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Interim CEOs are seen as the product of poor succession planning.
Interim CEOs are seen as the product of poor succession planning.

Interim leaders

Standing up for the stand-ins in the corner office Add to ...

Stuart Pearce is an unlikely management hero. The former England team soccer player became caretaker manager of the national team when Fabio Capello resigned abruptly last month. He may yet lead England into the forthcoming Euro 2012 tournament if his masters can’t get around to naming a permanent successor.

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Would that be a bad thing? I don’t think so. With fans’ expectations duly lowered, the former defender might have a better chance of shining than the overpaid Mr. Capello would have done. In the process, he could become a role model for anyone who has ever worked as stand-in CEO, interim director, acting divisional head or caretaker vice-president of sales.

Chief executive officer tenure averages 6.6 years, according to consultancy Booz & Co. (substantially longer than that of most soccer team managers). But CEO turnover has been as high as 16 per cent in the past decade. At the end of last year, only 25 of the world’s top 2,500 companies were run by understudies. Further down the corporate hierarchy, however, where sluggish succession, deferred decisions and mishandled handovers are common, many managers must be bridging leadership gaps.

Sometimes they take the permanent role. UBS hurriedly anointed Sergio Ermotti as CEO last November after he had provided temporary cover following a $2.2-billion (U.S.) rogue trading scandal. Ed Whitacre, then General Motors chairman, took over as interim, then permanent CEO in late 2009 – although he announced nine months later that he would step down, having fulfilled his “public duty to return this company to greatness.”

More often, acting managers arrive unheralded and leave uncelebrated. Three things are said to hold them back. First, they lack experience and authority. Second, their temporary nature makes the company vulnerable – to competition, a drop in the share price, or even takeover. Third, they manage only tactically, not strategically.

The experience question ought to be irrelevant at organizations that have done their succession planning properly. Directors should ask themselves: If we don’t have a capable internal stand-in, how strong is our team? As Christopher Kinsella, himself acting CEO of Britain’s Chartered Management Institute, puts it: “Everyone should be able to be replaced by someone else from the organization.”

Temporary “promotion” can be problematic. Boards must decide what to do if their stand-in insider is not the final choice. They should be ready to return him or her to a different role. Alternatively, they could avoid the issue by picking a fellow director to cover the gap, or one of many experienced professional interim managers, who relish the challenge of a finite appointment.

Anything that leads to increased short-termism is a worry – but so is excessive power concentrated in a long-serving authoritarian executive. As for increased vulnerability, this is usually due to the circumstances of the previous chief’s departure.

Two chairmen recently obliged to appoint interim CEOs told me they had made sure their stand-ins had full board support, and the power to act as full-time CEOs in virtually all but name. Strategy setting was the only area they were reluctant to put in the hands of a temporary leader.

Some big decisions – on pricing strategy, say – may not wait for a permanent appointment. But Mr. Kinsella reckons a good interim manager, backed by directors, should be able to take such steps. In any case, what is wrong with a leader being forced to concentrate more on managing and less on plotting the next great deal or wrenching a change of strategic direction? Mr. Pearce has ruled himself out as long-term England manager but says he has the skills to take the team through a tournament: such focus, minus the preening and politicking that sometimes distracts full-time executives, can be welcome.

The term “caretaker” usually stands for workmanlike lack of ambition. It is associated with the man who plugs the leaks in the roof of the parish hall. But his opposite is the man who bets the parish hall itself on a possible rise in the property market. Few would advocate a world run permanently by temps. But before making a long-term appointment, boards should take a look at the solid virtues of a good interim manager. A little more caretaking and a little less risk-taking might be a good template for any full-time replacement.





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