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How to Pave the Way for a Smooth Leadership Transition

At Interbrand, we know the strongest, most influential brands start internally. Only when an organization’s leadership team has clearly articulated a value set and committed to embedding this consistent strategy into the DNA of a company—from employee experiences to customer experiences—will a brand reach its full potential value.

While many factors impact an organization’s ability to wholly adopt their brand’s strategy internally, the necessity for the CEO to embody these brand values is undeniable. Couple this challenge with the need to continuously monitor the health of the business and respond accordingly, and the CEO’s responsibilities continue to expand. Given the importance of an effective leader in today’s rapidly evolving market, one of the most important tasks a CEO must manage continues to be the preparation for and selection of a successor.

Finding the best way forward

Every corporation will inevitably deal with leadership transitions, but successful firms and struggling companies will employ different strategies to either protect a healthy status quo or initiate needed changes. Ultimately, it is the objectives the organization hopes to achieve that determine who will step into a leadership position and how the transition will be handled.

In planning for a leadership succession, all organizations should take pause, reflect on past performance, and project future ambitions. Brands that are self-aware and know where they want to go won’t find this so difficult. Brands that are experiencing any kind of internal confusion or are unsure of their strategy for future growth may benefit from outside counsel. The objective of this planning period is to understand what direction the company needs to head in, and which type of leader can execute this plan (Figure 1). But, of all possible directions, how does an organization find the best path forward in a time of transition?

Making the transition

First, company leadership should evaluate whether they can extract more value from existing assets (physical/technological/intellectual property and human capital) or whether an entirely new set of assets is required to revitalize the organization. Next, current leaders must acquire a full picture of the company’s performance, as this will determine the nuanced requirements for the eventual hire.

Figure 1

chart 1

When hiring from the inside is the right call

For successful and growing brands—those that develop products and services that reflect customer needs and can deliver on an overarching strategic vision for both today and tomorrow—there is much to be said for consistency throughout a leadership transition. After all, as the old adage advises, “If it isn’t broken, don’t fix it.” In situations where a company hopes to perpetuate its current market success by further extracting value from existing assets, decision-makers should look within the organization when seeking a successor. Selecting someone who is already part of a high-performing company’s unique internal culture will help ensure that the candidate will embody the brand and continue implementing winning strategies adopted by his or her predecessor. Such a candidate’s deep understanding of the organization and its inner-workings tends to ease the leadership transition, as this person knows what spurs productivity.

Among more high-profile examples, Tim Cook’s transition to CEO at Apple is a top-of-mind case. After spending 30 years distinguishing himself in the industry and more than 14 years as Steve Jobs’ right hand—which included acting as CEO or effective head of the company during several of Jobs’ leaves of absence—it was a natural choice for Cook to succeed Jobs. Similarly, when CEO Angela Ahrendts decided to leave Burberry in 2013 to head Apple’s retail and online stores, she appointed Creative Chief Officer Christopher Bailey (who had helped her transform the British trenchcoat maker into one of the most widely known luxury fashion houses in the world) as her successor. The rationale behind her choice?  “No one knows [the business] better than him.” As Ahrendts noted at the time, the CEO’s abilities to live the brand and capitalize on internal talents are among the biggest factors in determining future success.

However, while maintaining consistency is often desirable, even the strongest performing companies should vet internal candidates carefully to ensure they will push their predecessor’s vision and continue to lead the brand in a successful direction.

If transformation is what you need—look to the outside

For underperforming businesses stagnating in the market or those just looking to expand, a leadership transition can serve as the catalyst for redirection and innovation as it will introduce an entirely new set of assets and processes into the business. When the board brings in an external hire, they are not only looking for change in goals and direction, but for it to be implemented rapidly, giving analysts and shareholders a boost of confidence. From Yahoo!’s Marissa Mayer to Gap’s Glenn Murphy, these sorts of transitions are commonplace enough in the business world. In such situations, of course, there is always the risk that not all changes initiated by new leadership will be brand-enhancing ones, but in a successful scenario any negative impact on brand will be temporary and the effects of positive changes will soon be felt. Within a couple of months, the new leader will infuse the brand with their own stamp, signaling change and growing the business to new heights.

This strategy was employed by Yahoo! with the appointment of Marissa Mayer in 2012. Her high profile status as a Googler signaled immediate change to the market that Yahoo! was committed to reversing its downward trend. Mayer was met with some internal friction, as she lacked firsthand knowledge of the business’ culture. However, Mayer swiftly brought new and refined products to market, grew Yahoo! through acquisitions, and secured a robust talent pool. The result?  Within two years, Yahoo! stock more than doubled.

In the end, alignment of values is what really counts

Though it’s often said that change is the only constant in our turbulent world, knowing that doesn’t make change any easier to implement. You know that your brand is a precious asset and that it must be managed carefully in order to drive value for your business. You know that, no matter what, you want that asset—and your organization’s future—to be in the right hands. With much of the equity of your brand built by the CEO, it is crucial that successors are carefully selected.

For high-performing businesses, an internal hire can be the most logical choice to ensure consistency and push the company further in its current direction. For those looking for real transformation or growth in new directions, scouting for an external hire with the necessary skills and experience to take you where you hope to go can be a wise choice. In both cases, it is essential to find a candidate whose values align with the hiring company’s strategy; otherwise the organization risks creating dissonance between what its brand stands for and what it does.

However, with the right plan in place, informed by outside strategists if needed, the sense of uncertainty and risk that comes with leadership transition can be eased, and a choice that brings confidence, optimism, and peace of mind can be made.

Contributors

Associate Consultant, Strategy