KARL MOORE: This is Karl Moore of the Desautels Faculty of Management at McGill University, talking management for The Globe and Mail. Today, I'm delighted to speak to Joe Bower, who's a very senior professor at the Harvard Business School.
Good afternoon, Joe.
JOSEPH BOWER: Good afternoon, Karl.
KM: Joe, one of the big topics we'll look at this day is CEO succession and how we choose the next CEO. What are your thoughts on the matter?
JB: It's a problem that's about as badly handled as anything really important in big companies. There's a great tendency to treat CEO succession as an event; it's something that happens and you begin to worry about it about a year before it's necessary. But that leads to all kinds of problems.
There is a survey that was done of something like 1,200 senior [human resources]officers of big companies, and the response was that 60 per cent of the responders said that their companies did not have [succession]programs. In fact, to do it right you need to begin five, seven years before the fact and it needs to be based on a real program of talent development, which ought to be part and parcel of the way the company is run.
So, my mantra is that the way you manage your succession is actually a direct reflection … of how you manage the company. You are either managing the company to develop talent, which means that, at each juncture, when you have opportunities, you think of them both in terms of the development of the business, but also in terms of the development of the managers.
KM: Is it a board responsibility, then, to choose a CEO?
JB: The board is responsible, in the end, for the succession process, but the board cannot do it. It is very much a job, a key job, of the chief executive and the top team that the chief executive would work with. More and more in the best companies today, you see that there is a chief HR-type person; in some, there's a chief talent officer. And, in some ways, that person is more important than the chief financial officer, because, in a way, there's a lot of money around and there's not a lot of top talent.
There's often a triumvirate of the chief talent person, the chief financial person and the CEO. At any rate, that group, some intimate group, is working and really starts focusing on the problem five to seven years before. They begin interacting with the board … and it's a very delicate process, because in the end you're talking about the end of a career for a chief executive, if it's a happy situation.
KM: It's something that's no longer a CEO's job, it's [between]the board and the talent pool.
JB: Well, the board is responsible, but they just don't know enough. Only the top of the company really understands the quality of the people and what they need. What kind of experience do they need to be able to get to that point where they can step up? The board can listen, the board can provide advice, the board can meet people, the board can visit them in their divisions or subsidiaries and form impressions, but at the end of the day, it has to be managed by the CEO.
KM: This has been Karl Moore of the Desautels Faculty of Management at McGill University, talking management for The Globe and Mail.