This article summarises the recent leadership succession approaches of large blue chip companies and refers to the recent appointment of John Flannery to the Chief Executive post at GE. The article concludes that ‘buying in’ leadership or recruiting externally is gaining traction at the expense of preparing internal talent; the ‘build’ method. This is despite the fact that buying in talent can come at a huge cost.
However, whilst ‘build' might be the most advantageous approach financially it really can only be done by the largest companies. ‘Build’ refers to mentoring, sponsorship and leadership programmes involving business schools stays. In addition, these leadership programmes require the shaping of current leadership roles that resonate with predicted future leadership agendas at a more senior level. If this isn’t enough, Leena Nair, Unilever’s Chief HR Officer, states that programmes need to be constantly updated to adapt to new requirements for leaders: “Every year we look at each other and say, oh my god, we need to do more.” Susan Peters, GE’s Senior Vice-President for HR, made similar remarks to the FT.
Which brings us to the third-way, which my clients tend to favour. This is ‘buy and build’. That is, recruit externally with a pre-planned view that the individual is promoted to a highly visible job in one or two roles time. The article cites the example of Emma Walmsley, the Chief Executive of GlaxoSmithKline (GSK) appointed to the post in 2016. She actually joined GSK in 2010 with responsibility for Consumer Healthcare, Europe and was subsequently appointed President of GlaxoSmithKline Consumer Healthcare and then succeeded Sir Andrew Witty. Her tenure to date has broadly been perceived as successful. In April 2017 it was reported that she had delivered, “a strong first set of quarterly results, as the drug group grew sales better than forecast, improved profit margins and kept its dividend on track.”
Indeed, my clients, which have included one of the world’s largest technology companies, one of Europe’s largest industrial companies and an innovative US components mid-cap, have favoured ‘buy and build’ (a service we call talent pipelining) at a divisional C-suite level for a number of reasons including:
- Leaders can quickly learn to navigate the company and culture ahead of any high-risk move
- They’ll be accepted more quickly by more junior staff members who are often, through transformation programmes, being compelled to change the way they work
- The company benefits from an injection of new thinking, cultivated in a completely different high-performance environment, and sometimes in a different geography
- External leaders often bring with them start-up or transformation experience, from which they have already made mistakes (not too many) and learnt some hard lessons
- Not only is an appointment made, but also risk is managed by enhancing bench-strength for when more senior positions become vacant
- Brutally, they get to capitalise on someone else’s leadership development programme
- A degree of ‘try before you buy (a lot more)’ is facilitated
- Finally, stakeholders, sponsors and investors are reassured that a succession plan is in place and any sudden changes in leadership can be explained by referring to previous planning; thus softening any difficult messages
It is hard to put a figure on the amount spent on creating the next corporate leaders. Barbara Kellerman, a lecturer in leadership at Harvard’s Kennedy School, estimated in 2012 that more than $50bn was expended on leadership development annually in the US, including on business school courses. Deloitte reckoned that in 2013 US companies spent $15.5bn training future leaders. But many large companies prefer to spend money on hiring ready-made senior executives than on developing them, bidding up executive pay in bloodier and bloodier phases of the “war for talent” first identified by McKinsey, another consultancy, in the late 1990s.