|
January, 2009,
Volume 13, Number
3
13th Annual Wharton Leadership Conference: Leading in a
Dynamic and Unpredictable World, June 16, 2009
The Responsibilities of Leadership: Alex Gorsky,
Worldwide Chairman of Johnson & Johnson’s Surgical Care
Group
Book Excerpt: Know What You Don’t Know: How Great
Leaders Prevent Problems Before They Happen
By Michael Roberto
Job-less: Steve Jobs’s Succession Plan Should Be a Top
Priority for Apple
Published in Knowledge@Wharton
13th Annual Wharton Leadership Conference:
Leading in a Dynamic and Unpredictable World, June 16,
2009
On June 16, 2009, the 13th
Annual Wharton Leadership Conference will take place on
campus in Philadelphia, focusing on “Leading in a
Dynamic and Unpredictable World.” The event, a joint
collaboration among the Wharton School’s Center for
Human Resources, Center for Leadership and Change
Management, and Wharton Executive Education, touches on
the timely challenges organizations are facing in our
current economic climate, as well as ongoing tests of
leadership in a period of greater risks and higher
stakes. How can executives in the private sector, public
service, and non-profit world prepare themselves and
their teams to lead in this uncertain environment? What
are the best ways forward when leadership is on the
line? And what will be needed when enterprises
increasingly work across national boundaries?
To date,
confirmed speakers include:
 Peter
Guber,
chairman and CEO of Mandalay Entertainment Group, a
multi-media venture spanning motion pictures,
television, sports entertainment, and new media. Guber
is a weekly entertainment and media commentator for Fox
News and has also recently appeared on CNN, CNBC, and
MSNBC. Films Guber personally produced or executive
produced, including Rain Man, Batman,
The Color Purple, Midnight Express, and
Flashdance, have earned more than $3 billion in
worldwide revenue and more than 50 Academy Award
nominations. He has been seen every Sunday morning for
the past six years on American Movie Classics cable
network as co-host of the critically acclaimed national
TV show, Shootout.
 Ellen
J. Kullman,
chief executive officer of DuPont. Kullman is the 19th
executive to lead the company in more than 205 years of
DuPont History. She became president on Oct. 1, 2008,
and CEO on Jan.1, 2009. Prior to her appointment as
DuPont president and CEO, Kullman served as executive
vice president and a member of the company’s office of
the chief executive. She was responsible for DuPont
Coatings & Color Technologies; DuPont Electronic &
Communication Technologies; DuPont Performance
Materials; DuPont Safety & Protection; Marketing &
Sales; Pharmaceuticals; Risk Management; and Safety &
Sustainability. In March 2008, Ellen was tapped to lead
the dynamic planning process for the company’s growth in
emerging international markets.
 Steven
Pearlstein,
columnist for The Washington Post. Pearlstein’s
columns on business and the economy appear twice a week.
In 2008, Pearlstein received the Pulitzer Prize for
Commentary for his insightful columns at The
Washington Post that explore the nation’s complex
economic ills with masterful clarity. In the 1980s,
Pearlstein founded and edited the Boston Observer,
a monthly political magazine, and he was also a senior
editor at Inc. In addition to his years as a
print journalist, he has worked as a television news
reporter at Boston’s public television station and,
during the late 1970s, he served as administrative
assistant to U.S. Senator John A. Durkin and U.S.
Representative Michael J. Harrington.
 Frank
P. Russomanno,
president and CEO of Imation, the world’s leading
provider of removable data storage products that help
customers create, protect, and retrieve digital
information. Prior to Russomanno’s current position, he
was chief operating officer and acting CEO of Imation
and has also held several other executive positions
within the company. He began his career with 3M Company
in 1973 as a sales coordinator and eventually became a
European Business Unit Director. Russomanno achieved the
rank of captain in the U.S. Army and currently serves as
chairman of the board for the Content Delivery & Storage
Association.
 Harbir
Singh, vice
dean for Global Initiatives at the Wharton School. In
this new role at the School, Singh champions Wharton’s
global activities including research, education, and
knowledge dissemination. Singh has been a member of the
Wharton faculty for nearly 25 years and has served the
Wharton community as a researcher and chairperson of the
management department. He is the Mack Professor of
Management and co-director of the Mack Center for
Technological Innovation. His research focuses on
strategic alliances, corporate acquisitions, and
corporate restructuring.
For more information
and/or to register for this event, visit the website at
13th Annual Wharton Leadership Conference.
The Responsibilities of Leadership:
Alex Gorsky, Worldwide Chairman of Johnson & Johnson’s
Surgical Care Group
Wharton faculty
frequently invite industry leaders to speak on campus.
This past fall, Alex Gorsky, who was recently named
Worldwide Chairman of Johnson & Johnson’s Surgical Care
Group, spoke in a first-year MBA course about his own
career and lessons he has learned along the way. The
following portion of his speech, transcribed below,
takes place earlier in Mr. Gorsky’s career, when he was
promoted to the position of president of Janssen
Pharmaceutica, a division of Johnson & Johnson. While
in this position, Mr. Gorsky managed a large number of
employees for the first time, 3,000 in total.
 As I assumed leadership
positions in my career, I came to understand that you
are responsible for many more people than those who
report to you directly. Your responsibilities, and the
impact of your decisions, touch many, many more people.
I’ll never forget one
of the first times this really dawned on me, and, again,
this might sound trite, but it really hit me at a
company picnic. It’s one thing to walk in the door
every day, go into the board room and work together with
your direct reports. It’s very different when you go to
your first company picnic with 3,000 employees. The
average family has around three and a half people. So,
you are looking out at a sea of several thousand people
and children and suddenly it dawns on you that there are
families out there depending on you to make the right
decisions. It’s no longer just about me and my career.
In addition to
patients, there are a lot of families in your local
community that are counting on you to make the right
calls – it’s just a different level of responsibility.
And what I found is that when I was promoted, I went
from being responsible for a product or a small team to
very suddenly realizing not only did I need to deliver
on my commitments and the commitments of my team, but I
also needed to set the tone for the company. I needed
to create and nurture the team’s vision and keep the
ship on course – because, as you know, over time, if a
large ship isn’t heading in the right direction it can
take you years to correct. And so, I had to think about
the future a lot. What behaviors I allowed to take
place in the organization really set an important tone.
I’ll give you an
example of that. I was talking earlier about feedback
and how important it is to be able to give people
feedback, set the right standards and bring diversity
of thought to the decision-making table. I’m a firm
believer in building teams comprised of people with
diverse skill sets and perspectives. I want people on
my team who are not just like me, but people who
complement my skills, who can challenge me and who bring
a different point of view and perspective to the table.
Otherwise, if we’re all thinking the same and have the
same characteristics, why the heck do I need you sitting
there? I can just listen to myself and it’ll be easy
for me to make a decision.
I had one experience
with one team where everybody was extremely opinionated
and outspoken. There was one member, in particular, who
was very bright, probably the most competent leader I
had. He was part of a very large business unit and
always felt a need to demonstrate that he was the
smartest person in the room by winning every argument.
It got to the point where other people would just shut
up when he was talking and if other people were talking,
he’d look the other way, work on his Blackberry and not
pay any attention to what was going on around him. You
can imagine the dynamics. You could just see the non-verbals
going on in the room.
I was new into that
particular role, so after observing this a few times, I
pulled this person aside and said, “Look, you’re
bright. There are a lot of things you can do, but the
impact you have on other people is that you shut them
down. And, it’s very clear, even though you don’t say
anything, that you’re not valuing what’s being said and
the problem with that is that once and a while they may
actually be saying something that could really help
you. You’re not going to pick this information up and
you’re not going to make the right decision.”
Well, he didn’t really
change his behavior. He listened, but his behavior went
on. In a board meeting, I saw the same thing where
somebody started talking and he literally talked over
them. Something needed to be done, so I said in the
middle of the board meeting, “You know, let’s just stop
for a minute. When somebody else is talking we need to
behave in a respectful and a professional way. And, I
don’t think talking to somebody else out loud when
someone else is talking is the right behavior that we
want to have among this team. “ Well, you could hear a
pin drop.
Now, it was risky for
me. This was one of my most talented people. And you
might ask, “You did that in public forum?” Well, I had
given him a chance before that to change. I talked with
him. The behavior continued and, in my mind, no one
person is more important than the team. And sometimes
an uncorrected standard becomes a new standard. And,
again, I’m not saying this to say, “Well, see how tough
I can be?” I’m saying, once and a while as a leader,
you’ve got to take one approach. And, there are other
times when you’ve just got to be brutally honest and
direct and call people out.
After that, the whole
dynamic in that room and among that team changed. It
wasn’t perfect, but we certainly made a lot of
progress. But, to me, it was an important moment. As
you assume leadership roles in business, you take on
broader responsibilities in creating the right tone,
culture and attitude.
Another thing that we
spent a lot of time talking about was how do we get the
organization lined up behind a goal. With 3,000 people,
four or five different franchises and functional areas,
it’s very easy for everybody to move very fast without a
vision of the direction they are heading in. So, we
conducted a goal setting exercise to line up our
strategies and to make sure everybody in the
organization, all the way down to the administrative
assistants, knew what the goals of the company were. We
felt that if everybody understood the goals of the
organization, it would help to insure priorities were
being followed. Secondly, we wanted to make sure that
everybody in the company had their personal goals lined
up with the goals of the organization.
So, we started a
contest by functional area in which all of our board
members carried tickets. If a board member stopped
somebody over a two-week timeframe and asked, say
Amanda, about the company’s top five goals and how it
relates to her job, if she responded with the right
answer, she got a ticket for her functional area team.
The team with the most tickets received awards like
parking spaces by the front door or they got to wear
jeans for three months. It sounds a little bit hokey but
I’ll tell you, what it did right away was drilled down
ownership of company objectives.
And, it actually got to
the point where I would be stopped on my way into the
office in the morning with people saying, “Ask me,
Alex!” because a ticket from the president was worth
three tickets. Another thing that came out of this was
that it started a whole new dialog between managers and
their teams and kept managers accountable for good
training. For instance, I told people who stopped me
that if you can’t tell me how your job relates to
company goals, it’s time to have a talk with your
manager.
This exercise added a
lot of power to us. It got us aligned. Our company
survey scores went up when we asked employees how they
felt about the vision of our organization, about our
goals. And, there was much more ownership of our
overall business. Setting that tone became really
important, strategically and culturally.
This one, simple,
creative approach to drive alignment behind our goals
also created approachability with management because up
to that point there were people who felt, well, they
couldn’t or shouldn’t talk with a board member.
Suddenly, people were approaching each other, starting
conversations in the cafeteria and during walks from one
meeting to the next. So, I really think it was a
successful way for us to engage the organization and
have people feel part of something.
BOOK EXCERPT: Know What You Don’t Know: How Great
Leaders Prevent Problems Before They Happen
By Michael Roberto
 Next
month, Wharton School Publishing will release Know
What You Don’t Know: How Great Leaders Prevent Problems
Before They Happen by Michael Roberto. The book
shows leaders how to go beyond “problem solving” to
uncover and address emerging problems while they are
still manageable. Roberto highlights seven skill sets
for becoming an effective “problem hunter” to find and
manage issues before they erupt into crises. Below is
an excerpt from the book’s first chapter, “From
Problem-Solving to Problem-Finding.”
“It isn’t that they can’t see the
solution. It’s that they can’t see the problem.” - G. K.
Chesterton
Code blue! Code blue! Mary’s heart
has stopped, and her nurse has called for help. A team
rushes to the patient’s room. No one expected this
crisis. Mary had come to the hospital for routine
knee-replacement surgery, and she had been in fairly
good health prior to the procedure. Now, she isn’t
breathing. Working from a “crash cart” full of key
equipment and supplies, the expert team begins trying to
resuscitate the patient. Working at lightning speed, yet
with incredible calm and precision, they get Mary’s
heart beating again. They move her to the intensive care
unit (ICU), where she remains for two weeks. In total,
she spends one month more than expected in the hospital
after her surgery. Her recovery, even after she returns
home, is much slower than she anticipated. Still, Mary
proved rather lucky, because the survival rate after a
code blue typically does not exceed 15%.
After Mary begins breathing regularly
again, the patient’s family praises the team that saved
her life. Everyone expresses relief that the team
responded so quickly and effectively. Then, the team
members return to their normal work in various areas of
the hospital. Mary’s nurse attends to her other
patients. However, as she goes about her normal work,
she wonders: Could this cardiac arrest have been
foreseen? Did I miss the warning signs? She recalls
noticing that Mary’s speech and breathing had become
slightly labored roughly six hours before the arrest.
She checked her vitals. While her respiratory rate had
declined a bit, her other vital signs – blood pressure,
heart rate, oxygen saturation, and body temperature – a
remained normal. Two hours later, the nurse noticed that
Mary appeared a bit uncomfortable. She asked her how she
was feeling, and Mary responded, “I’m OK. I’m just a
little more tired than usual.” Mary’s oxygen saturation
had dipped slightly, but otherwise, her vitals remained
unchanged. The nurse considered calling Mary’s doctor,
but she didn’t feel comfortable calling a physician
without more tangible evidence of an urgent problem. She
didn’t want to issue a false alarm, and she knew that a
physician’s assistant would come by in approximately one
hour to check on each patient in the unit.
This scenario, unfortunately, has
transpired in many hospitals over the years. Research
shows that hospitalized patients often display subtle
and not-so-subtle warning signs six to eight hours
before a cardiac arrest. During this time, small
problems begin to arise, such as changes in heart rate,
blood pressure, and mental status. However, hospital
personnel do not necessarily notice the symptoms. If
they notice a problem, they often try to address it on
their own, rather than bringing their concerns to the
attention of others. One study found that two-thirds of
patients exhibited warning signs, such as an abnormally
high or low heart rate, within six hours of a cardiac
arrest, yet nurses and other staff members brought these
problems to the attention of a doctor in only 25% of
those situations. In short, staff members wait too long
to bring these small problems to the attention of
others. Meanwhile, the patient’s health continues to
deteriorate during this window of opportunity when an
intervention could perhaps prevent a crisis.
Several years ago, Australian
hospitals set out to save lives by acting sooner to head
off emerging crises. They devised a mechanism whereby
caregivers could intervene more quickly to address the
small problems that typically portend larger troubles.
The hospitals invented Rapid Response Teams (RRTs).
These teams respond to calls for assistance, typically
from a floor nurse who notices an early warning sign
associated with cardiac arrest. The team typically
consists of an experienced critical-care nurse and a
respiratory therapist; in some cases, it also includes a
physician and/or physician’s assistant. When the nurse
pages an RRT, the team arrives at the patient’s bedside
within a few minutes and begins its diagnosis and
possible intervention. These teams quickly assess
whether a particular warning sign merits further testing
or treatment to prevent a cardiac arrest.
To help the nurses and other staff
members spot problems in advance of a crisis, the
hospitals created a list of the “triggers” that may
foreshadow a cardiac arrest and posted them in all the
units. Researchers identified these triggers by
examining many past cases of cardiac arrest. Most
triggers involved a quantitative variable such as the
patient’s heart rate. For instance, many hospitals
instructed staff members that the RRT should be summoned
if a patient’s heart rate fell below 40 beats per minute
or rose above 130 beats per minute. However, hospitals
found that nurses often noticed trouble even before
vital signs began to deteriorate. Thus, they empowered
nurses to call an RRT if they felt concerned or worried
about a patient, even if the vital signs appeared
relatively normal.
The invention of RRTs yielded
remarkable results in Australia. The innovation soon
spread to the United States. Early adopters included
four sites at which my colleagues (Jason Park,
Amy Edmondson, and David Ager) and I conducted research:
Baptist Memorial Hospital in Memphis, St. Joseph’s
Hospital in Peoria, Missouri Baptist Medical Center in
St. Louis, and Beth Israel Deaconess Medical Center in
Boston. Nurses reported to us that they felt much more
comfortable calling for assistance, especially given
that the RRTs were trained not to criticize or punish
anyone for a “false alarm.” As one said to us, “It’s
about the permission the nurses have to call now that
they didn’t have before the RRT process was
established.” Another nurse commented, “There is nothing
better than knowing you can call an RRT when a patient
is going bad.” With the implementation of this proactive
process for spotting problems, each of these pioneering
hospitals reported substantial declines in cardiac
arrests, transfers to the intensive care unit, and
deaths. A physician explained why RRTs proved
successful: “The key to this process is time. The sooner
you identify a problem, the more likely you are to avert
a dangerous situation.”
Academic research confirms the
effectiveness of RRTs. For instance, a recent Stanford
study, published in the Journal of the American
Medical Association, found a 71% reduction in “code
blue” incidences and an 18% reduction in mortality rate
after implementation of an RRT in a pediatric hospital.
With these kinds of promising results, the innovation
has spread like wildfire. The Institute for Healthcare
Improvement has championed the idea. Now, more than
1,600 hospitals around the country have implemented the
RRT model. Many lives have been saved.
What is the moral of this remarkable
story? Small problems often precede catastrophes. In
fact, most large-scale failures result from a series of
small errors and failures, rather than a single root
cause. These small problems often cascade to create a
catastrophe. Accident investigators in fields such as
commercial aviation, the military, and medicine have
shown that a chain of events and errors
typically leads to a particular disaster. Thus, minor
failures may signal big trouble ahead; treated
appropriately, they can serve as early warning signs.
Many large-scale failures have long incubation periods,
meaning that managers have ample time to intervene when
small problems arise, thereby avoiding a catastrophic
outcome. Yet these small problems often do not surface.
They occur at the local level but remain invisible to
the broader organization. These hospitals used to expend
enormous resources trying to save lives after a
catastrophe. They engaged in heroic efforts to
resuscitate patients after a cardiac arrest. Now, they
have devised a mechanism for spotting and surfacing
small problems before they escalate to create a
catastrophic outcome. Code Blue Teams are in the
business of fighting fires. The Rapid Response Team
process is all about detecting smoke.
This book uses the terms problem and
failure interchangeably; they are defined as a condition
in which the expected outcome has not been achieved. In
other words, we do not witness desired positive results,
or we experience negative results. These problems may
entail breakdowns of a technical, cognitive, and/or
interpersonal nature. Technical problems consist of
breakdowns in the functioning of equipment, technology,
natural systems, and the like. Cognitive problems entail
judgment or analytical errors on the part of individuals
or groups. Interpersonal problems involve breakdowns in
communication, information transfer, knowledge sharing,
and conflict resolution.
Many organizations devote a great
deal of attention to improving the problem-solving
capabilities of employees at all levels. Do they spend
as much time thinking about how to discover problems
before they mushroom into large-scale failures? One
cannot solve a problem that remains invisible,
unidentified and undisclosed. Unfortunately, for a
variety of reasons, problems remain hidden in
organizations for far too long. We must find a problem
before it can be addressed appropriately. Great leaders
do not simply know how to solve problems. They know how
to find them. They can detect smoke, rather than simply
trying to fight raging fires. This book aims to help
leaders at all levels become more effective
problem-finders.
Note: Michael Roberto’s Know What
You Don’t Know can be ordered at
Wharton School Publishing.
Job-less:
Steve Jobs’s Succession Plan Should Be a Top Priority
for Apple
Published in Knowledge@Wharton,
January 7, 2009
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2134
 When
Apple announced on December 16 that Philip Schiller, the
company’s senior vice president of worldwide product
marketing, would deliver the keynote speech at this
week’s Macworld conference instead of CEO Steve Jobs,
speculation swirled again about the future of the
company – and Jobs’s health. Jobs disclosed in August
2004 that he had a cancerous tumor removed from his
pancreas. Observers at recent Apple events reported that
the visionary technologist appeared gaunt. Adding fuel
to the fire, Apple also announced that it would not be
participating in future Macworlds, saying, “Trade shows
have become a very minor part of how Apple reaches its
customers.”
Responding to questions about his
health, Jobs said in a January 5 open letter that he was
suffering from a hormone imbalance that was “robbing”
his body of nutrients. He also noted that he is
receiving treatment and will remain CEO of Apple. “I
have given more than my all to Apple for the past 11
years now. I will be the first one to step up and tell
our board of directors if I can no longer continue to
fulfill my duties as Apple’s CEO,” stated the letter.
Meanwhile, the looming question of
who would replace Jobs if he had to leave Apple remains
unresolved for shareholders, analysts and customers.
While the company maintains it has a succession plan, it
has offered no details. Observers are left to question
what Apple might look like without Jobs and whether the
company can continue pumping out hits like the iPhone,
MacBook and iPod.
A succession plan is critical for
most companies, but especially so for Apple, according
to Wharton faculty. They acknowledge that every company
is different, but also point to established best
practices for succession planning, including hiring from
within, conducting an audition period, easing the
successor into a leadership role and providing some
level of succession disclosure to shareholders.
Companies with strong corporate
cultures can usually count on continued success if they
can seamlessly transfer power to an executive from a
strong bench of managers. But selecting Jobs’s successor
will be challenging, given the degree to which he is
tied to Apple’s identity. As Wharton management
professor Michael Useem puts it: “There are few
companies where the top person has as much of an impact
[as Jobs has had] at Apple.”
Apple and Jobs seem almost
inseparable in the public mind. Jobs cofounded Apple in
1976, left during a power struggle with corporate
investors in 1985 and returned to Apple in 1997 after
the struggling company acquired NeXT, another computer
firm started by Jobs. Apple ousted CEO Gil Amelio, who
had been at the helm a little more than a year. Jobs
became interim and then permanent CEO, quickly
establishing himself as the voice of Apple and launching
a string of consumer electronics hits.
“He really is the face of the
company,” says Kendall Whitehouse, senior director of IT
at Wharton. ”When you speak to Apple employees, there is
always a lot of talk about Steve and what Steve wants.
It’s palpable. That has generally been a positive thing
for [Apple]. Jobs was the centerpiece for refocusing the
company and brand” following his return.
But some Wharton faculty say Apple
now seems eager to show that there is more to the
company than the vision of Steve Jobs. At an October
press event, Jobs appeared on stage with Schiller and
chief operating officer Tim Cook, the latter wearing
Jobs’s trademark black shirt with jeans. “The strategy
here appears to be showcasing different members of
middle and upper management to illustrate that Apple, as
an organization, is more than just a cult figure at the
top,” says Wharton management professor David Hsu.
Analysts agree. “Apple could have
diffused speculation regarding Jobs’s health by having
him keynote this year’s Macworld,” Piper Jaffray analyst
Gene Munster wrote in a research note. “While we do not
believe that this change provides any indication
regarding Jobs’s health, we do believe that it is a sign
we are in the early stages of changing roles in Apple’s
management structure.”
Although Apple’s succession plan for
Jobs remains unclear, experts at Wharton offer a few
tips to help guide the company’s succession planning
process.
Promote from Within
Apple has a strong bench of
executives who could succeed Jobs, but major
stakeholders, such as investors, customers and partners,
don’t know much about them, according to Wharton
faculty. The first step in any succession plan may be
illustrating that Apple is more than Jobs.
According to Wharton management
professors Useem and Peter Cappelli, Apple’s effort to
highlight executives other than Jobs is a good test for
any successor. Why? Part of Apple’s mystique revolves
around messaging and generating buzz. By putting
executives like Cook and Schiller in the limelight,
Apple can give other managers some practice introducing
products and familiarize them with investors and
customers. “It is important for any company to be
developing talent internally. And it is also important
to be promoting people from within,” notes Cappelli. The
board “should pay a lot of attention to the abilities
and potential of their leadership team – always.”
Wharton management professor Lawrence
Hrebiniak also urges Apple to show off executives beyond
Jobs. “Apple wants the world to know that it doesn’t
sink without Jobs. The company is addressing a common
concern [that arises] when you have a powerful,
well-known leader.”
Useem suggests that a board of
directors should be responsible for ensuring that a
company has the right leader as well as the right
leadership team – especially if there is any hint that
the chief executive may step down in three to four
years. He cites numerous research studies indicating
that internal successors are more effective.
One related challenge is determining
whether a company even has the talent to adapt to the
new environment. If the decision is made to hire from
the inside, then “a CEO and board should be looking at
the top contenders” and analyzing what is known about
each one, says Useem.
If a company develops its internal
talent well, there should be a strong bench of
executives who can lead under various scenarios, thus
making succession planning easier. “Succession planning
per-se is a waste of time,” says Cappelli. “It means
trying to determine in advance who will take over a top
job. But because the needs change so frequently, as
often do the players, there is no real ability to plan.
These plans take a lot of time and energy, they divert
the attention of people in the company and they almost
always get tossed aside because they are out of date.”
The solution: Companies need to develop talent
internally so that they have multiple options when a
successor is needed.
Useem notes that some companies turn
to testing as a way to vet internal candidates. For
example, they may hire third parties to interview
executives who report directly to the CEO. More often,
companies like GlaxoSmithKline pick internal candidates
and then ask each of them to take on a CEO-level project
and present it to the board. “This approach gives a
company a better fix on how executives perform head to
head. It can be awkward because these executives work
together every day, but it is important to pick the
right person.”
What remains to be seen at Apple is
whether Jobs would stay as a non-executive chairman with
a new CEO. While these arrangements are rare in most
American industries, says Useem, there are many examples
among technology firms. Intel, Microsoft and Dell have
all had CEOs become chairmen as day-to-day management
was transferred to a new executive. Such an arrangement
is more likely if a company founder – such as Michael
Dell or Microsoft’s Bill Gates – is involved, Useem
adds.
Meanwhile, a company also has to
prepare for the inevitable mop-up duty that follows the
appointment of the new CEO. It is unlikely that
executives who lost out on the top job will stay. For
example, when General Electric transitioned leadership
from Jack Welch to Jeff Immelt, the other top candidates
for Welch’s job – Robert Nardelli and James McNerney –
departed to become the chief executives of Home Depot
and 3M, respectively. Nardelli is now CEO of Chrysler
and McNerney is chief executive of Boeing. “Having
successors just waiting in the wings is not a good
idea,” Cappelli says. “If they’re good, they won’t
stay.”
Transparency Is Key
Generally speaking, companies in the
midst of succession planning need to deliver some kind
of transparency to customers and investors. In Apple’s
case, disclosure – or lack of it – about Jobs’s health
and future plans appears to be a sore point with some
analysts. Wharton faculty agree that Apple needs to
disclose more about its succession plan, but how much
detail is needed is open to debate.
Wall Street is clearly worried about
Apple’s future post Jobs. Any rumor about Jobs’s health
can move the stock. Following Apple’s announcement that
Jobs would not be the keynote speaker at Macworld,
Oppenheimer analyst Yair Reiner downgraded Apple shares
because the company would not disclose details about the
state of Jobs’s health or a succession plan.
In general, having a succession plan
is a good idea since it minimizes uncertainty, but how
much a company discloses depends on culture, says
Hrebiniak. If a company is too transparent, “every
would-be CEO would leave if he or she was not a
finalist,” and performance would suffer.
Cappelli agrees. It “isn’t obvious”
that Apple needs to outline its plans. “Whatever [Apple]
outlines today will be irrelevant as soon as
circumstances change, and that will happen in months.
Apple probably will go through three or four plans
before Jobs steps aside, so what’s the point?”
Meanwhile, it’s unlikely that Apple
will fall apart without Jobs, suggests Cappelli.
“Investors get worried if they think the future of an
entire company depends on a couple of key individuals.
In fact, that is almost never the case. This bias –
attributing the success of organizations to individuals
– is pretty common. Several studies have looked to see
what happens when CEOs ... die unexpectedly. All the
studies show that, rather than collapsing, share prices
in fact actually go up. The current leaders are not that
crucial. Companies don’t collapse when the leader
departs and there is some time to fill the job.”
Whitehouse, however, says Apple
“needs to articulate something.” If the company needs a
disclosure blueprint, he adds, it doesn’t have to look
any farther than its long-time rival – Microsoft.
In January 2000, Bill Gates signaled
the beginning of a transition of power at Microsoft. He
named Steve Ballmer, who became president of the company
in July 1998, as CEO. Gates said he was stepping down to
focus on long-term strategy, but he remained chairman
and added a new title – chief software architect. At the
time, Gates said making Ballmer CEO was a “very good
transition” for Microsoft. Over the next eight years,
Microsoft gradually put other executives in the
spotlight. In June 2006, Microsoft announced that Gates
would transition out of his day-to-day role to focus on
the Bill & Melinda Gates Foundation. The biggest change
for Microsoft was appointing Ray Ozzie, then chief
technology officer, to be the chief software architect
working side-by-side with Gates. Gates’ last day as an
executive was June 27. He remains chairman and advises
Microsoft on “key development projects.”
“Microsoft had been about Gates for
so long. But he scheduled a long, phased wind down. You
can see the way that the succession was comfortable for
the company, customers and shareholders,” Whitehouse
notes.
Preserve Corporate Culture
What remains to be seen is whether a
post-Jobs Apple will retain the corporate traits that
made the company successful with its iconic leader at
the helm. The conventional wisdom is that Jobs’s control
has influenced everything from marketing to design at
Apple, says Hsu. After a decade of leading Apple, he
argues that it’s quite possible Jobs’s imprint is
permanently etched on the company. “No one could move up
in the organization without Jobs’s approval. Eventually,
management fits the mold Jobs wants.”
Hsu says the secret sauce for all
successful companies is having a corporate culture that
transcends any individual. “You want a culture to be so
ingrained in the rest of organization that it [provides
a] competitive advantage.”
Useem agrees. “You cannot overstate
how important corporate culture is – if it’s a good one
– in sustaining and carrying on a company.” Some
companies, such as Wal-Mart, Mary Kay Cosmetics and
Southwest Airlines, support strong cultures that have
lasted well beyond their founders’ departure, Useem
notes. “A strong culture will transcend the exit of
leaders. At Wal-Mart, pictures of Sam Walton keep the
company thinking about the values that were used to
create the company.”
The problem for
Apple is clear: No one will know until after Jobs leaves
how thoroughly his imprint permeated the company. Useem
acknowledges that developing a corporate culture is not
clear cut. “Culture is one of the great mysterious
aspects of company business. It is very important, but
poorly understood. You can try to copy a company like
Southwest, but rivals can’t get their hands around what
it is that makes these companies so successful.”
Santa:
The
Failed Leader We Love
A Holiday
Read from The Washington Post’s “On Leadership”
Website
By Michael
Useem and Steve Clifford
At first glance, Santa appears to
fail as a leader.
His organization
is overly centralized. Instead of focusing on
overarching strategy and delegating the details to
others, Santa makes all the decisions himself. Was
little Johnny naughty or nice? Does he deserve the “God
of War III“ video game he asked for? These
are not questions that should entangle a leader, yet
Santa handles each and every customer-service request.
Click
here for the
On Leadership
article.
|
