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Financial Times: Corporate star performers need auditions and a stint at understudy

By Stefan Stern
Published: May 1 2007 03:00 | Last updated: May 1 2007 03:00

Jeffrey Immelt had been in post as General Electric’s new chief executive for a whole four days on the morning of September 11 2001. It was a good thing he had spent the previous nine months shadowing the outgoing chief executive Jack Welch. The new boss already had a thorough understanding of the state of the business when the world was turned upside down.

In 2005, Willie Walsh spent six months by the side of outgoing British Airways chief executive Rod Eddington before taking charge in the autumn. During that time he saw up close exactly what sort of problems the head of BA can face, including widespread unhappiness among its unionised workforce – the Gate Gourmet and baggage handler disputes blew up that summer – and the impact of oil price spikes. This was a five-star induction programme. Mr Walsh can hardly claim that he did not know what he was getting into.

This column likes to give praise where it is due. And it seems to me that a lot of big businesses have woken up to the difficulty of managing leadership transitions. In spite of the pressures that they face to take decisive action fast – pressures that explain the amazingly brief average tenures that new chief executives can look forward to nowadays – some enlightened boards are taking their time to spot and groom potential new leaders.

Take BP. The incoming chief executive, Tony Hayward, finally emerged earlier this year as Lord Browne’s successor from a crowded field of highly regarded competitors, all of whom had been preparing to take on the leadership role. Even though there was some turbulence surrounding the outgoing chief executive’s departure date, which was brought forward to July this year, the new boss will be well placed to achieve “day-one effectiveness”.

BP’s rival Shell has also confirmed that it is at the start of a two-year process to find a new chief executive from within the company. Just as GE did a few years ago, GlaxoSmithKline is “auditioning” three senior executives over two years to see who has the right stuff to succeed Jean-Pierre Garnier. And last week, Marks and Spencer’s chief executive Stuart Rose reshuffled his team to give the board “multiple choices” when the time comes to pick a successor – a time some way off, Mr Rose was keen to stress.

Is this all in danger of getting a bit too cosy? There is nothing a complacent boardroom might like more than picking out an “approved” internal candidate, in order to avoid any unpleasant surprises – such as a newcomer marching in and spoiling everybody’s fun.

As Shell chairman Jorma Ollila told this newspaper last week: “When there’s a crisis, and you need to change the corporate culture . . . then you typically might look to hire [outside].” But if a culture is not broken there is no need to fix it.

Either way, businesses are right to proceed carefully over these leadership transitions. Taking on the top job is a big step up, whoever you are and however brilliant your record has been. Executives usually get to the top having specialised in only one or two disciplines, but need to appreciate the many problems other colleagues are facing.

The cost of getting these transitions wrong can be high. Marie Melnyk, once marked out as a likely successor to Sir Ken Morrison, head of the supermarket group, left the company in December with a consolation prize of an extra £3m in her pocket. This on top of the months of confusion that were caused by Sir Ken’s seeming unwillingness to accept that it was time for someone else to take over at the top. And even the most carefully planned transitions can go awry, as Klaus Kleinfeld’s departure from Siemens last week shows.

In Britain we are about to witness the final stage in one of the most drawn-out leadership transitions in history: the handing over of power from prime minister Tony Blair to his now certain successor Gordon Brown. (“Well, Gordon’s been shadowing Blair for the past 13 years,” as one wag put it to me.)

But unlike at GE or BA or BP, and unlike at Shell or GSK or Marks and Spencer, there will have been limited formal grooming of the new leader. The two jobs of chancellor and prime minister “need completely different skills”, as former PM (and chancellor) Sir John Major put it last week.

But, talented and experienced though he is, Mr Brown will have little idea of what it’s really like to run the country. And far from there having been a constructive handover from TB to GB, until recently the two protagonists have been locked in a near-fatal struggle, like Holmes and Moriarty on the Reichenbach Falls.

The unique and quirky nature of the British political system has meant that we are only now on the brink of having confirmed what the rest of the government (and nation) has been expecting for months, indeed years: that Mr Blair is definitely off, and that Mr Brown will be taking over, probably in July.

What a way to run a country! No wonder the shareholders are restless.

Copyright The Financial Times Limited 2007

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