One industry produces more examples of ill-conceived and ill-managed succession planning than any other: late-night TV. From the moment that Johnny Carson announced he was abdicating The Tonight Show in 1991—thus launching a protracted and public skirmish between David Letterman and Jay Leno for his kingdom—the talk-show realm has struggled to ensure orderly transitions between its dynasties. Even the best cases are fraught with enough poor planning to make a management consultant wet the bed.
Succession planning is like flossing—everyone knows it’s important, but very few of us do it properly
Succession planning is like flossing—everyone knows it’s important, but very few of us do it properly. Ninety-five percent of corporate directors said that CEO succession was a critical issue, yet 53% of respondents rated themselves as “ineffective” at facilitating it, according to a survey by Chief Executive magazine. While it’s fun to mock Hollywood’s ineptitude, more sober-minded companies often suffer the same shoddy planning when picking their next CEO.
The selection of a new CEO at CIBC was riddled with vague timelines and abrupt announcements. In April, the bank baffled investors with its announcement that current CEO Gerry McCaughey planned to retire, just a quarter of the way into a four-year contract. Equally jarring was CIBC’s failure to immediately name McCaughey’s successor—unlike rivals TD, Scotiabank and Royal Bank, each of which of undertook a similar change in the past year.
McCaughey committed to staying up to two years in his role, but that plan was overturned this summer when the bank announced Victor Dodig as CIBC’s new CEO and said McCaughey would be gone within six weeks. To all watching, it looked like the bank’s strategy was being written and rewritten as it went along.
Podcast: How to Avoid Succession Disaster
While most observers focused on the remarkable speed of the transition period, it’s the erratic planning by CIBC that’s more troubling. Successful transition plans are crafted in advance and supported by CEOs, board members, candidates and employees alike. It doesn’t really matter if a new leader comes from inside or outside the company, the selection method used, or the length of the transition period. What matters is that on the day the new CEO shows up, the company starts planning for the next one. Anne Mulcahy took over Xerox in 2000; by 2001, the board had already identified four potential successors. She then spent eight years coaching Ursula Burns, the leading candidate, who was made company president in 2007 before replacing Mulcahy two years later. After nearly a decade of preparation, the actual transition period was incredibly short. Mulcahy announced her retirement on May 21; Burns took over on July 1.
If CIBC had a stable transition plan in effect, the swift change from McCaughey to Dodig would be inconsequential. We fetishize long transfers of power; all of the banks, with the exception of CIBC, are taking between seven and 18 months to ease in their new CEOs. But long transitions create problems as well. At best, the outgoing CEO is a lame duck; at worst, they can actually hurt the business with ego-boosting, and hastily enacted legacy-building projects.
It’s better to have a plan and then enact it as cleanly as possible. When NBC found that Jack Paar, who hosted The Tonight Show from 1957 to 1962, was struggling, they enlisted guest hosts, including Carson, then a popular game show host. Paar quit two years later and Carson took his spot as soon as possible. It was an long set-up, but an excellent punch line.