Succession Planning - Transparency in Succession

Transparency in Succession

When company leaders work on succession planning -- especially for the CEO spot -- mum is definitely the word, unlike the situation recently involving a statement by Ford's former HR executive. Providing such information can only lead to the loss of talented employees, experts say.

By Tom Starner

When Joe Laymon, former group vice president of HR at Ford Motor Co., recently blabbed to an auto industry trade magazine the names of six potential successors to current Ford CEO Alan Mulally, it stunned the business world -- and most of all, Ford.

After all, Mulally's contract doesn't expire until 2011, so having an HR executive publicly name-dropping who might be next to lead Ford caused a PR and HR nightmare. If such a list does exist, and no one at Ford -- naturally -- has confirmed that it does, announcing it three full years before the current CEO exits it not a smart policy, according to experts.

Laymon left Ford the day after his revelations to become vice president of human resources and medical services at Chevron.

"Succession communications is one of those rare situations where HR has to interact with marketing and public relations," says Betsy Leatherman, a consultant with Razr Marketing, of Plymouth, Minn.. She formerly was global director of Employee Performance for Carlson Companies.

"The Ford situation obviously was way too early," she says. "No one is really sure if the HR executive could have been making it all up or was just out of line. But if you are in HR and choose to communicate that message, you certainly need to work with marketing/PR and plan it together."

Betsy Atkins, who serves on the boards of SunPower Corp., Polycom Inc., Chico's FAS, and Reynolds American Inc., can hardly believe it happened.

"The Ford situation could go down as one of the all-time major corporate gaffes," says Atkins, based in Florida. "HR usually knows better. It seems impossible to me that he [Laymon] could hold a senior-level position and be that dumb. It's inexplicable."

Atkins, an entrepreneur who has been a CEO herself, adds that having some degree of internal competition is good, but certainly going public with the process is not.

"When you set up a beauty contest, for example like GE did when Jack Welch left, it's not wise," she says.

Atkins is referring to the much-publicized process at General Electric when the names of 21 potential replacements for the legendary CEO found their way to the media, with the selection process eventually coming down to three prime candidates -- James McNerney, Robert Nardelli and Jeff Immelt.

When Immelt was named Welch's successor in 2000 (he began the job in September 2001), McNerney and Nardelli soon left the corporation, becoming CEOs at 3M and Home Depot, respectively.

And therein is the problem with creating what Atkins calls a "broken glass" policy: if the process is made public, as soon as a choice is made, the company probably will lose some very talented people.

"By making it so brutally public, those who are passed over often lose face and leave," she says. "So it's impossible to maintain the talent. Who does this really serve? Certainly not the shareholders or the employees, because it demoralizes people."

Of course, releasing names of potential successors also means they can be picked off by other companies even before any CEO selection decisions are reached.

"They immediately go on an executive search firm's 'hit list,' " Atkins says.

According to Ron Garonzik, vice president in the Leadership & Talent practice group at Hay Group, the Philadelphia-based global HR management consultancy firm, it was irresponsible for Laymon to name six candidates since Mulally's contract with Ford runs to 2011. In fact, Garonzik says he doesn't believe there are six viable candidates.

"If [those involved with the succession planning] had a good enough understanding of the CEO's role, and had really defined the demands of the position, there would be three candidates at most," he says.

So how "transparent" should a CEO succession plan be, both internally and publicly? And what is the best way to make public the news of the next CEO, no matter what specific internal succession strategy is in place?

According to Garonzik, the less information you put out there, the better. While candidates need to know they are being developed for the position at least two years beforehand, this information needs to be carefully communicated to the candidates only.

He says that all of the top executives should have development plans in the company -- where they are going and what role they are being groomed for. Also, a CEO and other executives can evaluate candidates behind the scenes for the CEO profile.

"The top two candidates should be informed two years before the CEO contract is up that they are being considered, because they need to start preparing for that role," he says.

Atkins says companies who have it right communicate often with both employees and the public that they have a robust CEO succession process, and they value it and invest in it. Other than that, enough said.

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