Leadership

3 Examples of Succession Planning Done Right

By Nicole BeckermanMay 2, 2017

Leadership transitions are a vulnerable time for companies. Stock prices take roller-coaster rides and employees at all levels feel uncertain about what changes a new CEO will usher in. The media keeps an eagle eye out for transitions gone wrong, and they usually have a good amount of material: While about 70% of companies do conduct succession planning, the actual execution of said plans is often more uncertain. Maybe the CEO tasked with finding and grooming their successor isn’t invested in performing the task well, a top candidate suddenly makes a highly visible mistake, or an external appointee begins steering hard in an uncertain direction. The ways that leadership turnover can go sideways are countless, so it is vital to have a plan in place.

The CEO role is complex, and each leader brings a unique focus to an organization through their leadership. Finding the right person and preparing them for such a role is far from straightforward, but here are three transitions which illustrate the positive results of planning succession thoughtfully:

McCormick & Co.

In 2008, spice and flavorings giant McCormick & Co. transitioned their CEO position from Robert Lawless to his successor Alan Wilson using a succession model praised by Bloomberg for being thoughtful, comprehensive, and well-executed. McCormick developed their own robust succession planning over the course of many years, taking their time to intentionally identify and create thorough development strategies for all senior executives. They began planning in a time of strong performance, when spirits of collaboration and energy were high, and involved younger teams in the process of planning for the future. Lawless prevented being rapidly forced out by his successor by establishing a transparent timeline of five years, planning his transition to a non-executive chairman of the board role. “When the board and the individuals are ready, I am prepared to move on.” He also tied part of his discretionary compensation to succession planning, proving his investment in finding and preparing the right person. An outside firm was also brought in to help temper any elements of bias in evaluating the contenders.

After years of monitoring the progress of the candidates and meeting with them, the board and Lawless settled on Wilson. Lawless says Wilson’s fit with the company culture was what made him stand out in the end, because it was so important for a McCormick CEO to provide leadership, but also to be people-oriented and understand front-line issues.

When Lawless speaks of succession planning, he warns of CEOs becoming too consumed by their assignments and too invested to imagine a life after leadership. Ego can also get involved, with leaders convincing themselves that they are the only ones capable of fulfilling the breadth and depth of their responsibilities. Lawless says tension is created because “These are life-consuming assignments, and if you don’t have anything else to go to, why leave? It also gets involved with, ‘I’m better than anybody else. Nobody else can do this. Nobody else is ready.’ ”Lawless’ insights point to a need for boards and CEOs to work together by keeping the process transparent and realistic in strategy. The McCormick succession model continues to function well, as seen last year during the transition of the CEO position to Lawrence E. Kurzius, another internally developed executive.

IBM

Virginia M. Rometty’s succession as CEO of IBM in 2012 also is a case of internal succession planning done correctly. Her tenure with IBM began in 1981 as a systems engineer and since then she has climbed the ranks upward to SVP and Group Executive for Sales, Marketing, and Strategy before being offered the CEO role. Rometty is a prime example of an incoming CEO who was well-entrenched in the company culture, known to the board, and demonstrated a sterling track record.

Rometty’s advancement worked well because of her cultural fit, and because of the professional development systems which allowed her to succeed based on merit and become IBM’s first female CEO. Allowing candidates to compete on an even playing field (rather than simply choosing leaders based on their similarities to previous ones) shows transparency in the selection process and values, which the entire staff of an organization will notice. Rometty had many opportunities to lead and highlight her innovative strengths along the way, including countless promotions and a high profile role during the integration of PriceWaterhouseCoopers Consulting following a $3.5 billion acquisition in 2002.Josh Bersin, principal and founder of Bersin by Deloitte says of Rometty’s appointment: “IBM’s talent management process is very mature, integrated, and global. At the executive level the company takes development planning and succession very seriously.” Yet Rometty’s appointment does come with a twist: IBM’s original planned successor in 2009 for then-CEO Sam Palmisano, was Robert Moffat. Moffat was disqualified due to an arrest over insider trading. IBM weathered this shake up well as Palmisano proceeded to develop four internal candidates over the course of several years, and finally handed off his role to Rometty.

Barneys New York

Luxury retailer Barneys New York went through a long-planned change earlier this year as Daniella Vitale stepped into the CEO role. Her predecessor and mentor Mark Lee held the position for over six years, and appears to be another case of a leader being ready to hand the reigns over to a trusted colleague. Lee said of the changeover, “it’s time for me to turn the day-to-day management over to Daniella who has long been my planned successor.” Vitale worked under Lee’s leadership at Gucci, and then followed him to Barneys in 2010.With her long tenure in the high end fashion retail industry, Vitale is considered “uniquely qualified” to run Barneys. She worked as an assistant buyer while still in school at LIM College and worked her way up through lateral moves between major brands, including a stint at Ferragamo and a VP of Wholesale position with Armani for five years. Vitale then accepted a similar position at Gucci and moved up in 2006 to become President. She spent eleven years total at Gucci before taking some time off and realizing she felt ready to pursue a CEO position.

Joining Barneys as Chief Merchant, Vitale was prepared for the CEO role over the course of years, with her ever increasing responsibilities and exposure including promotions to President of the Americas and then COO.In conjunction with Perry Capital, which owns Barneys, Lee was instrumental in putting together a formal succession plan for Vitale in 2012 that planned the next five years. Vitale was given substantial leadership opportunities over this time and had experience running nearly every facet of the organization by the time she was offered the CEO position. It also appears she was able to develop a cohesive working relationship with the board, who were supportive of her leadership.

Insights

These three companies made succession planning an intentional, thoughtful process with strong results to show for it. They cultivated internal candidates over the course of at least five years, and more often than not developed an entire senior executive team as potential candidates for leadership. The board was involved in the planning process at all stages, and there was a high level of transparency between board members, the incoming CEO, and the one leaving. Finally, each outgoing CEO was personally ready to transition away from that role and was invested in helping secure a successor to lead the company. These factors together created strong succession transitions which have enabled each company to forge ahead under new leadership without breaking stride.

Nicole Beckerman

Nicole Beckerman

Writer

About the Author

Nicole Beckerman is a marketing consultant, writer, and clothing designer based in Los Angeles, CA. She holds an MBA from Mills College as a Goldman Sachs Scholar.

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