Poor foundation, wobbly skyscraper

In part 2 of a series, the author says the challenge for an incoming CEO is to clean up the mess, if any, quietly and without blame

Writing about CEO departures in his book, The Hero’s Farewell, Jeffrey Sonnenfeld described the end of an illustrious career as a plunge into the abyss of insignificance, a kind of mortality. Does a successor have to clean up the predecessor’s mistakes? Yes, for sure. It is good to remember that the mess, if any, has probably been contributed to by several predecessors, not one single person — think of bank NPAs as an example. 

No predecessor can leave a clean slate for the successor that is part of enterprise and entrepreneurship. This has been admitted by Dara Khosrowshahi, the CEO who took over from Uber founder, Travis Kalanick. “My predecessor made mistakes. I am going to make mistakes as well. The fact is that I have inherited a fabulous company with fabulous people,” he said in a recent interview. It does not look likely that Khosrowshahi will have a light load for quite a long time to come. 

Jeff Immelt struggled with GE for almost two decades. The board replaced him five months before his term was to end. His successor, John Flannery, got just a year. Debates rage about how old the problems are, and the legendary Jack Welch’s actions are now being reopened. The company had executed initiatives for the future including entry into businesses like broadcasting, financial services and health care. GE made several acquisitions for which it paid top dollar, according to some critics. Importantly, like with most acquisitions, GE failed to deliver value to the shareholder. The acquisition of power company, Alstom, impressed deal makers, but did nothing after being acquired. Building businesses is a long-term game requiring consistency of purpose. Somewhere down the years, GE leaders are thought to have become obsessed with their personal legacy and how they wished to be remembered. It happens in India as well.

The challenge is to clean up quietly, professionally and without blame. The clean-up has to be done, but doing it discreetly is desirable but not essential. It is better to clean up visibly early on in the successor’s tenure. Mistakes are like stocks in a warehouse. There will always be opening stocks, fresh mistakes and closing stock. The incumbent CEO must be convinced about the opportunity; the outgoing CEO’s mistakes should not prevent him or her from leading a successful team. The outgoing CEO may be a hero or a demigod, as was the case in GE. Here are some practical suggestions to consider.

Listen, listen and listen. The echoes from the walls and cliffs within the organizational rocks shout. Do not criticise the predecessor as far as possible, but for god’s sake, do the clean-up. If he or she is perceived to blame the predecessor, it may turn into a crisis. The analyst calls, quarterly results and media routine, however, do place a pressure on the incoming CEO to state what has to be stated within a few months, take the hit and proceed. 

Square up your perceptions with the principal or promoter director(s). They should not get surprises as far as possible. Seek their guidance if not their understanding. In this process, the CEO must not become the scapegoat.

Your management knows the company, its fault lines and how much time it would take to fix. Don’t try to be a hero to them. If you come through to your employees as the superman then you have not done well.

Focus on building strong relationships within the company. Relationships with new subordinates, business partners and management as a whole. Employees are the guys who know what requires fixing in the hidden plumbing and wiring in the organisation. Often CEOs are so preoccupied with the tensions of the mess and managing upwards/externally that they miss out on strengthening the strongest allies who will have ideas on how to solve the problems.

Count on your moral authority apart from your hierarchical position. A governance system can function if it is built on a strong moral foundation in a company. The civil engineering principle is relevant — poor foundation, wobbly skyscraper.

The writer is a corporate advisor and distinguished professor of IIT Kharagpur. His new book, “CRASH: lessons from the rise and exit of business leaders” will be published by Penguin India in December, 2018. Email: rgopal@themindworks.me