New CEOs: Why So Many Fail
Posted by Russ Ray on September 29, 2008
This is kind of a continuation about the apprenticeship stuff I was talking about earlier. A lot of people come to school with big dreams of becoming a CEO one day, but how does one get meaningful on-the-job training for that?
“One … study found that almost half of US companies with more than $500 million dollars of annual revenue had no meaningful succession plan,” says Charan. And when CEOs fail? ”The direct and indirect costs of this to both individual companies and the economy as a whole are simply enormous.”
Charan says any board or company that fails to put in place a decent succession plan is ignoring one of their most important responsibilities. At minimum, the board should ensure that at least two sessions a year are devoted to reviewing a minium of five potential candidates – both internal and external.
He also observes, in my view very importantly, that in preparing executives for the next big job, a classroom is not a management development program. Executives need real experience. ”Management training develops awareness, provides tools and resources, and helps people develop strong professional networks, but the real learning occurs on the job.”
So, the next time you see a CEO bail out with a $45 million parachute, just remember that it is probably a training issue.
