Joe Griesedieck is Vice Chairman and Managing Director, Board & CEO Services, at Korn/Ferry International, which assists organizations in attracting, developing, retaining and sustaining their people in nearly 40 countries. Joe is based in San Francisco, and focuses primarily on engagements for CEO and director searches across multiple industries, as well as working with boards of directors on CEO succession planning and other related senior-talent management solutions.
His prior experience includes two terms as global chief executive officer of another international search firm. He also served as co-head of the firm’s Strategic Leadership Services practice in North America. We began our talk with a discussion of succession planning.
C-Suite Insight: Everyone says succession planning is important, but to what degree do you think it gets back-burnered in the C-Suite, the boardroom, and the day-to-day world of business?
Joe Griesedieck: I don’t think it’s getting back-burnered to the extent that it might have been two or three years ago, or maybe even a year ago. There’s been so much written about it, and now SEC Bulletin 14E has made all board members aware that this is really one of their primary responsibilities. So the issue today is along the lines of “Are we doing this the right way?” versus “Are we doing this?”
CSI: How many companies are doing it the right way?
JG: We did a survey that found that a lot of boards felt they didn’t have a good succession plan in place. The way I translate this is that they feel they don’t have a succession plan that they think is defensible in terms of shareholder reactions or ISS reactions. Are they confident that they’re going through the right steps? Can they competently say they’ve done a thorough job in assessing both internal and external candidates? Overall, though, I would say succession planning is much more on the front burner than in the past.
CSI: Is this a widespread belief?
JG: McKinsey did a study a year or two ago that looked at the top five priorities that boards have today. Number three was talent development and succession planning, something that did not even appear four or five years ago. So it’s clearly on the agenda of all boards, and it’s certainly been a part of all the discussions I’ve had with board round tables.
They’re all aware that it’s their responsibility. They obviously want to do it in concert with the current CEO, if that’s appropriate, but they realize that at the end of the day, they have to make a decision.
CSI: As far as best practices, does this mean there’s sort of a steep learning curve for board members? They have to come up to speed rather quickly, right?
JG: Well they do. A lot of them will say, “We think we have a pretty good plan in place.” But then the question is, how good is it? How does it compare to what we would consider to be best in class, if you will, or best standards?
CSI: And do you have a process to help them with this?
JG: First of all, you have to understand what the strategy of the company is—not just today, but what it’s going to look like three years, five years out. Because it could change. One of the competencies that you’re looking for is being in sync with that. People who have done a great job in the company up until now may not be the right people to lead in the future, because [a board may require] different experiences and different competencies. So the board needs to do a very thorough job of making sure that they’re aligned with what the strategy. This becomes the road map for the specs or the criteria they’re going to look for in the next CEO.
CSI: Do you mean boards need to look externally?
JG: No, they should look internally. And if boards today are really doing their job, they should not only be looking at CEO succession, but at the whole C-Suite and below. There’s a limit to how far boards themselves can go, but they need to make sure the CEO and the Head of Human Resources or Talent Development are really looking at people developing within the organization. You don’t want to go outside if you don’t have to. It’s always riskier, culturally and otherwise.
CSI: So finding the right successors may not be a linear, straight-down process, but there should be good candidates in the organization.
JG: Yes, and if you’re a big company, you should have the luxury of having multiple candidates. If you’re a smaller company, it’s harder, of course. But as boards assess internal candidates, they should also do what we call a “talent benchmarking.” This is not a search, but rather, just a look outside to see who would be best in class according to the
board’s specs. They can make that comparison, at least.
CSI: If they’re just taking a look, what’s the advantage to them?
JG: They can come back to any constituent or shareholder group and say they’ve done a very thorough job of vetting, not only the internal candidates but looking at who would be good from the outside. This is an ongoing process that boards should be doing anyway, because it helps them if there’s an emergency, which would put them into a different succession-planning scenario altogether.
CSI: To what degree does the board have a responsibility to work with HR to institute policies that develop careers all the way down the line, so that those internal candidates are there as they move up through the organization and into the top spots?
JG: I think this is a growing responsibility, and I would say that many boards today are not as engaged in that as they should be. They’re thinking about CEO succession planning, sure, but a lot of them haven’t yet started to think about much broader succession planning and executive development. Succession planning is not really an event; it should
be an ongoing process. It’s really about growth and innovation, and it takes people to bring that about.
CSI: You find a lot of very strong-willed individuals in the top spots, so one way of looking at succession planning is you’re saying to people, “Well, OK, you’ve got the job. But now we have to know who’s going to replace you.” How does that fly?
JG: Well, good corporate governance today would tell you that the day the CEO is appointed is the day the board should start planning for his or her succession. It’s not meant to be a threatening thing, and the board should be doing it in sync with the CEO. Now the fact is, too many boards rely on the CEO’s recommendations. Granted, the CEO knows these people probably better than many of the board members, but it’s only one person’s point of view. I think boards have to have a broader, independent point of view, about not only internal executives but also, potentially,external executives.
CSI: We’ve heard you and others talk about “learning agility,” that is, how some executives have a general talent that can be applied to corporate leadership.
JG: Yes, there are “A players,” people who you can drop anywhere in the world under any circumstances and they will find a way to succeed. I think it has to do with learning agility. This is a very important characteristic, along with the integrity and high ethics that lead to success. It can be more important than experience.
CSI: More important than experience?
JG: Experience is terrific, too, and obviously overall success depends on the industry and the situation. If you’re hiring a turnaround CEO, for example, you’re going to look for much different skills than you are if you’re bringing someone in to take the company through its next series of growth. So finding the right person can be situational, depending on where the company is, but I think you’ll find high degrees of integrity, high ethics, and learning agility in all the great leaders.
CSI: Can you summarize leadership in a few sentences?
JG: Beyond what I’ve already mentioned, there is what I call “intellectual toughness.” This is the ability to make difficult decisions in a logical, yet compassionate way. You have to have a very strong sense for people and teams and people development. It’s just too difficult for a single CEO to run a company today, particularly a global company. So an important aspect of leadership is about building teams, and about having the courage to make the right decisions on who should be on those teams and who shouldn’t.
CSI: How do you decide who’s on the team?
JG: Obviously, in any given situation, industry knowledge and customer knowledge are both very important. And global perspective is almost a must these days, because if you’re not selling globally, you’re dealing with somebody who is. [Add to that] the softer qualities about learning agility, which is really the ability to adapt to situations and know which way to go. Beyond those basics, you have to be a superb communicator, and be willing to communicate openly and transparently. You have to be able to do this not only with your people—which is where you star—but also with your board, with your shareholders, and with Wall Street, the media, and all the rest of it.
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What is SEC Bulletin 14E, and Why Does It Matter?
In the accompanying interview, Korn/Ferry Vice Chairman Joe Griesedieck refers to SEC Bulletin 14E. A sub-section of this bulletin has the potential to drive HR professionals as well as C-Suite executives and board members slightly mad, by increasing the burden of compliance on them in the wake of Great Recession reforms.
Specifically, Rule 14a-8 in this bulletin “provides an opportunity for a shareholder owning a relatively small amount of a company’s securities to have his or her proposal placed alongside management’s proposals in that company’s proxy materials for presentation to a vote at an annual or special meeting of shareholders,” according to the SEC. Further embedded is 14a-8(i)(7), which simply refers to “a matter relating to the company’s ordinary business operations.”
This may all sound innocuous enough, but it has opened the door to shareholder proposals regarding succession planning—which is now considered a part of ordinary business operations.
Background
The SEC reported in 2009 that it had received “a number of no-action requests from companies” regarding shareholder proposals in this area; that is, the companies had requested that they be allowed to exclude these proposals.
The SEC had previously agreed with the companies, citing a 1998 ruling [Exchange Act Release No. 40018] in which it took the position that these proposals could be excluded because they “related to the termination, hiring, or promotion of employees.”
However, the Commission has since reversed course, treating succession planning as part of governance. Noting that one of a board’s “key functions is to provide for succession planning so that the company is not adversely affected due to a vacancy in leadership,” the SEC refers to the Great Recession when it states that “recent events [that] have underscored the board function to governance.” Therefore, the SEC now “[takes] the view that a company generally may not rely on Rule 14a-8(i)(7) to exclude a proposal that focuses on CEO succession planning.”
In other words, companies must consider shareholder proposals related to succession planning. This increases their obligation to have thorough, defensible plans in place, as Joe discusses in his C-Suite Insight interview.
