Tech news For tech firms, the risk of not preparing for leadership changes is huge

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JasonDressel
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Jason Dressel is the president of History Factory. This company helps companies to use their heritage and history to improve and transform strategy and positioning.

Every week over the past three and a half years, an average of three CEOs have exited tech companies in the U.S. That tally is higher — in good times and bad — than in any of the other 26 for-profit sectors tracked by executive search firm Challenger, Gray & Christmas. Because tech companies are in constant flux, you would think they should be the model for how to prepare for leadership transitions.

They’re far from it.

A change of command is one the most important moments in any organization’s life cycle. Mishandled transitions from CEOs to other leaders can lead to a loss in market value, momentum, focus, key personnel, and customers. This could even be the turning point for an organization that is on its way to irrelevance.

With so much at stake, 84% of tech execs agree that succession planning is more important than ever because of today’s fast-changing business environment, according to our new survey of corporate America’s leaders. Seven out of 10 survey respondents agreed that tech companies face more scrutiny than other multinationals during a transition.

84% of tech execs agree that succession planning is more important than ever because of today’s fast-changing business environment.

But we found that tech executives are just as unprepared as peers from other industries for C-suite changes. Three-fifths of respondents stated that their companies do not have a plan for handling a leadership transition. However, that same ratio also indicates that they believe that having a plan is crucial to smooth transitions.

These findings might not be concerning if the respondents were founders of millennial startups and are years away from quitting their company. The executives we polled, however, hail from 160 companies that have been in business for a minimum of 15 years — 35 are tech companies, the largest industry cohort in the survey.

The smallest companies have at least 1,500 employees and $500 million in annual revenue, while the largest have head counts of over 500,000 and revenue upward of $100 billion. They are able to plan for and manage risk and crises, and what to do if their leaders become victims to the “milk truck”.

Tech executives should be more careful about succession planning because of one important reason: institutional memories. Tech firms generally are younger than other companies of a similar size, which partly explains why the median age of S&P 500 companies plunged to 33 years in 2018 from 85 years in 2000, according to McKinsey & Co.

These companies have clearly achieved a lot in their short life spans, but they haven’t captured their history like their more long-lived counterparts in other industries. In fact, less than half of these tech companies have recorded the story of their leaders for posterity. This puts them in a disadvantage when they have to hire new members to their C-suites.

It is best to keep track of this history before the chaos of a leadership transition starts. It will be crucial for the future leaders and incoming generations to understand the key aspects of the organization’s track record, lessons learned, culture, and identity. It also provides insight into why the organization evolved in the way it did, what has brought people together, and what might cause resistance. It is as important to look forward as it is to move forward.

Most executives in our poll agree with this, with 85% stating that a company’s past can serve as a guide for new executives and help them to prepare for the future. One respondent stated that history is essential for innovation in any company. Another respondent wrote that history “includes both the roadmap to successes .”

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But, this documented history can’t be a hagiography for the departing CEO. Too often, departing CEOs spend their final years building their own trophy cases. Even though they admitted to their own ineptness regarding transition planning, most execs stated that they had already taken steps towards creating and strengthening their personal legacy. Two-thirds of them said that they have completed formal legacy planning, with many of these blessings from their boards.

It’s not surprising that three-quarters of the five said that the legacy of a founder or CEO often outweighs the skills and experience of the successor. According to two-thirds, tech executives believe that the longer a leader is in office the more difficult it is for a successor.

Tech leaders are capable of doing this right, and they have. Respondents were asked which five CEO transitions were most successful. 1 was Apple’s handoff from Steve Jobs to Tim Cook (38%), followed by Microsoft’s page-turn from Steve Ballmer to Satya Nadella (28%). The others, at General Electric, General Motors and Goldman Sachs, each netted no more than 13% of votes.

Apple might have a dominant position in this survey, which could contradict the advice to minimize the aggrandizement caused by an exiting CEO. Instead, highlight the compilation of and transfer of the organization’s history to a new chief executive. Jobs managed his legacy with great care until the end, and that was a fact. But even as he continued to take center-stage, he also made sure to pass along Apple’s institutional knowledge and ethos to Cook over the 13 years they shared space on Apple’s executive floor.

Sooner or later, all of the current C-suite members — even startup founders — will be leaving. They should start preparing for the day, so that everyone is not left behind.

http://feedproxy.google.com/~r/Techcrunch/~3/u3F30FAsVDM/, TechCrunch
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