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Even a visionary can be replaced

It's hard to image Apple without Steve Jobs at the helm, but the same has been said about many companies headed by powerful, charismatic, seemingly irreplaceable leaders.

Against the odds, many such companies have thrived under new leadership, although not always consistently: Walt Disney after its namesake, Wal-Mart Stores Inc. after Sam Walton, Mary Kay cosmetics after Mary Kay Ash, Southwest Airlines after Herb Kelleher, IBM after Thomas Watson.

General Electric has produced a string of successful successors to founder Thomas Edison including Charles Coffin, Charles Wilson and Jack Welch. "Each in his time was regarded as a giant," says Joseph Bower, a Harvard Business School professor and author of The CEO Within.

It's harder to remember the companies that failed because they are no longer with us. Some companies, such as Enron and Washington Mutual, died "precisely because their so-called charismatic leaders led them off a cliff," says Charles O'Reilly, a professor at the Stanford Graduate School of Business.

Some companies are still around, but just seemed to lose their mojo after saying goodbye to a visionary leader.

"Sony is an example," says Sydney Finkelstein, a professor at Dartmouth College's Tuck School of Business. "It has been in a slow descent" since Akio Morita gave up the helm in the mid 1990s.

Xerox is another one "that really went downhill" after the departure of founder Joe Wilson, Bower says. Wilson was "a very strong founder who did a phenomenal job of managing technology."

There is an old saying that sums up the problem: "Acorns seldom flourish in the shade of a great oak," Bower says.

When a company transitions successfully from icon to new leader, "more often than not, the successor has been at the periphery (of the company) rather than the center." He might have been working in Asia or on noncore businesses. "They have had a chance to develop their own way of thinking and doing things."

One example, he says, is IBM CEO Sam Palmisano, who succeeded Lou Gerstner. Palmisano was involved in open systems, software and services when IBM was all about closed systems and hardware. Bower says companies should look for someone "who has grown up inside the company but maintained enough objectivity so they understand the need to change, and change in dramatic ways."

O'Reilly says that is true, but only when the company needs radical change.

"For me, the transition to a new CEO hinges on whether the company needs to continue with their existing strategy" or move in a different direction. "In the former case, you'd want someone with the same values, but not necessarily the same personality, who could continue to execute and keep leveraging the existing culture," such as David Glass, who followed Sam Walton at Wal-Mart, or John Young, who succeeded William Hewlett at Hewlett-Packard.

"In the latter case, you might prefer someone who could reallocate resources and realign the culture to the new strategy, as Jobs did at Apple when he returned," O'Reilly says.

Finkelstein says it will be hard for Apple to maintain its momentum no matter who is in charge. It's very unusual "to hit one home run after another."

Even a visionary can be replaced 09/02/11 [Last modified: Friday, September 2, 2011 10:16pm]
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