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The Heir Unapparent, on Leadership

Rene Carayol, the international business guru and thought-provoking speaker on Leadership has been facilitating a series of Scottish Enterprise events around Scotland which we attended. Read his article on the need for Leadership, as distinguished from management, in these challenging days. He also provokes the leaders of organisations to ask themselves “Am I the still the right person to lead this organisation? Why? Could someone do it better?”

There's an old saying that when the sea is calm, everyone is a great sailor. It is only when the storms come that real leadership counts.

Put another way, people show their true colours when under pressure.

The economic downturn that we find ourselves in makes for very choppy seas indeed and the difference between leadership and management is even more striking than it was before.

For management read strategy, process, procedure, systems, execution and an ever-increasing range of management tools such as league tables, balance scorecards and KPIs.

Put simply, it is about "making sure". Whereas in the good times this was enough, in the downturn it isn't. Management has become commoditised; everyone is doing it and most are doing it well.

Don't get me wrong, management is crucial to run any business successfully but it is no longer enough in isolation.

There HAS to be leadership as well.

You've heard me say it plenty of times before but what has become increasingly apparent over the last few months is that leaders who are brilliant in the good times might not necessarily be the best in the downturn.

My guess is that most things our Chancellor and Prime Minister are doing to end the recession are probably the right things to do but they just cannot inspire us to believe them or energise us to change our behaviour. This is because they are managers not leaders.

And micro-managers at that.

What we need now is a little less forensic analysis of the detail and far more vision around the big picture. That requires inspirational leadership.

The passing of the baton from Blair to Brown demonstrates everything that is wrong with succession plans hatched by the incumbent protagonists. How did the Labour party allow Blair and Brown themselves to determine the party's future?

We'll come back to that later.

The rules of engagement are changing and you only have to look at the average length of service for UK and US chief executives and you can see that they are shortening dramatically. It is now just under 4 years in the US and 3½ years in Europe.

Time and again we have seen some of the best people outstay their welcome and in the fast moving yet unforgiving business world we are living in, those organisations on top of their game are refreshing their CEOs regularly to keep current and up to date.

But still some of the best leaders hold on and have their outstanding reputations tarnished.

Thatcher. Blair. Lord John Browne. Sir Fred Goodwin.

Even from here I can feel football supporters shouting out, "but what about someone like Sir Alex Ferguson?"

Well, he proves a different point. Over the course of his illustrious career he has stayed fresh, vibrant and contemporary by regularly changing his deputy. In doing so, he has refreshed himself.

But importantly, his first four years at Manchester United were barren and it is not clear whether even this well run club would be that patient now.

When someone has been in power too long and finally gets deposed there is always an urge to replace them with someone who is the polar opposite, rather than selecting the right person for the job in rapidly changing times. For Margaret Thatcher read John Major, for Tony Blair read Gordon Brown, Mandela and Mbeki, Brown and Hayward at BP, Goodwin and Hester at RBS.

Despite everyone knowing that nothing stays still, there are countless examples of no natural successor being in place for when the time comes, especially when the leader has an air of invincibility. Most potential successors will not hang around long if they do not feel there is any chance of the boss moving on. Consequently, when the incident comes that finishes off the once great leader (and it will come) panic sets in and the resulting outcome almost appears to be pot luck based on the prevailing mood or having to "make do" with what is available.

We saw the mess at Chelsea when Mourinho walked out. When the leader appears to have it all, the organisation and its stakeholders seem to assume that golden eras never end, but they do, and how.

Succession planning is always seen as another management process.

But guess what? It should be about leadership.

In the army, leaders are always groomed and ready to step up to the plate if the leadership falls. So why can't businesses and governments be the same?

Still there is a tendency at the very top of UK PLC to "recruit" the personnel for the top positions from the questionable talent pool of the "old boys club", overlooking in the process the real issue at stake; growing the business and not lining the pockets of your old school pals.

Take a look at BP as we speak.

The company is recommending Sir Tom McKillop (an old friend and ally of current chairman Sir Peter Sutherland) be re-elected to its board despite Sir Tom's record as the former RBS chairman who signed off Sir Fred Goodwin's pension, failed to act on shareholder concerns over Goodwin, supported the disastrous takeover of ABN Amro and quietly contributed to the tarnished image that has engulfed the banking profession.

It is an appointment that can only end in tears for the reputation of BP.

Something has got to change.

So let's start the relatively simple process right here with two golden rules.

Firstly, the current leader can't pick the candidates. They simply cannot and must not have too much say. Again, look at the Blair / Brown transition on how not to do it. Secondly, the succession should be 'owned' at the most senior level possible in the organisation. It must not be left to HR. Of course they are an integral part of the solution but it sometimes demands a confrontation that HR would rarely win.

If allowed to make the decision over their successor, the current incumbent so often falls into one of two traps; they choose a non-threatening foil that sustains their own reign or they choose someone exactly in their own image.

Instead the process should be left to the chairmen or independent directors.

We can all learn something from the US Presidential elections; two strikes and you're out with absolutely no say in who replaces you.

It's a simple way of facing up to the fact that we have different leaders in different eras and just because they were once great, they might no longer be relevant.

In business the days of the twenty year boss, even the ten year boss, are long gone. And it's not just in business that the sands are shifting; the days of a Sir Alex Ferguson-type spell at the top are never going to happen again. The likes of a Tony Blair ten year reign should never be ALLOWED to happen again.

The business market place is so unrelenting, aggressive and unforgiving that it needs fresh leadership on a more frequent basis. In fact, it needs to be forced; an eight year upper limit should be set.

But the current CEOs, MDs and leaders will not hear of such a move. People like Sir Fred Goodwin, Lord John Browne or Sir Stuart Rose have always historically surrounded themselves with people that daren't suggest that perhaps their time has come.

Even the likes of the quite brilliant Steve Jobs at Apple should not be allowed to stay forever. His tragic illness has exposed a yawning gap at Apple.

You need instead to have a strong, forceful board that provides support, challenge and vitally, change.

Even then there are pitfalls. If you make the succession plan an open competition both internally and externally then it leads to a drawn-out turf war with bitter internecine warfare.

And when the winner emerges, they immediately kill all of their rivals. Again look at how Brown has decimated the cabinet he inherited. All likely and potential challengers have been quickly removed.

So what to do?

The clues have come in the downturn. CEOs are being ousted regularly due to bad results and falling profits, with no heir apparent. The immediate perceived sign of weakness, and a potential power vacuum, is quickly reflected in plummeting shares.

But look at the change at the top for the Prudential for an example of how it should be handled. The changeover has been grabbing headlines due to the new incumbent Tidjane Thiam being the first black CEO of a FTSE 100 company but underneath that landmark achievement the process has been immaculate.

The outgoing CEO Mark Tucker resigned unexpectedly after four successful years in the role, quoting "it was a tough thing to do but I've put into place many of the things I set out to do."

Him departing on a high and leaving the company in good shape for a new round of fresh, innovative ideas was a masterstroke.

The market reacted positively to Prudential's results and management shuffle, with Pru shares soaring as much as 28 percent.

Kevin Ryan, an analyst at ING said it all. "The results were good and they gave a good account of themselves. I thought the markets would like Tidjane, he is better suited to CEO than CFO."

Succession planning doesn't have to be a blood bath. It just needs to be done regularly, sensibly and not allow one individual to make all the decisions.

So now is the time to answer the really tough question that only the authentic leaders ask themselves - am I still the right person to lead this organisation? Why? Could someone do it better?

When I'm called into an SME that is struggling to get to the next level in the good times or fighting for survival in the downturn, it is essential that the toughest question is confronted early on. Why should these people be led by you now?

It is uncomfortable and bordering on rude but it is necessary and does not have to be aggressive or confrontational.

But it must not be avoided.

The entrepreneurial spirit, vision and courage of the founder are usually irreplaceable in the formative years. They generally put the necessary processes in place, hire the top team single-handedly and cut all the initial deals with all the suppliers.

It means that they tend to make all the calls and all the decisions, without consultation. As the business grows, the organisation will need bigger and better people who, in the main, will not respond well to a prescriptive and commanding style of leadership.

The same things happen in huge multi-nationals when the leader has been around for a long time and especially if they have been successful.

This then becomes the crucial time for the private fireside chat with a senior member of the top team or the 'critical friend' (the chairman or the non-executive director).

It is never easy but usually when pointed out forcefully and supportively, it tends to have the desired effect. Different environments demand different approaches and no one leader is right for every occasion, no matter how brilliant they have been in the past.

Is it time for a change at the top of your organisation?

At the time of this blog going to press it seems common sense has prevailed and Sir Tom McKillop has released a statement saying that he will no longer seek re-election on the BP board at the group's annual meeting in two weeks time, amid growing concern from investors.

Read more of Rene’s thoughts, or subscribe to his emails, at his website www.carayol.com.