Ensuring a capable successor to a sitting Chief Executive is one of the most important duties of a board of directors. The incumbent CEO and senior HR leaders also have key roles to play in this crucial task. But where do they start? In order to groom a World-class CEO, you must begin by defining the target. In part 1 of this 2-part Executive Insight, RHR International outlines the criteria that define world-class leadership performance in the Chief Executive position.
While you might think individuals promoted from within would have a distinct advantage over those hired from the outside, a study from RHR International has found that these executives face unique challenges of their own. In the latest edition of its publication, Executive Insight , RHR International explains why organizations should apply the same methodical approach to managing internal succession as they do their external recruitment and hiring.
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How, in the face of demanding and complex environments and an ever shifting business landscape, will your key people develop the leadership capabilities needed to ascend to the next level? It should be a vastly different approach than lower level high potential programs designed for large numbers of managers.
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The new economic “normal” is going to call for tough decision making and very hard judgment calls to keep analysts, shareholders and the board happy. With rare exceptions, CEOs are starting to realize they can’t do it alone. Who will be your strongest ally in preparing for the future? It should be the people who share the C-suite with you: the senior executive team.
Why do certain CEOs relish taking on challenges that have literally ended the careers of their predecessors? How do they accept a set of circumstances that have already defeated others and turn them into a triumph? To thrive in conditions like these, leaders must possess confidence, determination and a firm belief in their ability to do what they set out to do.
What is it about certain people that cause us to catch our breath and think, “Wow!” when they leave the room? Their presence seems to linger, along with an almost pal- pable aura of maturity and self awareness. This sense of underlying strength can be found in all great leaders. Individuals who cultivate it (few are born with it) have a solid impact on their teams, board members, customers and shareholders.
What is the real difference between competent leader and extraordinary CEO? Is it pedigree, experience, intelligence? The answer is yes...and much more. Exceptional leadership hinges on the complex interaction between individual psychology and unique business needs. At the top rung of the ladder, where the dynamics are even more compli- cated, subtle adjustments in style can produce outstanding results.
Final decisions aren’t what they used to be. The rapidly changing operating environment demands intellectual quickness and mental flexibility to resolve complex issues. Is your executive management team agile enough to measure up? In a recent survey by RHR International, senior executives were asked to name the most critical characteristic or behavior for successful future leaders. A majority of participants specified some form of mental or learning agility.
The number one responsibility of any board of directors is to ensure that their organization has the ability to sustain excellence in CEO leadership over time, with seamless transitions from one leader to the next. This process is pivotal as CEO successions are always disruptive. Changing the head of an enterprise impacts company culture, board/CEO relations, and perceptions from multiple constituencies inside and outside the business. Depending on how it is managed, the disruption that occurs can impact performance in a positive, neutral or negative manner.
Life is a series of endless decisions, and perhaps nowhere do we make them under such consistent stress than in the executive suite. First, because the issues being decided there have a wide-ranging impact on the rest of the organization – and sometimes well beyond. Second, because their impact is so great, such decisions are more difficult to reverse. Third, at the top there are fewer guidelines, fewer precedents, fewer clear outcomes and less overall certainty for any given course of action. Fourth, whatever decisions are made will seldom be optimal in the general organization sense; there are usually winners and losers – and such tradeoffs are always less than satisfying.
For over 65 years, we have helped clients such as these drive success by assessing, aligning and developing senior leaders (click the logos for more info):
Often, a body of work can tell more about an organisation than any one particular instance. Such is the case of the relationship between RHR International and Reckitt Benckiser.
Reckitt Benckiser (RB) is a world leader in household, health and personal care. Three well executed acquisitions have played a major part in its successful expansion. Starting in 1999 with Benckiser's merger with Reckitt & Coleman, management turned to RHR International to define and execute its pre-acquisition management due diligence process. In that year, RHR assessed nearly 300 executives as part of the merger and restructuring that created the company in its modern form.
In 2005, RHR also delivered the management due diligence that brought Boots Healthcare International into the business and added new powerbrands to the portfolio. Again, in 2010 RHR consultants were asked to lead the assessment and integration of the manage- ment resources of SSL International into a further expanded RB.
Over a ten year span RHR International has established itself as a trusted advisor to RB. The company has an outstanding record of growth, increasing profitability and return on investment from 2000 to 2010. Since 2000, net revenues for the company have doubled and its market cap has quadrupled.
Today, RB is one of the fastest growing and most successful consumer goods companies in Europe. It is the global No 1 or No 2 in the majority of its fast-growing product categories. Its strong portfolio includes 19 global powerbrands which include: Finish, Lysol, Vanish, Woolite, Calgon, Airwick, Clearasil, Scholl and French’s.
Senior Vice President, Best Buy
When an $8 billion consumer products company sought to improve its cross-matrix business practices, it discovered that it also needed to develop its leadership talent. The HR organization, tasked with effective succession planning, asked RHR to create a development program for the company’s next generation of leaders. Management’s ability to identify high-potential people and find them crucial stretch assignments had been hampered by a siloed organizational structure. The Client needed a reliable and consistent process for looking across the company to find and develop its high potential talent.
Instituted a rigorous, data-based process for identifying high-potentials that is now applied through the middle management level.
Created a common language and metric for evaluating people that has enabled open discussion between senior leaders and builds consensus about who are the company’s next generation leaders.
Designed a development process that meets the special needs of high-potential employees and relevant, actionable, realistic development plans for each individual.
Program eventually included 200 of the Client’s executives across six continents, 36 countries and nine RHR offices.
David Kirchoff, President & CEO, Weight Watchers International
A global leader in food and facility management services found that the turnover rate for external hires in their executive ranks was over 25%. The expense created by a constant cycle of recruiting, training and replacing was proving costly, not to mention the loss in productivity while a stream of managers worked their way through the system. The company turned to RHR International to create a process which would facilitate the integration of executives into the corporate culture and improve the retention rate.
Over 25 executives have participated in the program to date with a 100% retention rate. The program continues to be supported by the CEO and is gaining increasing recognition throughout the company.
The program is considered to be a significant organizational change initiative since many managers and HR personnel now have a better understanding of the key success factors and derailers for new hires. Communication and dialogue around integration has increased and warning signs of retention risks are being highlighted and managed more quickly than they were in the past.
Douglas Reeves, Founder, The Leadership and Learning Center
A major Canadian Private Equity firm was considering the purchase of a large residential and commercial heating oil distributor. The plan was to enlarge operations through a number of acquisitions. The PE firm knew the management team was doing a good job of running the company at its current size, but didn’t know if it could handle the expansion. The PE firm asked RHR International to evaluate the capabilities of the target management leadership, make recommendations on how they could improve as individuals and a team, and identify organizational issues which might affect future profitability.
The RHR consultants’ report confirmed the team was strong and held untapped potential that would allow it to successfully handle the additional responsibility of the acquisitions.
The consultants advised the team how they would have to change their working style to deal with the growth and geographic distances of the expanded company.
RHR advised each individual on the team about their own professional development.
Based on the recommendations of the RHR consultant team, the PE firm went through with their investment. To date, the portfolio company has successfully worked through its first major acquisition and is currently working on a second that will see its business double again in size and extend its range into Alberta and B.C.
John Rowe, Chairman & CEO, Exelon Corporation
Michael Meriton, President & CEO, The Golden Source
Ajay Banga, President & CEO of Mastercard Worldwide
H. Gary Pannell, Attorney and Advisor to Boards
JONES, WALKER, WAECHTER, POITEVENT, CARRÈRE & DENÈGRE LLP
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