CEO succession is a big deal. The best-run companies and boards invest a lot of time and energy to think it through in advance, and do everything they can to smooth the new CEO’s onboarding into the role. We’re in the midst of three very different CEO successions at Walmart, Kroger and Microsoft. The lesson to be learned here is clear: one size does not fit all when it comes to succession.
Succession Strategies at Kroger, Microsoft and Walmart
At one extreme is Kroger, where everyone knew the succession plan for a long time and the formal announcement of Rodney McMullen’s appointment as CEO was really not news (see “Kroger CEO Transition: No Story Here”).
At the other end of the spectrum is Microsoft, where Steve Ballmer’s departure was announced without a plan for who would be taking his place. It doesn’t appear that they know that yet (see “Coming Soon: The Great CEO Transition At Microsoft (And The 7 Steps That Will Help Them Get It Right”).
Walmart is in the middle, announcing that Doug McMillon will take over from Mike Duke. While many found McMillion’s appointment surprising, the choice makes sense after a moment’s thinking.
Which Approach to Succession Planning is Best?
It really depends on the context. Kroger’s “no story here” approach is best when things are going well and little change is required. Walmart’s slight surprise approach is best when you want to shake things up a little. Still, it’s hard to think of a scenario where Microsoft’s approach is what anyone would want. Uncertainty creates stress and people often make suboptimal choices under stress. But as Microsoft scrambles to pick up the pieces, they should consider that bringing in new blood makes sense when you want to shock the system or at least shake it up a lot.
Which Approach to Onboarding is Best?
The right approach to onboarding depends on the context (the business environment, organization’s history and recent business results) and organizational culture’s openness to change (click here for a more detailed explanation):
- Assimilating is the right approach if the context does not require significant changes now and the culture is ready to change. The organization will figure out the changes it needs to make over time
- Converge & evolve slowly if the context does not require significant changes now, but the culture is not ready to change, converge & evolve slowly, applying a steady stream of little shocks. Eventually changes will be required. But you have time to become part of the organization before pushing the changes
- Converge & evolve quickly if the context does require significant changes now and the culture is ready to change. You may be the catalyst that helps the organization wake up to the need for change
- Shock the system if the context does require significant changes now and the culture is not ready to change. The system’s very survival is at stake
Implications for Kroger, Walmart and Microsoft
Kroger is a classic example of an organization with less need for change right now, but ready to change. In cases such as this, promoting from within makes a lot of sense. Giving the new CEO a long time to ramp up seems like exactly the right approach.
Compare this to Walmart – its same-store sales are declining and they need to make some changes… quickly. Promoting from within suggests that they think at least some in the organization are ready to lead this change. Thus, their new CEO will need to converge into the new role quickly and start evolving things. [Follow this link for more on how that played out.]
Microsoft is facing a completely different situation, which worsens every day it waits to name a new CEO. Uncertainty is stressful. The longer it takes to start the changes, the greater the urgency of the changes will be. If Microsoft waits any longer, it will get to the point where its new CEO is going to have to shock the system.
Implications for Boards and Leaders
- Get as close to the lower left quadrant I as you can. (Less need to change right now; Ready to change)
- If you need some change (quadrants II and III), manage the transition to maximize the impact you want to have while minimizing the unintended consequences
- If the organization must change and is atrophied (quadrant IV), then you will have to shock the system. Do it quickly and decisively knowing that there will be a lot of pain and anguish. You can’t disrupt without disrupting. But you can manage the disruption so people can deal with it and get back to their real work.
Follow this link for more examples from George Bradt’s New Leader’s Playbook
