Disney’s Board was well prepared for the succession of Chairman and CEO Robert Iger, until blindsided by the surprise resignation of COO and heir apparent Thomas Stagg. This was the second time in 25 years that the company suffered the loss of an internally selected CEO candidate. Mr. Stagg’s unanticipated departure was preceded by the tragic death in a helicopter crash (1994) of Frank Wells, CEO Robert Eisner’s carefully groomed successor.
CEO succession planning is a significant challenge for all businesses, given the many variables in play. At minimum, these include the company’s dynamics and culture, health of the business, and global macroeconomic environment. Disney’s Board implemented a comprehensive CEO succession plan that appeared to “check” all the necessary boxes:
Everything was on track for the succession. However, the plan derailed when news of the Board’s interest in evaluating a “broader slate” of external CEO candidates leaked outside the Boardroom.
Now, as the Disney Board focuses on the selection of a CEO candidate for the second time, we’d like to provide some advice - commit to the selection and grooming of an internal candidate (and, What’s said in the Boardroom stays in the Boardroom)!
Research data supports the commitment to selecting an insider CEO. Executives coming into top senior management positions from outside the company have a failure rate of approximately 66% within five years. Often the executive remains an outsider and elects to leave the company or is asked to leave (both outcomes akin to an organ transplant rejection).
The commitment to finding a suitable internal candidate has to be managed with all constituent parties.
This is especially relevant when working with search executives. While search companies fill a valuable role in vetting external talent pools, it would be naïve to ignore the prestige, visibility, and increased contacts gained by placing a high profile outsider at Disney.
Examples of failed external successions abound. In 2001 when Jack Welch chose GE executive Jeff Immelt as his successor, the unsuccessful and high profile other CEO candidates Bob Nardelli and Jim McNerny left the organization almost immediately for new opportunities. The window to be CEO of a major company is open only so long.
Both external hires were regrettable decisions that cost shareholders billions of dollars. Both companies, under the leadership of an outsider CEO lost market share and talented senior executives. These executives anticipated the cultural disruption of having a new leader who would likely bring in several trusted GE lieutenants to fill key positions.
Randy Cheloha, Ph.D. has been consulting to senior executives for over 30 years. He is a licensed psychologist with graduate degrees in both industrial and clinical psychology. This foundation anchors and informs his perspective. He has expertise in executive assessment and coaching, succession planning, and career transition.