To achieve sustained growth and profit in today's hyper-competitive global markets, leadership must have a deep commitment to and knowledge of those who truly invest in the firm — employees, vendors, customers, the community, and owners in for the long term. My view is that an emphasis on short term (i.e., quarterly) earnings has many damaging effects on a company's ability to pursue an innovative or entrepreneurial corporate strategy.
Perhaps the most pernicious effect of an emphasis on short-term earnings is its destructive impact on the succession process. My research shows that the most successful CEOs are inside outsiders, executives who have grown up in the company and know how it works but have developed an outsider's perspective and have a vision of what needs to change in order to take advantage of the transformed markets. It takes time and attention to develop this kind of talent: recruiting, training, mentoring, coaching, and thoughtful sequencing of assignments. Every business development, planning process, and strategic initiative represents an opportunity to help executives grow. In other words, how the company is managed is the way you manage succession.
If you think you can buy talent when you need it, then you don't have it in the pipeline when the board is looking for the next CEO. Some "modern CEO's" and their boards think the market for executive talent is all they need when the time comes for succession — a crisis or the CEO is 64. I was appalled to learn recently that 60% of the respondents to a poll of 1,380 HR directors of large U.S. companies said their firms have no CEO succession plans in place.
As this finding suggests, too many companies have over the past two decades ignored the hard work of building future leaders while senior executives have focused increasingly on meeting the next quarter's earnings target. When the time comes to name a new CEO, more firms look outside. Yet strong evidence supports the notion that a well-groomed insider is a key to sustained company performance. In my analysis of 1,800 successions, for instance, I found that company performance was significantly better when insiders succeeded to the job of CEO.
Outsiders typically are good at cutting costs and "turning around" a company. But because they lack true understanding of the company's strengths — especially which individuals really have talent — but often as well because they lack a well-developed understanding of the industry and its markets, they cannot build new business. They lack the deep knowledge that would enable them to take intelligent strategic risks.
For management, development involves giving potential leaders jobs with increasing responsibility. Helping them maintain their unique perspective takes hours of mentoring; protecting them from the consequences of their mistakes requires careful intervention. Those who want to be chosen as leaders must build a track record of delivering in the short term while building for the long term.
Both challenges are tough, but both must be met if we are to restore our companies to long-term competitive health. Those companies that have ignored the challenge can start as soon as the board and CEO agree that it is a top priority. Start with that agreement. Make sure you have a world-class chief talent officer who understands what is needed and is excited rather than threatened by the systems that have to be built, the cultural change needed, and the extensive recruitment that will probably be needed. And then budget the time and money to make your company a talent factory.
Thanks to Joseph L. Bower / Blogs HBR / Harvard Business School Publishing
http://blogs.hbr.org/hbsfaculty/2011/09/most-successful-ceos.html?cm_sp=blog_flyout-_-hbsfaculty-_-most_successful_ceos
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