The longer I’m a student of our industry, the more firms we observe outperforming and underperforming, and the more clients we engage with (several recently) on the issue of leadership succession planning, the more firmly I believe that leadership matters. Really matters.
But “leadership,” like “value,” is easy to say and hard to define. It can be the classic empty vessel, or Rorschach test, inviting anyone and everyone to read into it whatever they’d prefer. Surely we can do better.
Actually, we can.
Two current articles in the Harvard Business Review address this very issue, from different perspectives. The prolific Ram Charan published The Secrets of Great CEO Selection (December 2016) and Dean Stamoulis How the Best CEOs Differ from Average Ones (November 2016).
Let’s start with Ram Charan.
Inevitably and appropriately, his article covers not just indisputably “great” CEO choices (Steve Jobs returning to Apple is surely the one that will go down in history, although Lou Gerstner—a deeply improbable dark horse—being brought in to IBM in 1993 should be equally celebrated), but also disastrous or certainly disappointing choices, like HP’s revolving door pre Meg Whitman or Yahoo since, well, since forever.
Here’s the thematic heart to Charan’s thinking:
In my experience, board members who are adept at picking CEOs do four things others don’t: They work painstakingly to clarify the essential qualities needed to succeed in the job; they keep an open mind about where the best candidate will come from; they go deep to understand which candidate is the best fit; and they allow for imperfections in the chosen candidate.
The first key criterion—the essential qualities needed—is really a different way of identifying what the organization needs at that specific juncture. Has it been exhausted and overextended by growth? Maybe it needs a period of consolidation and retrenchment, and indeed Charan provides an example of an unidentified Chinese real estate conglomerate that found itself so overextended it had a vast surplus of empty properties it coudn’t unload and lenders breathing down its neck; fortunately the founder, an instinctive and relentless builder, had the sense to bring in someone who could rapidly execute on rapid downsizing and restore the company to solvency and stability.
Similarly, we know from the turnover at high-profile retailers such as Lands End, the Gap, and (you name it) department store, that the CEO of a retailer today has to be ready to go up against Jeff Bezos and Amazon and have a deep understanding of how brick and mortar stores and online complement each other and interact.
How might Charan’s four guiding principles apply to Law Land?
- What are the essential qualities needed to succeed for this firm here and now? This is not only the first step but probably the hardest emotionally and intellectually. It requires unblinking honesty about the firm’s true market position and how it’s perceived by clients, as well as clarity about what might be the greatest threats posed to the firm and how they can be countered.Using the Gerstner/IBM example may aid understanding. At the time of IBM’s CEO search (1993), the outgoing CEO had proposed splitting IBM up. Conventional wisdom was that IBM had lost its way in terms of technology so a technologist would be required to right the ship: John Sculley of Apple, Ben Rosen of Compaq, and George Fisher of Motorola were names that came up all the time. The New York Times even ran a story on the search, “Help Wanted: Computer Skills a Must.”
Two directors decided to go through the botherment of testing the conventional wisdom and spent a month traveling talking to customers. They came back convinced IBM’s core problems were in its b usiness operations, not its technology. When Gerstner—who otherwise wouldn’t have been in the consideration set, as a marketing veteran and star—came in, he quickly concluded that splitting up IBM was the last thing they should do; customers strongly appreciated being able to go to IBM for a single access point to a mix of offerings. But its cost structure had bloated up out of control and its mainframe pricing was uncompetitive and irrational.
He decided to move from hardware towards software and services, cut costs by $7-billion and prices by 30%. Within 12 months IBM swung from an $8 billion loss to a $3 billion profit and solvency was no longer a question.