Problem
solving CEOs can become redundant in next phase:
Mumbai: Extraordinary situations
demand extraordinary leadership. But once the situation is diffused, the very
remarkable traits in a leader can at times lead him to his redundancy. In 1945,
even after Winston Churchill successfully led Britain through World War II,
displaying super leadership qualities, he lost the election. People voted for
Clement Attlee although they admittedly heroworshipped Churchill.
Cut to the present: Vikram Pandit, a year after he was named CEO of Citigroup, had to firefight a rather unforeseen crisis situation that gripped the global financial world. Some doubted his capabilities, but after suffering deep losses, the bank under Pandit’s leadership returned to profit in 2010 after paying off the government aid which it got in a bailout in 2008.
Last week, however, Pandit resigned, much to the shock of the investor fraternity even as talks about differences with board members surfaced. He said in a statement, given the progress the bank had made in the last few years, now was the right time for someone else to take the helm at Citigroup.
Whatever be the reasons behind Pandit’s ouster, management gurus believe the move re-establishes the fact that a leader who is best suited as CEO when the organization is in a particular phase of growth, may not fit the bill in another phase. That could explain why Vijay Mallya’s flamboyance, which helped him build his liquor empire, didn’t really help in his foray into aviation, a business that requires high levels of economizing skills.
According to Marc Effron, president of the US-based The Talent Strategy Group, boards should review on an annual basis the growth phase of the company and assess the fit of the CEO. The various stages of growth an organization typically transcends include entrepreneurial, operational, economical and revival — all of which require different capabilities from a CEO.
“The board should find a CEO who can help the company win in the lifecycle stage that they’ll be in for the next threefive years — a CEO who ‘fits’. For example, in the US, IBM had two smart, capable internal executives in the running for the CEO post — Michael E Daniels and Virginia Rometty. Daniels had a deeper history in operations and with efficiencyfocused businesses like outsourcing. Rometty had more experience with sales. The organization’s strategic focus over the next five years will be continued growth through new products and services more than trying to win through being the most efficient provider of services. That suggests that Rometty would be a better choice, and she did get that job,” said Effron.
Even at Apple, which is moving into a phase where operational efficiency is nearly as important as innovation, selecting Tim Cook over a marketer or design expert reflects an appropriate choice based on where Apple is in its lifecycle.
Pandit’s ouster also underscores what experts have been saying all along, that CEO tenures are indeed becoming shorter. “These days, the CEO’s tenure in the US — on an average — is slightly less than four years.
He (Pandit) has survived over four years and, in the movie called ‘Too Big To Fail’ starring William Hurt as Hank Paulson, it is clear Vikram did a great role in a crisis in 2008. And now in 2012 he is out. It is important every CEO should have a golden (may be platinum) parachute and you will need that in for years time,” said Bala Balachandran, J L Kellogg Distinguished Professor of Accounting and Information Management, Northwestern University.
The overarching philosophy, according to Santrupt Misra, CEO, carbon black business &group HR director, Aditya Birla Group, needs to be clearly communicated by the board to the CEO.
“Some organizations may prefer quick-fixes in performance, where CEO tenures could be short. However, most promoter-driven organizations look for long-term and sustainable goals, wherein CEOs would have longer tenures,” said Misra.
The shorter-than-normal tenures that companies are experiencing increasingly puts the spotlight on succession planning. “Thus, the importance of communication, a simple message and vision are critical in communicating direction to the organization,” said Mark Gottfredson, partner, Bain & Company.
CHURN AT THE HELM
• Winston Churchill lost the 1945 UK elections after he brilliantly steered a beleaguered nation through World War II
• Vikram Pandit’s shock resignation last week was after his successfully led Citigroup during the 2008 crisis, returning it to profit in 2010
• Mgmt gurus maintain a CEO who fits a co’s needs during a particular phase of growth may not suit it in another phase
• That’s probably why Vijay Mallya’s flamboyance with liquor biz didn’t keep his airline aloft for long, say experts
Cut to the present: Vikram Pandit, a year after he was named CEO of Citigroup, had to firefight a rather unforeseen crisis situation that gripped the global financial world. Some doubted his capabilities, but after suffering deep losses, the bank under Pandit’s leadership returned to profit in 2010 after paying off the government aid which it got in a bailout in 2008.
Last week, however, Pandit resigned, much to the shock of the investor fraternity even as talks about differences with board members surfaced. He said in a statement, given the progress the bank had made in the last few years, now was the right time for someone else to take the helm at Citigroup.
Whatever be the reasons behind Pandit’s ouster, management gurus believe the move re-establishes the fact that a leader who is best suited as CEO when the organization is in a particular phase of growth, may not fit the bill in another phase. That could explain why Vijay Mallya’s flamboyance, which helped him build his liquor empire, didn’t really help in his foray into aviation, a business that requires high levels of economizing skills.
According to Marc Effron, president of the US-based The Talent Strategy Group, boards should review on an annual basis the growth phase of the company and assess the fit of the CEO. The various stages of growth an organization typically transcends include entrepreneurial, operational, economical and revival — all of which require different capabilities from a CEO.
“The board should find a CEO who can help the company win in the lifecycle stage that they’ll be in for the next threefive years — a CEO who ‘fits’. For example, in the US, IBM had two smart, capable internal executives in the running for the CEO post — Michael E Daniels and Virginia Rometty. Daniels had a deeper history in operations and with efficiencyfocused businesses like outsourcing. Rometty had more experience with sales. The organization’s strategic focus over the next five years will be continued growth through new products and services more than trying to win through being the most efficient provider of services. That suggests that Rometty would be a better choice, and she did get that job,” said Effron.
Even at Apple, which is moving into a phase where operational efficiency is nearly as important as innovation, selecting Tim Cook over a marketer or design expert reflects an appropriate choice based on where Apple is in its lifecycle.
Pandit’s ouster also underscores what experts have been saying all along, that CEO tenures are indeed becoming shorter. “These days, the CEO’s tenure in the US — on an average — is slightly less than four years.
He (Pandit) has survived over four years and, in the movie called ‘Too Big To Fail’ starring William Hurt as Hank Paulson, it is clear Vikram did a great role in a crisis in 2008. And now in 2012 he is out. It is important every CEO should have a golden (may be platinum) parachute and you will need that in for years time,” said Bala Balachandran, J L Kellogg Distinguished Professor of Accounting and Information Management, Northwestern University.
The overarching philosophy, according to Santrupt Misra, CEO, carbon black business &group HR director, Aditya Birla Group, needs to be clearly communicated by the board to the CEO.
“Some organizations may prefer quick-fixes in performance, where CEO tenures could be short. However, most promoter-driven organizations look for long-term and sustainable goals, wherein CEOs would have longer tenures,” said Misra.
The shorter-than-normal tenures that companies are experiencing increasingly puts the spotlight on succession planning. “Thus, the importance of communication, a simple message and vision are critical in communicating direction to the organization,” said Mark Gottfredson, partner, Bain & Company.
CHURN AT THE HELM
• Winston Churchill lost the 1945 UK elections after he brilliantly steered a beleaguered nation through World War II
• Vikram Pandit’s shock resignation last week was after his successfully led Citigroup during the 2008 crisis, returning it to profit in 2010
• Mgmt gurus maintain a CEO who fits a co’s needs during a particular phase of growth may not suit it in another phase
• That’s probably why Vijay Mallya’s flamboyance with liquor biz didn’t keep his airline aloft for long, say experts
Namrata
Singh TNN TOI121025
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