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Succession Takes Planning: Leadership Matters

Todd Thomas

NEW YORK (TheStreet) -- Reading a couple of days ago about Dun & Bradstreet 's(DNB) CEO Steven W. Alesio's upcoming retirement, I was struck by how orderly the succession of leadership was going and how reassuring it is to shareholders who can see that the D&B board is prepared for leadership changes.

This has been the case before at D&B. When Allan Loren retired as CEO and chairman, Alesio moved smoothly into the CEO position first and then the chairman position shortly thereafter. Now, with Alesio's departure, Sara Mathews will move into the CEO position first and then the chairman position.

If you have been following D&B, you can also see that several key senior management shifts have taken place in order to facilitate the transition, although they may or may not replace the COO position. But you have the impression that being around well over a century has taught D&B the value of thoughtful and planned leadership development.

When companies ignore the obvious need to have top executive succession planning in place, they put shareholders at unreasonable risk. What responsibility is more of a priority to a board of directors than to have a lock on current and future leadership of their organization?

This is why the Bank of America(BAC) succession drama is so frustrating. Is it possible that everybody and their uncle knew that Ken Lewis's days were numbered except the board? Even if Lewis is innocent of any wrongdoing, the heat he has taken from the media and the pressure he has been under for months to turn BofA around should have alerted somebody that a plan to ensure uninterrupted leadership was essential.

Robert Stickler, a spokesman for BofA, said in a recent USA Today article, "There was a succession plan in place, but the board didn't have time to execute it, given the suddenness of this decision."

Of course, that's the point of a succession plan: to avoid the need for "sudden" execution. And it's not just Bank of America that could learn from D&B's planning process or JPMorgan Chase(JPM), which also went through a leadership debacle due to lack of planning.

The U.S. Conference Board published a survey in August that indicated over 50% of U.S. public companies surveyed in 2008 did not have a detailed plan for CEO succession. According to that same report, of the 1484 CEO departures in 2008, 46% of the successions were unplanned. Given that the median tenure for a corporate CEO is around five years, it is essential that succession planning become a priority for corporate boards.

This also brings up a previously discussed issue in this column about the conflicts of having the same person as CEO and chairman of the board. It is not hard to understand how the board may avoid discussion CEO succession when the chairman is the CEO. The strength of that model depends entirely on the strength of the individual holding the dual roles. This is not a formula for consistent and stable performance.

In the case of D&B, whatever happens with their business results over the next few months, it will not be because of over concern about leadership. Sara Mathews has been president and chief operating officer since 2007 and has been on the board since 2008. Her time at D&B was preceded by 18 years with Procter & Gamble(PG), where she delivered a strong record of results in her various executive positions.

We don't have to wonder about this because the board clearly has it under control. When succession plans are as transparent as those at D&B, we can focus more on the business and less on the rumors around who may be the captain of the ship.

-- Written by Todd Thomas in Southfield, Mich.