Rating Qualities

8
Applicable

Leaders at All Levels

Deepening Your Talent Pool to Solve the Succession Crisis
Ram Charan | Jossey-Bass © 2007

Everyone in the corporate world knows how important a CEO is. A CEO can make a weak
company strong and a good company great. Conversely, a bad CEO can do harm that may
take years to correct or even destroy a company. Although corporate board members know
all this, few boards adequately develop future leaders or prepare for CEO succession. They
ignore this vital task until dire need confronts them. Then, one day, the CEO quits, becomes ill,
dies or must be removed. Board members are bereft and bewildered, wondering how to find
a suitable replacement. Respected consultant Ram Charan offers an alternative scenario: the
“Apprenticeship Model.” General Electric, Colgate-Palmolive and other well-known firms have
found that this proactive development plan works for them. getAbstract recommends this stellar
book on leadership training and CEO succession planning as a must read for anyone who is – or
should be – involved in grooming, training or selecting future CEOs.

Take-Aways
• Few decisions are as important for a company as choosing the right CEO, but succession
remains a major problem for corporations.
• Companies should address CEO succession by cultivating a viable candidate pool.
• The standard methods corporations use to spot and develop new leaders don’t work.
• Instead, use the proactive “Apprenticeship Model” to plan ahead and prepare future chief
executives.
• This model enables you to spot potential leaders early in their careers.
• Challenge CEO candidates to learn by doing.
• Provide them with customized job assignments and responsibilities that will enable them to
learn how to make CEO-level decisions.
• Moving CEO candidates horizontally can broaden their skills.

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 • Sometimes, you will have to look for a CEO outside the organization.
• The CEO position is unlike any other; each position is different and CEOs have flaws just like
everyone else.

Summary

The “Apprenticeship Model”

Your CEO just quit or got fired, creating a leadership vacuum your company must fill quickly.
Many companies are not prepared to deal with this situation, and do not invest adequately in
leadership development and training. Is yours prepared to make this investment? If so, your board
and executives can put the Apprenticeship Model of leadership development to work, even if
combining CEO training and apprenticeship initially strikes them as incongruous.

“CEOs are failing sooner and falling harder, leaving their companies in turmoil.”

When you think of apprenticeship, you probably picture someone learning to become a plumber
or an electrician – not a CEO. But consider what “apprenticeship” actually means – learning by
doing, with feedback and practice – and you’ll quickly see how such hands-on training makes
sense for future CEOs. The Apprenticeship Model provides accelerated educational opportunities
that are perfectly tailored to specific CEO positions. Existing leaders can use it to gauge if a CEO
candidate has what it takes to plan and direct their organization’s operations in the future.

“It takes a ton of leadership ore to produce an ounce of CEO gold.”

The Apprenticeship Model requires a strong talent pool of potential CEOs and capable executives
who can teach them about leadership. This model succeeds where traditional leadership training
programs simply fail. This radical departure from most standard development programs is a big
hit with such respected firms as Novartis, General Electric, Colgate-Palmolive, WellPoint and
Textron. A recent A.T. Kearney study indicated that fewer than 25% of board members believe
their companies do a good job of training new leaders or developing CEO succession plans. Many
firms must recruit CEOs externally because they have done such a poor job preparing their own
executives for leadership – a failing that can be both risky and expensive.

The Leadership Training Gap

Most companies are erratic and inconsistent with succession planning and leadership training.
Many programs lack discipline or focus on the wrong areas, and therefore seldom work as
planned. This is troubling because graduate business schools routinely turn out exceptionally
talented young people, many of whom have the potential to become brilliant leaders. Too often
such capable individuals fall through the cracks when it comes to leadership training. Typical
succession program shortcomings include:

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 • Not understanding that only a small minority of executives are capable and talented enough to
run major companies.
• Not spotting such individuals early enough.
• Not making leadership identification and training an integral part of every senior executive’s
job description.
• Relegating such duties to poorly-prepared, lower-level executives.
• Making perfunctory performance reviews the backbone of career planning.
• Employing a one-size-fits-all approach to job rotations and career advancement.
• Not focusing precious leadership development resources on those who truly benefit.
• Using classroom training instead of on-the-job training for CEOs in the making.

CEO Apprenticeship

The Apprenticeship Model does not rely on books, classrooms and theories – it involves real
life, on-the-job training. Potential leaders learn by doing. To set up such a program, first identify
“high-potential leaders” who possess the innate qualities, abilities and talent to become CEOs.
Spot them early, preferably in their first jobs. Look for the capacity to master new job skills, a
thirst for knowledge, strong communication skills, and the ability to work well with others and
mobilize them to get things done. Once you identify such individuals, take a strong personal
interest in them and help them grow as professionals. Constantly challenge them to broaden their
approach and thinking. Provide them with customized job assignments and responsibilities that
will enable them to learn how to make CEO-level decisions. Normally, young executives will move
through four to five such assignments before assuming senior leadership positions. Make sure that
each job along the way pushes them to master important new skills and capabilities.

“Most companies have the wrong notion of what a leader really is and does.”

The primary requirements of the Apprenticeship Model include:

• Focusing on output. Be sure the company has or hires enough CEO “candidates.”
• Lining up mentors who are willing to invest their energy in young “CEO apprentices.” Former
GE CEO Jack Welch reviewed his managers five or more times annually.
• Involving a small number of potential CEO candidates in training and development.
• Defining and assessing each potential CEO’s skills, abilities and talents.
• Setting CEO-candidate jobs that offer major leaps of complexity and responsibility, as opposed
to the more standardized “incremental linear upward move.” New positions must involve
horizontal moves, be tailored to specific “developmental needs,” and enable CEO candidates to
expand their core talents and capabilities.
• Emphasizing “deliberate practice,” instead of theoretical training and “exposure.”

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 Spotting New Leaders

Colgate-Palmolive is known for its strong leadership. Daniel Marsili, head of its human resources
activities, says, “If you don’t start early, you lose critical time to develop people broadly.” His
company identifies leaders at the global, regional and local levels. Young individuals who are
clearly able to rise to the level of reporting directly to a subsidiary manager in their area are “local
talent.” People with experience who can assume positions of responsibility beyond a subsidiary
level in regions “like Asia or South America” are “regional talent.” And those the company is
grooming to become senior leaders are called “global talent.”

“Every up-and-coming leader benefits from deliberate feedback.”

At Colgate-Palmolive, future leaders must be visionaries who fully understand the business. They
must possess both the “people” and “business acumen” to motivate others and celebrate their
achievements. They must have drive, ambition and a wide “bandwidth” – the ability to see the big
picture. The selection process for future leaders starts early. Each subsidiary manager nominates
candidates who exhibit high potential. Eventually, the company shortlists what Marsili refers to
as a “high-potential pool” or “investment opportunities” of approximately 500 future leaders. It
makes a special investment in those candidates Marsili considers “blockbusters.”

“Boards need to compare periodic assessments of the depth and breadth of the company’s
current leadership pool against emerging leadership requirements, looking three to five
years out.”

You can’t go wrong with the Colgate-Palmolive approach, but do understand that the “DNA” it
needs in potential leaders will differ from the profile your company needs. Choose future leaders
from a leadership “gene pool” that fits your company’s requirements. Developing this adaptable
leadership pool creates a competitive advantage that allows a company to focus attention on
bringing out the best in its leaders. If you are recruiting talent from college or graduate school,
don’t focus on grade-point averages; top leaders ironically do not always get the best grades. Don’t
ever take the recruitment of future leaders lightly. Your company has far too much to lose if you
make the wrong choices.

Developing Custom Growth Paths

Expect high-potential leaders to develop in spurts of achievement, as they gain knowledge,

and develop competence and skills. For example, when your company puts a marketing vice
president in charge of a business unit, he or she must develop an additional management capacity:
profit-and-loss (P&L) skills. New metrics for achievement apply, and the executive will naturally
spend time adapting to a new set of responsibilities. Plan career-path jobs for leaders-in-training
according to their developmental needs. Constantly challenge them, but don’t make their leaps

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 into the unknown so massive that it puts the business at undue risk. You will need to devise jobs
for high-potential leaders that will be challenging enough without breaking them or the business.

“Leadership matters. It creates and harnesses the energy of people, gives them direction
and synchronizes their efforts.”

The career path you devise for one person will probably not work for another. Strive to provide
genuine learning and growth experiences for young executives on the fast track. Horizontal moves
often make sense. Always factor in room for failure; that’s where the best lessons are learned. Of
course, you will need a lot of forethought to create a challenging career path for a high-potential
leader. You may need to “unblock” a position within the company that will enable the young
executive to prove his or her mettle. Nobody wants to lose his or her position, but this kind of
move may be necessary to open up the right slot for your rising star. The person being moved out
of a senior position may lobby with superiors to stay. This is why you need the CEO and senior
management to be firmly on your side when it comes to career development for targeted CEO
candidates. They must understand the importance of “deployment and development of leadership
talent.” Never move high-potential people around willy-nilly.

What about Bosses?

The Apprenticeship Model fails if bosses don’t act as mentors. Effective boss-mentors:

• Understand that helping high-potential leaders grow professionally is vital.

• Focus their daily efforts on achieving this objective.
• Pinpoint ways to accelerate the development of high-potential leaders.
• Provide timely and direct feedback.
• Question high-potential leaders incisively about operations, thus expanding their business
understanding and grasp of important issues.
• Remain fully engaged with promising leaders regardless of their career paths within the
company, even if they move on to work for someone else.
• Talk to others about the continual development of high-potential leaders.
• Develop and update each leader’s “growth trajectory,” a chart-like document that summarizes a
high-potential person’s career, depicting his or her progression within the company, including
executive positions and accomplishments.

“Nothing is more important than pinning down the right criteria for a new CEO.”

Successful boss-mentors want their protégés to be decisive, ambitious, persuasive, innovative,

emotionally centered, willing to learn and good at managing their time. They want them to be able
to develop and lead cohesive working groups and teams, to handle relationships admirably, to
see the big picture, and yet to be able to work well with details. Protégés should be able to work

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 through obstacles and setbacks without complaining about a lack of resources. They should help
others develop leadership potential and ought to value earning respect over being well-liked.

Putting the Apprenticeship Model to Work

Though CEOs and senior management must champion the Apprenticeship Model, human-
resources professionals generally serve as trustees of the program, working in partnership with
boss-mentors to ensure that they meet five objectives: 1) Provide useful feedback; 2) Choose high-
potential leaders from the broadest possible, diverse talent pool, including newcomers as well as
“heritage” employees; 3) Promote people on the basis of concrete performance requirements; 4)
Regard leadership as a vital company resource; and 5) Give high-performance leaders legitimate
opportunities to advance and grow as professionals.

“The board must approach the CEO succession decision with passion and intensity,
devoting a lot of time and energy to it years in advance.”

The point of the Apprenticeship Model is to plan for CEO succession by providing a viable pool of
candidates. Your board must understand that the position of CEO is unique and figure out how to
choose the right person for this core executive slot. First off, the CEO must be able to anticipate
the future. Few can. Secondly, all CEO roles are different, making the right fit all-important. Third,
CEOs are not perfect. Neither are CEO candidates. Boards must weigh the good and the not-
so-good factors about each candidate, then make a selection. Developing the correct criteria to
judge candidates is most important. To do so, your board must have a firm grasp of what CEO
characteristics your company needs – and choose the right person accordingly.

“Becoming a CEO is a big leap for leaders, even those who have followed a thoughtfully
designed career path.”

CEOs must be good at crunching numbers, weighing data and options to determine the best
courses of action, and evaluating people. While the Apprenticeship Model is designed to develop
CEO candidates from within, it sometimes makes sense to look for a CEO outside the organization.
This is particularly applicable during company turnarounds that call for restoring needed
credibility in the firm, changing its culture or marking a radical shift in its strategy. Whatever
your company’s particular circumstances, plan your own CEO succession wisely. Few corporate
decisions will be as important.

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 About the Author
Ram Charan is a consultant and speaker. He also wrote Know-How, Boards that Deliver and
Execution. He teaches at the Harvard Business School where he earned his M.B.A. and doctorate.

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