Leadership and Strategic Succession

The How and Why for Boards and CEOs

Gry Osnes, Agnes Wilhelmsen

• Publisher: Routledge
• Year: 2020
• Print ISBN:
  9780367685171
• eBook ISBN:
  9781000320428
• Topic: Business
• Subtopic: Business General
• Index: Business

Based on a review of the literature and several in-depth case studies, this book suggests a strategy-as-practice framework for succession and explores leadership logic, trust and followership. This book takes the reader through the key stages and disciplines required for effective top-level succession.

Corporations, growing entrepreneurial companies and family owners all must manage strong group dynamics and individual needs in a succession transition. This book includes a wide range of global client cases, including public sector organizations, corporations, entrepreneurial firms and family owners. Based on rigorous research and written in an accessible style with a focus on practical needs, readers will also be able to combine this analysis within disciplines of governance, leadership, strategy and organizational development.

This book will be of interest to students at an advanced level, academics and reflective practitioners as well as executives at the top levels of businesses.

1

____________________

Introduction

With this book I will present analytic tools and perspectives for managing leadership successions. Readers that would find it useful are top leaders, board members, chairs of boards, family owners and advisors. I offer perspectives and insight into how complex and important succession processes are with a focus on strategy, emotions involved and group dynamics. Succession needs a strong strategic intent, while several of the dynamics are highly influenced by unconscious processes, strong individual and group emotions and cognitive biases. Understanding successions, and how authority has been constructed, is crucial for not only understanding successions in the organization but also the uniqueness of leadership in the organization. I offer an overview of the terrain and how to steer through a succession process. For the strategist and advisor, the book addresses the strategic and constructive aspects of a succession, destructive group and individual dynamics and different aspects of organizational and cultural differences.

1.1 Strategizing Complexity

From Best Practice to Complexity

A succession is an organizational event that can have a strategy process anchored in the exit and entry of a leader. At the individual level a CEO, or the chair of the board, will have their own agendas or ambitions. The latter are issues related to a leadership transition and not in itself a succession strategy. It is a role transition on the individual level with its own challenges and dynamics. Many best practice models, and planning tools, will cover these individual trajectories and they are more obvious and easy to identify. More elusive and crucial are the strategies, seven in total, individuals and groups need to carry out when attending to the challenges inherent in a succession, in order to create a successful outcome for the organization.

A best practice model or guidance of how to solve each of them will either underestimate or oversimplify the scope of the challenge. Often it reverts to a focus on individuals or sub parts of the process. The complexity is further increased since all organizations will have different degrees of maturity, historical developments, strategic challenges and specific threats that makes the consideration and outcome of each of the strategic tasks unique to the organization and time of succession. The classic dilemma of recruiting a new leader from inside or outside is just one best practice field that will be influenced by all these factors. With regards to decision makers there are governance structures such as a board, ownership group or family ownership structure that are ultimately responsible. To have a succession capability is a key part of its responsibility, that is, it should be able to trigger and manage a succession with further review and strategizing, and aligning, of these strategies.

Succession Wheel Model

There are seven succession challenges, or succession tasks, that apply to any succession process so as to bring it to a conclusion. Reviewing and addressing these seven such strategies includes, as will be described throughout, to align the outcome of each of them. Such alignment, in addition to each of them being through and executed, is what creates trust in the incoming leadership. The strategies are visually presented in the Succession Wheel Model, which is a due diligence tool. It integrates the seven necessary succession strategies as a complete process and categorizes the complexity. They are applicable to all types of organizations. Individual or group dynamics, often also described in isolation but summarized in this book, will erode or threaten the strategizing of each of these. The model helps in identification of these threats.

Such an integrative model is also useful as guideline and planning for discussion and decision making. It is also useful for practice-based researchers. The fragmentation in approaches to understanding succession has previously led to a call for longitudinal and qualitative studies to clarify succession phenomena (e.g. Dyck et al, 2002). Complexity in understanding a succession has been a central finding from my research. The model relies on such research and offers an integrated perspective in what has been a rich but fragmented research field.

Constructive and Destructive Group Dynamics

All groups and organizations that aims to be more than a project will encounter a succession process. Successions are a group dynamic and system event that can change or reset the organization’s leadership logic. When that is the case, or necessary, the succession is particularly disruptive and triggers strong dynamics. The seven strategies that optimize a succession outcome also, crucially, counteract destructive dynamics. They are linked because a succession is a constructive group dynamic that has its polarity in destructive dynamics. In some cases an undercurrent of group conflict, disagreement and individual ambitions can make a board, or owner, incapable of triggering a top leadership exit process. It is a group dynamic that ensures the organization stays alive and this is influenced by individual psychological factors. Succession is as such a stress test for the board, and succession and unconscious dynamics will also affect the board dynamics. It is one of the decisions where the board members and Chair will have an operational function. In addition to group and individual psychological processes successions are affected by institutional and cultural contexts.

The issue of responsibility to a board, or any formal governing structure, is crucial. A failed, or series of unfortunate successions, will radically erode trust in the board. Loss of trust due to a failure to trigger, or in managing and optimizing, a succession process is justified. Failed successions put the organization’s very survival at risk. More typically succession is seen as a family business or family ownership issue. I will show that successions are critical for any organization and they are always complex. A non-family business can, with a good board, easily trigger and manage a succession process. However, it is harder for them to shift between, or have at the same time, a succession and an incubation process. An incubation strategy should be considered, together with a succession, as an alternative or part of a strategy for renewal. In an increasingly complex and disruptive world, both succession and incubation as process and strategy are increasingly critical for many businesses.

Ownership Evolution

Successions are crucial and are the main milestones in what I call ownership evolution. Entrepreneurial groups will, when growing and developing their business, have to address their leadership and governing systems. Family ownership and business succession; if managed by a family with robust and healthy dynamics these organizations can be resilient in crises and agile in developing new things. Each succession will reset or evolve ownership and reflect the ownership history, business and technological context and social changes such as gender diversity. In addition there are the maturation and growth of a new company or other major shifts. I use the term ownership evolution to capture the different types of ownership structures that can be used to enable, or trigger, a succession process. Again there are too many variables and conditions, including innovative solutions, to make ownership and leadership successions follow predictable patterns. Context factors, opportunities and challenges will possibly make it best to innovate and not just reset a solution from the past. Successions are also tried to be captured as predictable through using life-cycle models of businesses and/or individuals. Life stages of individuals are now less normative or predicable; we have new types of choices with regards to retirement than before, or might change careers. Other social changes on gender or the seniority of entrepreneurs also reduces what were often seen as predictable patterns.

Educative and Evocative Cases

I will use client and research cases from listed companies, state-owned companies, higher education institutions, familyowned companies, entrepreneurships and security organizations. There are cases from Asia, Middle East, Europe and the USA. More exotic cases such as religious and tribal cases are also explored for the purpose of underscoring how succession processes are influenced by institutional and cultural aspects and will have significant strategic consequences even when it is a habitual succession. The cases also underscore the evolutionary aspect of succession processes as most successions bring with them an adaptation or more radical system shift. The more radical the shift the more disruptive and complex the succession process will be. Our history is filled with such dramatic or intriguing succession stories and I have included historical cases from the classics (in boxes), written by my research assistant Agnes Wilhelmsen, to illustrate specific issues in an evocative and educational way. Famous historical events, cultural artefacts, rites and leaders will, with a succession perspective, give the reader a broader perspective on these issues.

1.2 Succession as Stress Test

For the board, succession is one of its main responsibilities, although it is not often the case that the board has much experience with succession processes. Most business leaders and board members have economic, legal, financial or other business-related experience and are therefore not trained to identify the psychological or group dynamics that arise during a succession. Yet the ability to trigger and manage a succession process is fundamental and it is often a decision the board has not been through before as a team. It is also a relatively rare event. A research project I’m currently leading has found that even the most experienced chairs of boards have at most managed three succession processes. In addition they would, at most, exited and entered a three top leadership role themselves. Even top chairs of boards who have been in charge of, or experienced as leader, four or five succession processes are wary and put substantial effort into planning and reviewing their role and the process. It is the decision-making process they are the most operationally active in. None of the succession processes they describe has been the same. One complicating factor is that a board member, CEO or chair might have roles across different types of cultures or organizations and so will engage with organizations with different types of leadership logics.

In one way or another, when I discuss successions, the underlying issues in succession processes are the struggles one has with the complexity of the process. Four aspects of a succession makes it complex: it is an emotional process, it is highly consequential for the organization, there are seven strategies necessary that need to be integrated and also counteract irrational processes and, elusively, the outcome is not only a new leader but the all-important issue of trust.

Succession is an Emotional Process

A young leader explained to me his hesitation in announcing to the board that he wanted to exit the role as follows:

It just starts such an extraordinary push and pull all over when a succession process is triggered – the forces are extraordinary.

The leader in question had been the CEO of one of the biggest companies in the insurance sector in its country of operation since his early thirties, staying in the role for a decade. He was highly successful and could have expected several new CEO roles during his career, given that he was still only in his early 40s towards the end of a successful tenure. Yet such were the powerful forces involved, the push and pull – at board level, in his team, with employees, from the media and elsewhere in the sector – that he hesitated. The company was listed and a succession process was expected. Candidates positioned themselves for the role, while public interest and speculation grew. In addition to a leadership group resenting having a new leader they were not comfortable with, there could be implications for their ambitions and roles. Some internal members of the leadership team, as well as external candidates, were applying for the role. Appraisal of his tenure took place both in private forums, at the board level and in the media. For the board, there can be a struggle not to be drawn into a defensive position regarding miscalculation or choices made. The push and pull mentioned refers to ambitions, sense of loss, anxiety, envy and so on, of varying but often powerful intensity. Individual ambitions can dominate the process and an exiting and/or entering CEO goes through a complex set of different types of emotions. Such emotional and group dynamics constitute threats to the succession, and are important for decision makers to identify.

Successions are Highly Consequential

A succession is a strategic event that can be highly influential for the organization; more than that, it can be of crucial importance for its very survival. Its importance is most evident when a succession, or several successions in a row, have resulted in corporate collapse. A board that is passive and does not trigger a succession when needed, or recruits the wrong leader, is putting the organization at risk. A failed CEO succession can reduce confidence and the attractiveness of the role, and make further succession processes even more difficult. A series of CEO entries and premature exits can lead to a CEO revolving door, and radically reduces trust in the chair of the board and the board more generally. It can also lead to a brain-drain of key employees and leaders in addition to creating a toxic or highly anxious internal atmosphere within the organization or board.

Successions Represent Strategy Formation at Several Levels

A succession is a strategic process. It is also highly emotive and unpredictable, with powerful group dynamics that need to be acknowledged and contained. Strategic thinking is necessary to contain these, while addressing the external and internal reality of the organization. The strategies presented in this book have been shown to be effective in containing the dynamics and addressing the many different dimensions of succession. They are geared to identifying, and preparing for, the specific type of leadership necessary, as well as addressing the challenges inevitable in a succession process. Leadership effectiveness is not only about addressing strategic choices, but also about how to negotiate the role and to create a match between the leader and the development of culture, and matching these to the strategic course. A misfit between the culture of an organization and a top ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Contents
• List of Illustrations
• List of Boxes
• About Gry Osnes
• Acknowledgements
• Foreword
• 1 Introduction
• Part I Exit of a CEO and Strategic Succession
• Part II Entry of a CEO and Followership
• Index