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Sam Palmisano, the former chief executive officer of IBM, was often overheard to say that his core obligation as a leader was to leave his organization in a better position than when he took it over.
In his 11 years as CEO, Mr. Palmisano clearly accomplished his goal. Under his stewardship, IBM enjoyed unparalleled financial returns and growth in leadership capacity throughout the company. Bill George from Harvard Business School defined him as the best CEO of the 21st century, an executive who eschewed short-term gains for long-term stability and growth.
If Mr. Palmisano’s legacy serves as the definitive measure of true leadership, how would other leaders measure up? Let’s take a look at Gord Nixon, the CEO of Royal Bank of Canada.
On Dec. 5, the long-serving CEO announced he was stepping down from RBC. Mr. Nixon will remain on the job until next summer, at which time Dave McKay, now the head of commercial banking, will take over the helm.
The extraordinary thing about the timing of Mr. Nixon’s announcement was that it came on the same day RBC announced its fourth-quarter numbers. RBC earned a profit of $2.1-billion in the fourth quarter of 2013, up 11 per cent from the same period in 2012.
Talk about going out on the top of your game. After 13 years at the helm, Mr. Nixon’s organization was making more money than it ever had before. Why, you might ask, would a successful CEO choose a moment like that to retire?
Leadership decisions like this are never completely transparent. However, it certainly seems that Mr. Nixon is leaving of his own accord. By leaving when the bank is thriving, Mr. Nixon has embodied one of the best practices in great leadership.
Both Mr. Nixon and Mr. Palmisano seem to understand that it’s absolutely critical to recognize when it’s time to make a change at the top. For any organization to thrive, that change should come when times are good; waiting until the organization is struggling, or going through troubled waters, can only be viewed by outsiders as a sign of weakness and disorganization.
This is not an easy thing for a successful CEO to do. When times are good, there will be no outside pressure from shareholders or the board to make a change. This is where some CEOs fall prey to their egos – thinking that they must stay on to ensure future success.
As a leader, how do you know when you’ve achieved enough to think about stepping aside? Financial results are certainly an important measuring stick. However, there are other issues to be considered. Is the culture of your organization strong and well defined? Have you built leadership capacity in others during your tenure? Are your employees truly engaged?
As Mr. Nixon and Mr. Palmisano demonstrated, you’ll know it’s time to leave when you can say with confidence your organization is succeeding in all of these key areas.
How can you ensure that you are leaving your organization in better shape than when you took the reins? True leaders typically take the following steps:
1. Commit to making things better every single day – in ways that position your organization for both short- and long-term success. Don’t be a bystander and watch problems fester; have the courage to tackle them head on.
2. Guard the interests of the whole organization. Don’t just focus on your own department or self-interests.
3. Try to anticipate threats that can put your organization at risk. Stay plugged into what you hear from customers or employees close to customers. This is often where the early warning signs exist.
4. Build strong relationships both inside and outside your organization. Inside, connect with peers and key leaders in other departments. Outside your organization, develop strong links to suppliers and regulators. In too many organizations, these relationships are adversarial, strained and unproductive. When relationships are strong, you make your organization stronger.
5. Develop an unyielding commitment to building a strong culture that drives high employee engagement.
6. Develop leaders for the future. This is probably one of the most important ways you can leave an enduring legacy and have a real impact in your organization.
Vince Molinaro (@VinceMolinaro) is managing director of the leadership practice at Toronto-based Knightsbridge Human Capital Solutions and the author of The Leadership Contract.