The touchy task of grooming a CEO successor without losing the incumbent
October 24, 2013 Leave a comment
The touchy task of grooming a CEO successor without losing the incumbent
Published 23 October 2013 09:55, Updated 24 October 2013 08:48
Michael Smith
Chief executive succession planning is a tricky balancing act for many boards. Leave it too late, and there is a leadership vacuum if a top executive quits or is sacked unexpectedly. But grooming internal candidates for the boss’s job too early can also backfire, as they may get impatient and leave to become top dog elsewhere. Paul Zahra’s abrupt resignation from David Jones on Monday highlights the challenges companies face in an era when the average tenure of a chief executive has fallen to just over four years.“It is terribly important boards spend time on succession planning, and most of them do, but you can still get caught by surprise every now and again,” former David Jones chairman Dick Warburton said.
The retailer has said it could take up to 18 months to find a replacement. While Mr Zahra has agreed to stay on during the transition, it is not an ideal situation for a company struggling to get back on its feet in some of the worst conditions the industry has seen for decades.
Despite this, not everyone is complaining about David Jones’s succession planning. “What do you do? You can’t keep another CEO warm and not give him the job,” says major shareholder, Allan Gray chief executive Simon Marais.
Mr Warburton said it was important to keep top candidates in the organisation happy. “You certainly do try to keep good executives on the boil because you don’t want to lose good people, but you aren’t necessarily going to get rid of your current CEO just to keep the next one,” he said.
Boards have a number of options if a chief executive leaves earlier than expected. One is appointing an interim chief executive from its internal ranks until a successor is found. Treasury Wine Estates appointed Warwick Every-Burns interim chief executive last month after sacking David Dearie due to the company’s under-performing US operations.
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