Planning for an exit

The field of corporate governance is occupied by regulators, accountants and lawyers. Board practitioners and operational leaders should also express views from their perspective. This monthly column is about wisdom from practice; this piece is about succession planning — and it is a boom time for corporate succession tales.

HBO debuted Succession on June 3, 2018, one inspiration being the succession tales at Murdoch’s Twenty First Century Fox and Sumer Redstone’s Viacom. As board nominations committees grapple with succession planning, experience recommends a holistic agenda of not only succession, but also predecessor exit planning.

Good succession requires the choice of a successor as well as a gracefully departing predecessor. If either malfunctions, the process wobbles. Successful leaders are easily persuaded by sycophants that competent successors are unavailable, whereas the truth is that the leader has made it so. According to research, in almost all cases, the non-availability of a successor is a failure of the predecessor. Two academics, James Champy and Nitin Nohria, wrote, “To feel threatened by one’s successor is a futile but remarkably common reaction to inevitable departure.”

On May 25, 2018, CNBC carried “As consumer giants struggle, Unilever rises above the pack,” a piece by Harvard Senior Fellow, Bill George. Knowing a bit about Unilever, I read the piece very carefully, “….Unilever has risen above the pack…. everything traces to the leadership of Paul Polman for the past decade…..turning a moribund company into a powerhouse.” Without doubt, Paul Polman had a vision and an execution plan, kudos to him and his team. He also had the freedom to execute under the superintendence of the board. It takes many years to judge the success of a succession. Former Unilever Chairman Mike Angus said, “The success of my judgment of a CEO candidate is visible only when the chosen CEO’s successor is regarded as successful.” Testing against that lofty standard, several successions show cracks.

At Hindustan Lever, Prakash Tandon took the top job in 1961. Thereafter followed Vasant Rajadhyaksha, T Thomas, Ashok Ganguly, Susim Datta and other successors right till now. The distinctive aspect about each transition was that the succession included a clean exit of the predecessor from the affairs of the company. 

Louis Begley’s novel, titled About Schmidt, was made into an Academy Award-winning film in 2002, starring Jack Nicholson. Warren Schmidt retired from his managerial position in a life insurance company, but found it difficult to adjust to life thereafter. He visited his young successor periodically to offer advice and help, but his overtures were politely declined. Seeking meaning in life, he sponsored a Tanzanian child. He disapproved of his daughter’s choice of life partner. Despite his professional accomplishments, Schmidt begins to wonder whether he will be remembered for having made a difference to anyone. Don’t we see too many Warren Schmidts? 

In 2012, writing a book titled Leaving on Top: Graceful exits for leaders, ex-Marine, teacher and author David Heenan stated that most leaders could be characterised by four exiting types. ‘Timeless wonders’ have great skills, are still relevant and have no reason to call it quits. ‘Ageing despots’ are reluctant to leave. ‘Comeback kids’ return to resurrect their company. ‘Graceful exiters’ quit while still ahead, leaving behind a sterling reputation. Heenan shared his wisdom and exiting lessons: (i) Know your situation (ii) Take risks (iii) Build networks (iv) Continue to be curious (v) Use instinct to know when to walk away.

The tendency to continue to yearn for what one has left behind is not new. In the Mahabharata, the story of King Yayati is illustrative. He was a fine and successful king, who worked very hard for success. Due to certain denouements, he was cursed by a holy man to age prematurely. His reprieve from the curse was to persuade one of his sons, a future successor, to swap age with him. The youngest son agreed. 

King Yayati enjoyed the fruits of youth all over again. It took Yayati a whole life to realise, “Not all the food, wealth and women of the world can appease a man of uncontrolled senses.”

The author is a corporate advisor and distinguished professor of IIT Kharagpur. His new book, CRASH: Lessons from the rise and exit of business leaders will be published in September 2018. 

Email: rgopal@themindworks.me