Sensible Succession Planning

It appears that Warren Buffett has "reluctantly discarded the notion of continuing to manage the portfolio after my death" and has embarked on finding three successor to fill his job. This is consistent with my June 2007 Chief Executive Magazine article entitled: "Decision Time for Immelt and Buffett." In this article, I contrasted the GE succession planning system with Buffet's lack of concern and lets wait until it is necessary approach.

"Trust Me vs. Obsessive" was the title of one of the paragraphs.

• This is what I wrote: " General Electric has gained a reputation as an innovator in management systems and practices. it succession planning system is complex, time-consuming and expensive, In some ways, it has become an obsession. Reginald H. Jones, Jack Welch's predecessor as chairman and CEO, even reorganized the company to select his successor. Immelt spends a month a year performing the process."
• "Buffett is the other extreme. He is 75 and "he is Berkshire Hathaway" he makes it clear that he has a successor in mind. He doesn't plan to leave and asserts "trust me" that everything is under control".

In a recent March 13, 2008 Business Week article, Rick Wartzman quoted one my favorite author's and management scholars...Peter Drucker: "we tend to pick people who remind us of ourselves when we were 20 years younger". First, this is pure delusion. Second, you end up with carbon copies and carbon copies are weak".

In my book: The Secret to GE's Success"; I emphasize that one of the reasons that GE is still alive and vibrant is that it has had only ten CEOs in its 127 year history and each one was different than his predecessor. Jones was a financially trained executive and different than his predecessor the risk taking Fred Borch; the aggressive Welch was very different from statesman Jones. And it is clear that Jeff Immelt is not a carbon copy of Welch.

There are those in GE, that will tell you that the reason that GE has been able to have internal candidates to succeed its leaders, is because of its elaborate manpower system. But it is important to point out that Borch succeed Cordiner and Jones Borch BEFORE the current elaborate system was in place and both were the right leaders for the right time. In fact, the only two CEO's that were selected with this type of system were Welch and Immelt.

I agree the current system may help but is not the only reason and in fact, it may inhibit the company's growth, which I believe happened under Reg Jones' tenure. (page 185 in my book: "The Secret to GE's Success")

I strongly believe that the reason GE has had this ability is because it has had a commitment to developing people from its beginning and it has been able to recruit, develop and motivate people because of training programs at all levels. I joined GE out of college and became a very committed GE employee because I knew that if I did my job, the company would provide opportunities for me to grow and develop. I also knew that I had to earn my strips and it was not just because of I had friends in high places.

Another key to GE's successful CEO and senior management successions is that it has recognized that different leaders and professional skills are required for different business situations and places on the life cycle. In my book: "Risktaker, Caretaker, Surgeon Undertaker- the four faces of strategic leadership", I describe the different types of leaders and teams required and explain how GE and a few other companies have recognized this fact and have been able to select different types of leaders and professionals to fit its market and competitive environments.

In conclusion, I am pleased to see that Warren Buffett now recognizes the need to select a successor but it is also important to emphasize that his successor will have a very difficult time succeeding a legend and will never have the acceptance as he has had. This is what I wrote: " But it is clear that his successor will not be placed on the same pedestal as Buffett, and if expectations are not met, the investors will not be as kind in their response".

I totally agree with Peter Drucker's quote in his 1999 book: "Management Challenges for the 21st Century" : "Succession has always been the ultimate test of any top management and the ultimate test of any institution"... In my book I put it this way: "Avoid Cookie Cutter succession planning".

Bill Rothschild, author of: "The Secret to GE's Success" and "Risktaker, Caretaker, Surgeon, Undertaker- the four faces of strategic leadership". Both available on Amazon and http://www.strategyleader.com/