I first discovered Dan Ciampa when his book, “Taking Advice, How Leaders Get Good Counsel and Use It Wisely,” came out in 2006. This is an amazing book about helping leaders find good sources of outside advice. It is the perfect companion to my approach in, “Why Should the Boss Listen to You? The Seven Disciplines of the Trusted Strategic Advisor,” which is about teaching advisors to be better coaches, more management focused and having more influence.
Dan’s latest book is, “Transitions at the Top, What Organizations Must Do to Make Sure New Leaders Succeed.” This book (with David Dotlich) is designed to counter the rather startling fact that an estimated that 40% of executives fail within the first 18 months on the job. The annual cost of CEO departures is estimated at $14 billion in the United States alone. Clearly, this is a very important topic. He also wrote (with Michael Watkins) “Right from the Start.” That one is the recognized standard work for new leaders who take over. This new book completes the cycle by answering the question of what the company must do to make sure the new leader has the best chance of success.
Dan has spent his career in, around, on, and being a hands-on corporate leader. He is a perfect example of a fascinating practitioner.
Dan: There are two parts to that answer… the taking side of the equation and the giving side.
Dan: The most satisfying and successful boards I’ve been on or have advised had directors who saw their role as both overseers and advisors… and where that was made clear to the CEO and also informed the nomination of new directors.
I believe that it is short-sighted and destructive for boards to only be concerned with short-term returns to investors. Rather, that should be one of two primary concerns… the other is to make the organization as operationally and culturally strong as possible. This second goal should be measured by its ability to continuously improve, so that it prospers over the long term.
There is a natural tension between these two. Too much emphasis on short-term returns will compromise operational and cultural improvement… and too much emphasis on continuous improvement without financial returns robs the organization of a vital metric for progress and an incentive to experiment with new behavior.
The CEO must manage this balance day-to-day, but the board has to be conscious of it and manage it wisely. It must be both overseer and advisor.
Dan: There are usually three types of barriers that keep leaders from making the most of advice.
Dan: Great advice takers find people they can turn to for help in the areas where the biggest challenges lie; but they also make sure those advisors complement one another. In addition to being experts in one or more of the areas in which the leader wants help, their styles of advice giving should be compatible, their values should be consistent, and they should be adept at building trusting relationships.
Dan: I did and it was very important to me and to our company. Bruce Henderson, who founded the Boston Consulting Group (and along with it the strategy consulting business) was my strategic advisor. Jim Richard, who had been CEO of a pump manufacturer and then became a senior vice president at Polaroid was my political advisor (the person whom I turned to when I needed to make organization and people changes). Sandy Jenks, who had run the counseling center at Boston College where I went to undergraduate school, was my personal advisor (the one I could talk with when the stress and pressure built). Each was expert in an area that was vital to my success and each was always available when I needed him.
I knew each person well; and each believed in my vision of what the company should be and the strategy I intended to pursue. But, it’s important to say that I didn’t construct this group purposefully. It just seemed to make sense. Their help was enormously useful but if I had been more strategic about it, it could have been even better. For example, the three of them did not know one another and I never brought them together. If I had, the combination could have been even more helpful.
Dan: I think it would involve the first barrier to taking advice mentioned above. It’s always been something of a mystery why leaders who are facing tough, complex problems without any apparent solutions fail to take advantage of help when it is available. When they choose to go it alone (and it is always a choice they make), usually it takes longer to come up with answers, the cost to the leader himself is high, and the organization suffers. And, I’m not talking necessarily about external help, but also when help is ignored from subordinates and directors.
Most of the time, it comes back to “personal blocks” … by that I mean blocks within us that hinder positive action. Examples are hubris, inability to accept responsibility for one’s actions or admit a mistake, and insecurity to the point of being threatened by people who can help.
Anyone who takes on the responsibility of leadership should be self-aware enough to recognize personal blocks and be good enough at self-management to reduce them. As important as anything else, boards must make it a priority to carefully vet CEO candidates in these areas and to be aware when they are compromising the organization’s ability to succeed.
Dan: I think the best example is CEO succession. To understand my answer, perhaps some background will help.
The rate of CEO turnover has increased in US companies and shows no sign of letting up. More important, the success rate is pretty dismal and is not improving. The classic research on this problem (done about 20 years ago at the Harvard Business School) investigated “planned succession” where a successor is promoted or hired as the #2 with the expectation that he will move into the top spot when the incumbent leaves. It showed that the success rate of those promoted from within was 50% and of those who were hired, only 25%.
A CEO hand-off that fails is very expensive. There are obvious costs such as search fees and payouts of executive contracts. One research study estimated that each time there is a botched succession, these costs can climb to $50 million for large-cap companies and $12 million for small-caps. But there are less obvious “insidious costs” that are hardly ever recognized but are much greater and more damaging to the organization over the long term. Just one example is the disruption when a new leader comes on the scene with a change agenda that moves the organization in a new direction, but who fails and is replaced by the next leader who wants to put her own brand on the company and goes through the same drill. Results are poor decisions, lost revenue, stunted innovation, missed opportunities, and also damage to relationships and the culture in general.
Ensuring a smooth hand-off requires recognition that a CEO succession is not an event but a process made up of two broad phases. The first is procedural in nature. It includes definition of requirements for the successor, an external search, and assessments of both internal and external candidates. The second phase starts when the successful candidate says “yes” to the board’s offer and lasts until he as CEO has won the loyalty of the company’s managers and support of the board. This second phase is more complex because it deals with the human drama of the transfer of power and the resulting mix of emotions, ego, ambition, and in particular, company politics.
As much or more than any other challenge facing an organization, CEO succession requires teamwork between the CEO and board, involvement of key subordinates of the CEO, and also the right advice.
So, this is an important issue because for the most crucial decision facing the company (who will lead it), costs of failing to get it right the first time are high, complexity is significant, and the success rate is low. The good news is that we know what it takes to succeed and there is help available. The bad news is that no single advisor is experienced and expert enough to master both phases (regardless of claims in marketing material). If the board and CEO do not select and manage help wisely, the door is open to problems. Also on the bad news side, success requires what few companies display—careful management, concern for the common good, and collaboration between power bases inside the company.
To be successful, transitions at the top require contributions from the board, the sitting CEO, certain senior executives, and the designated successor who hopes to be the next CEO. The willingness of each one to be open to help from the others along with careful management of the right mix of outside experts will make the difference between success and failure.
* My request of these Fascinating Practitioners was that they supply questions they wish people would ask them in the hope of better explanations of what it is they actually do that makes them so outstanding. In this case, as in the previous interviews, we discussed the questions with Dan, agreed on the handful shown and he provided answers for these questions as they appear here.
Dan Ciampa is a senior advisor to CEOs and boards of directors who must implement new corporate strategies that call for structure, systems, and process changes that are significant enough that the culture must change.
Often, these changes coincide with a CEO transition. Dan specializes in helping leaders prepare themselves and their organizations for the hand-off to their successors and in helping the new leaders take charge.
He was chairman and CEO of Rath & Strong, Inc., has served on seven boards (both corporate and not-for-profit), and named by Business Week as one of the top five CEO advisors. He’s the author of five books, including “Right from the Start” (with Michael Watkins) for the new CEO taking over and “Transitions at the Top” (with David Dotlich) on the organization’s role in ensuring the new leader’s success. For more on his background, see danciampa.com.