I may call you that? Did you have a question?”
“Sorry, yes I do.” She directed her words to the old man: “Mr Chairman, sir, may I ask how you will be spending your retirement?”
He looked up sharply. For the first time everyone in the room could see tears filling his soft blue eyes. He looked pitifully at Simon, who shook his head almost imperceptibly. It looked for a brief moment as though he were fighting an inner conflict, before a moment of resolution arose. He stood up and spoke gruffly.
“Simon, please forgive me but I owe it to the board to provide a clear explanation.”
“Simon, I think it is important,” said the old man firmly. “This is after all a family company and the board have been my family. I consider Mrs Henderson to be my youngest grandchild, my great hope for the future. The fact that she had the insight and courage to ask that question of all questions tells me I was right to place a great deal of trust in her.
“Yes, that is the nub of the question – what will I do next? After all, why would I not work until I drop – what else do I have in my life? I may not be a young man but I haven’t lost my faculties yet – but I can’t go on for ever. On one hand the question of succession is key to any company and sometimes you have to strike while the iron is hot.
“But there is a more pressing concern that forces my departure and makes this the right time to hand over to Simon. You’ll see it in the papers so there’s no point in denying it now. I’m being prosecuted for fraud. I intend to plead guilty with mitigations, and expect to spend my final years in jail. Having ploughed my earnings back to build the company, I used this company as security for loans to fund my retirement portfolio with a few dealings on the side. In the process it seems I broke a few technical rules…”
“If we’re going there, you did a lot more than that. You engaged in insider dealing and defrauded savers out of millions in a ponzi scheme,” said Simon bluntly.
The old man looked mortified but continued with a hint of remorse. “Yes, it’s true I betrayed my own ethical principles, but with the best of intentions. However, in my dealings here I’ve never been less than honest or fair. Please trust me when I say that. You’ve worked with me over a long period and you know I’ve never betrayed you in any way.”
It sounded uncharacteristically like pleading, a man suddenly fighting to save the reputation carved out over 50 years of dogged business deals. To her right, Josie spotted Fitzroy scribbling an urgent note and passing it to Bridges.
“And the trick with the signature sheet was an example of the finest ethical principles,” muttered Bridges to nobody in particular, though he was more engaged in writing a hasty reply to Fitzroy.
“Albert, I’m sorry to hear you say that, but in the circumstances not entirely surprised. I may add that you are not averse to devious methods yourself, but now is not the time for mudslinging. Let’s just say that I urge you to support Simon and give Josie every chance, even if that means taking difficult decisions. The worst sin of all would be for us to remain within a time warp and allow others to take advantage. The world is moving on and our work will be increasingly harder to win. Change is inevitable, you must face that truth – -and things would still need to change even if I had stayed.”
Simon paused to readjust, then continued regardless.
“Thank you for that contribution. But now you have to put your money where your mouth is. Commit to the company now and you will reap the rewards. If you don’t want to join the process and to win a brilliant new future, I’ll expect your resignations in the morning. No questions. Meeting is hereby adjourned.”
With that he turned smartly on his heels and returned through the Chairman’s office door without another glance. The old man shrugged his shoulders and added but a few words.
“You heard the man. It’s your choice. Nothing more I can do. Remember me fondly.”
And for his final exit, he left by the other door, duly demoted and leaving a sadder man.
The remaining directors lapsed into silence for a moment. Josie took the lull to pour some chilled water from the machine in the corner, a relatively recent innovation that made its debut about the same time she first entered the boardroom. She spoke to the assembled directors.
“If you’ll give me a moment, I’m guessing that the mood here is dissatisfied. And the point is that he wouldn’t care if we did resign en masse, because then he really could sell off bits of the company to competitors, liquidise the remaining assets of the company and make his money back. He can do that because he would have the controlling vote in any board meeting. The losers would be us and the employees of the company, so that’s not the answer. If we want to keep control over this company and keep it ticking along nicely with a good reputation, there’s only one way we can do this.”
At that moment Josie had the full attention of the room.
“We have to buy Simon out and choose our own chairman. But I’m hanging on to being Chief Executive, if you don’t mind. It’s a straight choice, gentlemen: plough in your savings and remortgage your houses, find a rival backer and fight back, or cave in, lose our jobs and lose our company. What do you want to do? Get up off your fat arses and take a few risks, or lose everything? As the chairman said, put your money where your mouth is.”
Conscious that she was sticking an already squealing pig, Josie sat down and waited for a violent reaction, but none came. Instead, Fitzroy stood abruptly, whispered to Bridges, who nodded slowly, then spoke quietly.
“Josie, please accept my apology. I think we all underestimated you, in fact you’re dead right: we have sat around too long on our, what was the phrase, fat arses. We allowed this to happen by not challenging our chairman. Mr Bridges accepts he was the main culprit, since as Chief Executive he should not allowed this to happen. Accordingly, he has accepted his pay-off and will retire forthwith.”
Someone patted Bridges on the shoulder. The action was accepted on the nod.
“You’ve set me thinking, Josie. I wanted the job you’ve been offered, dead man’s shoes and all that. But most of all I aspired to replacing the old man as the figurehead of the company. That was my ambition and I still have a few years left. I also have the contacts to get us new backers.
“Here’s my offer: if everyone around this table supports me as the next chair, I will support you as the new CEO and respect whatever proposals you table for the future of the company. I know someone who would make an excellent new director of finance, and I will recruit that person myself. What I won’t do is stand idly by and let the hard work of us all go in a direction we don’t want and don’t need, so the time has never been better for us to lead a management buyout. Is that a deal?”
With fresh resolve, there were no demurrals from this proposal. Josie thought carefully before replying:
“I’m just a humble engineer. Do you think you can win a fair deal against a guy who makes a living trading companies for huge sums? He’s not going to give away his shares for nothing, is he?”
“No,” agreed Fitzroy, “he isn’t. We just have to negotiate and find a bargaining counter he understands, just as he found the Achilles heel of our chairman that made him vulnerable to a takeover. Unless you know a way to persuade him? Find out what might please him…”
Fitzroy looked hard at Josie. Josie looked hard back at Fitzroy.
“Are you suggesting what I think you’re suggesting?” she said slowly.
A devious smile formed itself on Fitzroy’s face. “Well, you did say we have to make sacrifices and take risks. That applies to us all. I dare say we have more financial assets than you with your young family, so… I think the least you can do is get down on your knees for the company.”
He guffawed out loud. There was a smattering of dirty laughter from the assembled men – though gentlemen they were certainly not.
As realisation dawned, Josie stood up slowly. Leopards and spots, she thought to herself. These people will never change, whatever they say. She patted her small business case, where now resided the share certificate and a sizeable cheque.
“Goodbye, gentleman, and good luck,” she said quietly, and with that was gone.