Tuesday, July 14, 2009

Leadership Transitions

How might companies make the transition to an outsider CEO more effective? Let's take a look an interesting successful example that other firms might try to emulate.

In the late 1980s, General Dynamics encountered serious financial difficulty. The company brought in an outsider, Bill Anders, as CEO. Anders, the former Apollo 8 astronaut, had served as an executive at General Electric and Textron. In September 1989, the General Dynamics board chose Anders as the heir apparent to the current CEO, Stanley Pace. Anders joined the firm as Vice Chairman on January 1, 1990. He served in that capacity for one full year, and then succeeded Pace as CEO on January 1, 1991. During his time as Vice Chairman, Anders learned the business inside and out. He conducted a comprehensive strategic and financial assessment, and he evaluated the changing industry dynamics given world events taking place as the Cold War came to an end. He also evaluated the strength of the management team at General Dynamics, deciding on the individuals he wished to retain and those he would replace.

Why is this an interesting example? Well, many firms have planned successions for inside hires, but very few firms have periods of transition for outside hires. Instead, they often hire an outside and throw them into the fire. In many cases, the outsiders have a bumpy transition, to say the least. In this case, though, Anders had a year in which to get up to speed on the business, including a thoroughy assessment of the strategy, culture, and personnel. Anders had a remarkably successful tenure as CEO, and he set General Dynamics on a new course that would lead to exceptional performance over the past two decades. Many people remember his tenure at General Dynamics because of a controversial compensation package that he negotiated for himself and other top executives. Of course, in today's terms, his package looks rather bland! Still, what should be re-examined is the thoughtful approach to leadership transition which the company and Anders undertook so successfully. Other companies ought to consider emulating that strategy when bringing in an outsider as CEO.

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