The Most Important Lesson Every Company Should Learn From KKR’s CEO Transition

On the one hand, Henry Kravis and George Roberts’ handing over KKR’s co-CEO title to Joseph Bae and Scott Nuttall today is big news. On the other hand, it’s not a surprise. Bae and Nuttall both joined the firm in 1996. They made huge contributions leading the firm’s expansion in Asia private markets (Bae) and public listing, capital-markets and insurance (Nuttall.) They were named co-presidents in 2017, an obvious step on the way to co-CEOs.

 

 

 

 

The lesson every company should learn from this is how the successful implementation of long-term future capability planning beats short-term planning and prevents the need for crisis-management.

 

Look at the flow here. Kravis and Roberts led the firm for 45 years – 11 with Jerome Kohlberg and then 34 on their own. Bae and Nuttall have been with the firm for 26 years – over half their lives. Another way to look at this is to realize that Nuttall and Bae were 3 and 4 years old when Kravis and Roberts started KKR.

They came from Goldman Sachs and Blackstone as junior analysts. While they certainly worked hard and delivered through the decades, the firm consciously put them into positions to expand their remits, learn new areas and contributed in new ways – which they did.

As KKR describes:

Bae “was the architect of KKR’s expansion in Asia, building one of the largest and most successful platforms in the market. In addition to his role developing KKR’s Asia-Pacific platform, he has presided over business building in the firm’s private markets businesses, which included leading or serving on all of the investment committees and implementing the firm’s modern thematic investment approach. Mr. Bae serves on the firm’s Inclusion and Diversity Council.”

Nuttall “was the architect of the firm’s major strategic development initiatives, including leading KKR’s public listing, developing the firm’s balance sheet strategy, overseeing the development of KKR’s public markets businesses in the credit and hedge fund space as well as the creation of the firm’s capital markets, capital raising and insurance businesses. Mr. Nuttall serves on KKR’s Balance Sheet Committee and the firm’s Inclusion and Diversity Council.”

 

Future Capability Planning

The essence of future capability planning is creating a picture of your future organization and then doing three things to bridge the gap between your current reality and that picture:

 

  • Developing current people by evolving their attitudes and building knowledge, skills, and experience on top of their existing talents.
  • Acquiring new people with required attitude, talents and differential perspectives soon, then building their knowledge, skills and experience over time.
  • Acquiring new people with the required attitude, talent, knowledge, skills, experience and perspectives just in time as needed.

 

Developing current people is first prize. It’s the least disruptive, best perpetuates your culture and sends a message that your value your existing people. This is what KKR did with Bae and Nuttall and others. Had either Bae or Nuttall not made it or opted out, KKR had a built-in contingency plan in having the other ready – without it being a competition given they’ve had co-CEOs for so long.

Acquiring new people and then developing them further is something you should do sometimes to bring new ideas and perspective into your organization.

Acquiring new people just in time is the last choice. It’s the most disruptive, sends a message that you don’t think your current people are good enough and runs the highest risk of onboarding failure if these new people fail to fit in, deliver or adjust to changes down the road as 40% of new leaders do.

 

Implications for you

  1. Take your long-term future capability planning seriously. Flesh out your future state. Understand your current reality. Identify current people with the talent required to fill future roles and follow through to give them training to build knowledge, practice to build skills, and the right assignments to gain relevant experience.
  2. Fill your future talent gaps as soon as practical. The earlier you can bring future leaders onboard, the smoother their future leadership transitions will be. And align your succession and contingency planning with your future capability planning.
  3. Understand the risks of bringing new leaders in just-in-time to fill empty roles. Avoid it if you can and over-invest to make it work when you must.

 

Click here for a list of my Forbes articles (of which this is #731) and a summary of my book on executive onboarding: The New Leader’s 100-Day Action Plan.

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