January, 1998, Volume 2, Number 4
Turnover and Selection of Chief Executives
Rakesh Khurana has interviewed both company directors and executive
search firms, and he finds that well connected directors -- defined
as those who hold directorship with other leading companies --
acquire superior information about prospective outside candidates
for the chiefexecutiveship of their firm. Because of better access
to information about external possibilities, well connected directors
are, as a result, more likely to pick an outside executive to
Separately, Rakesh Khurana and Nitin Nohria examine the impact
of a CEO's departure and replacement on later company performance.
They find that when chief executives step down as they reach the
natural end of their tenure, the appointment of an outsider can
lead -- compared with the appointment of an insider -- to reduced
financial performance. Conversely, if the CEO has been forced
out for reasons of poor performance, the appointment of an outsider
can lead -- again compared to the elevation of an insider -- to
better financial results.
Implications: Add directors to your board who are familiar with
an array of other leading companies and executives, and go for
an outside replacement when poor performance has forced out the
Source: Rakesh Khurana, "Director Interlocks and Outsider CEO Selection:
CEO Positions as Open and Closed to Competition," 1997; Rakesh
Khurana and Nitin Nohria, "The Effects of CEO Turnover in Large
Industrial Corporations: A Study of the Fortune 200 from 1978-1993,"
1997, Harvard Business School. E-mail: <firstname.lastname@example.org> and <email@example.com>
Into the Zone
Adrian Slywotsky and David Morrison urge that companies redraw
their centers -- from product and market-share centric to customer
and profit centric. With detailed portraits of how the greats
have done it -- including Jack Welch of GE, Roberto Goizueta of
Coke, Andy Grove of Intel, Michael Eisner of Disney, Percy Barnevik
of ABB, and of course Bill Gates of Microsoft -- The Profit Zone identifies the strategic, organizational, and leadership choices
for moving a firm out of a "no-profit zone." It chronicles and
explains the choices that these executives faced and followed
as they transformed their companies into the lucrative enterprises
that they have become.
How do you discover your own profit zone? Find out what is important
to your customers and then identify what you can best deliver
them in that arena -- or a new one. A surprising number of companies
fail to raise such issues, and in case you haven't, the authors
offer a "handbook" to guide you through a rethinking of questions
ranging from "who should be my customers" to "what is my strategic
Robert Goizueta posed the first question and concluded that his
customers should number more than Coke-drinking consumers: They
should include the independent Coke-bottling and distributing
companies as well. He answered the second by moving to control
the worldwide system for distributing his product to ensure its
availability whenever and wherever anybody becomes thirsty --
and even better that it is the only choice available.
Source: Adrian Slywotsky and David Morrison with Bob Andelman, The Profit Zone: How Strategic Business Design Will Lead You to
Tomorrow's Profits. New York: Times Books/Random House, 1998.
The Wharton School and the Graduate School of Education of the
University of Pennsylvania are developing three programs for public
officials and managers of state-owned enterprises in the People's
Republic of China:
National School of Administration Senior Management Program: A two-to-three week course in Beijing for senior government officials
that focuses on China's transition into a competitive economy
in the global market.
Jiangsu Management Development Program: A six-to-eight week management development program in Philadelphia
for officials and executives in Jiangsu province that concentrates
on the economic principles and management practices of market-driven
Shanghai Executive Development Program: A two-week program in Shanghai for managers of state-owned enterprises
and multinational companies in China that focuses on general management
development and leadership.
Information is available from Stephen Kobrin <firstname.lastname@example.org> and Scott Koerwer <email@example.com>
What works and what does not work in building teams at the executive
"Self-managed senior teams don't work," for they "need a leader,
or at least an agreed-upon leadership process."
"Remotely located teams work less well than teams in physical
"Laissez-faire or consensus leadership doesn't work."
"Ill-defined objectives, processes, and rewards hamper performance."
Teamwork "makes sense when" people have "real and compelling strategic
or operational interdependence."
"Even the most effective teams need continuing maintenance."
"Teamwork starts with the CEO."
-- Paul A. Allaire, Chairman and Chief Executive, Xerox Corporation,
Source: Paul A. Allaire, "Lessons in Teamwork," in Navigating Change: How CEOs, Top Teams, and Boards Steer Transformation, edited by Donald C. Hambrick, David A. Nadler, and Michael L.
Tushman. Boston: Harvard Business School Press, 1998.