And now the end is near

An orderly succession is hard to pull off. For Plcs, the short-term pain of a proper selection process must be endured to find the best person.

by Richard Reeves, director of Intelligence Agency, an ideasconsultancy; e-mail:
Last Updated: 31 Aug 2010

Nobody will be taking lessons in successful transition from this Government. For all the talk of a stable and orderly handover of power from Tony Blair to Gordon Brown, the reality has been more like the run-up to a difficult wedding: strife-strewn, clannish, nervous and exhausting.

The people best placed to understand New Labour, according to the political theorist Peter Hennessy, are medievalists, with their knowledge of court intrigue, tribal jealousies and baronial conflict. Certainly, that is how it has seemed so far. The Labour Party conference was a tinderbox.

Cherie 'Gordon is a liar' Blair simply dropped a match.

But although the management of the end of the Blair era has been spectacularly inept, perhaps we should not be too hard on them. Succession is a very difficult business, and never more so when the departing chief is someone of great stature who has turned their company or party around. Blair is a tough act to follow. So too will Lord Browne be when he departs from the top job at BP; as was Jack Welch at GE.

One of the hardest tasks for any leader is handing over the baton. By definition, those who have risen to the top are fiercely competitive.

They want to be the best. And, as in the case of Blair, it is psychologically excruciating for them to quit the stage. As Manfred Kets de Vries of Insead puts it: 'I've often said, tongue in cheek, that the major task of a CEO is to find his most likely successor and kill the bastard.'

Even if the boss accepts that it is time to go - or more likely, the board decides as much - it can be difficult to achieve the necessary magnanimity to retire gracefully. A part of them wants their successor to fall flat on their face. Apres moi le deluge. What better evidence for your own brilliance than the crashing and burning of the next in line? 'It is not enough to succeed,' Gore Vidal reminds us. 'Others must also fail.'

In an ideal world, peopled with emotionally literate and spiritually aware CEOs, we would all want our successors to do even better than us.

But a moment's reflection should reveal that, for us mortals at least, the world is far from ideal.

This means that bosses are not the people to trust with finding and grooming their own replacement. Indeed, although there is a thriving consultancy sector in succession planning, it's questionable whether this is a good use of resources. Pre-selecting tomorrow's stars is a dodgy business, because circumstances and people change and it annoys the monkeys out of everyone else.

There are only two good ways to do succession: monarchical or meritocratic.

Succession planning tends to fall awkwardly between the two. Monarchical succession is the practice of many family-owned companies, as well as the monarchy itself, of course (don't forget that royals refer to themselves as 'The Firm').

The advantage of hereditary succession is that it is literally fixed: Charles will be king, so there's little point in the other royals trying to out-manoeuvre him in a plot. Some of the employees of Timpson, the shoe repair firm, reckon that the company is a much more pleasant place to work than many others because there is little internal politics: everyone knows James Timpson will succeed father John Timpson in the top job. Some research evidence suggests that family firms enjoy higher productivity: maybe this is part of the reason why. (Of course, it is more complicated when more than one child is interested in the job - witness the Murdoch clan.)

There are some advantages to the monarchical approach, not least lower director turnover and a more consistent leadership. While CEOs of plcs are tossed out almost as regularly as Conservative party leaders, owner-bosses stick around. They are less subject to short-term market pressures. In Stephen Frears' film The Queen, the same point is subtly made about politics. Whereas 'Mr Bleh' is obsessed with public opinion, the Queen can take a longer view.

Of course, the monarchical approach is limited in its scope. Most large firms are owned by shareholders. In these, a meritocratic approach should be adopted. This means that when the time approaches for a new leader, an open selection process should be held, with insiders and outsiders encouraged to declare their hand and slug it out. There can only be one winner, but the process should also be seen as an opportunity for the organisation to reflect on its future direction and needs, just as the Conservatives did during the election process leading to David Cameron's victory.

The other advantage of meritocracy is that you should end up with a high-quality candidate. There are downsides, of course. Meritocracy requires competition, and this uses up huge amount of time, energy and focus. Firms bemoan the resources wasted on internal politics - but what do they expect? If you hire bright, ambitious people, many of whom want promotion, they'll play the game. The hope is that the competition and its result will benefit the firm.

A smooth and orderly succession process might feel good to the board.

A genuinely meritocratic mechanism will be noisy, costly and destabilising - at least in the short run. In the longer term, though, competition will beat coronation every time. I'm not sure Gordon Brown agrees.

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