Building Sustainable Leadership Patrick M. Wright

Building Sustainable Leadership Why Executive Succession? C-Suite Failure –Frequency –Costs –Causes Building the Talent Pipeline

Research Foundation 2015 Survey of CHROs C-Suite Failure Study (interviews with 10 CHROs) CEO Succession Success Study (interviews with board members)

C-Suite Succession Why Executive Succession?

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C-Suite Succession Failure Research shows the increasing prevalence of forced turnover among CEOs (Huson, Parino, & Starks, 2001) CEO failure seems prevalent today, with roughly 35% (800 of 1800) of CEO turnover events being forced (Bushman, Dai, & Wang, 2010) Anecdotal estimates suggest up to 30% of C-suite succession decisions end up mistakes.

C-Suite Succession Failure Research shows the increasing prevalence of forced turnover among CEOs (Huson, Parino, & Starks, 2001) CEO failure seems prevalent today, with roughly 35% (800 of 1800) of CEO turnover events being forced (Bushman, Dai, & Wang, 2010) Anecdotal estimates suggest up to 30% of C-suite succession decisions end up mistakes. The cost of these mistakes is immense…$1.8 Billion in market value for CEOs according to Price Waterhouse Cooper

C-Suite Promotion Failures

Building Sustainable Leadership So, what causes C-Suite Failures? –Supply Side – Candidate Characteristics –Demand Side – Decision Makers’ Biases

Supply Side – Candidate Characteristics * * *

Successful CEOs Humble Feedback Seeking Unselfish Failed CEOs Arrogant Fail to Listen Selfish

Demand Side: Decision Biases In-group Bias Repetition Bias Bandwagon Effect Confirmation Bias Escalation of Commitment Overconfidence Bias

Building a Sustainable Pipeline Given that the prevalence and cost of failure is higher with external hires, firms devote more attention to developing a pipeline of talent How do firms attempt to build a sustainable pipeline of executive talent?

Building the C-Suite Talent Pipeline Canvassed literature to identify practices for managing talent Identified practices in three categories – Identification – Development – Retention Asked about importance of each practice as part of the talent strategy (6 = Critical; 5 = Very Important; 4 = Important; 3 = Somewhat Important; 2 = Less Important; 1 = Not a Part of Our Strategy)

High Potential Identification Very Important Important

High Potential Development Very Important Important Critical

High Potential Retention Very Important Important Critical

Innovations in Pipeline Development

Conclusion Most activities focused on development, particularly exposure to senior leadership, job extension/rotation, special projects Trend is toward systematic, integrated approach including assessments, developmental experiences, and formal customized learning. Challenges remain around building global perspectives when people have become less willing to move globally

Summary C-suite succession presents tremendous risk Little systematic research exists that gets at the process through which decisions get made, yet that is where many of the problems exist. Building strong process can help reduce this risk

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