Leslie Pratch on Assessing and Developing Leaders

By Leslie Pratch

A CEO—let’s call him Henry—decided to retire within two years. The assignment had already extended four years beyond his initial expectation but he would not leave until he felt  his successor was in place. Henry had two seemingly capable executives beneath him who might be able to grow into the CEO role. He sought to clarify whether either of his two  candidates were truly viable candidates and how to manage the succession process.

Henry suggested that I assess Mark, whom Henry considered closest to being ready to being CEO. Henry, however, had several doubts about Mark. The assessment of Mark indicated that Mark lacked the self-confidence and empathy to succeed as CEO. Mark had been promoting himself to be named COO but had failed to garner the support of his peers in operations. Henry doubted whether he could effectively lead as COO without gaining that support.

After determining that he would likely see a better return on his investment of time in mentoring his successor with  a different candidate, Henry asked me to assess David.

After assessing David, I concluded that he had all the qualities required to succeed as CEO. David had been serving capably as CFO and had never before had operating responsibilities before. He quickly identified the COO role as one in which he might simultaneously broaden his experience base and skill set while continuing to lead the finance organization.

Henry faced several issues that will resonate with most boards of directors. The first was to communicate to Mark that he was not going to be the follow on CEO. Given that Mark had been hoping for the position of COO, you might expect that Mark would  react with fear: “What about me if David gets the nod?” Henry told Mark, “I want you to stay and continue to grow as a manager here; given your relative strengths and weaknesses. I would like you and David to continue to work well together. We have two years to see how you two get along. Given Mark might wait until he finds the right job and then leave, having the formal testing and conversations up front can protect the individuals involved from unnecessary guilt over having exercised a choice (i.e., Henry’s saying David’s the better candidate. A scenario like that  is a compelling reason to do some succession planning and testing of talent before you put that talent into place.

As soon as Henry names his successor to CEO and that person is not Mark, Mark could turn off.  At that point, one would expect that psychologically, Mark is gone. Anticipating that, I would still not give the title of COO to Mark. Don’t give him false hopes.

Henry’s next step was to ensure he had a really good CFO in the waiting. He did–that person was David. Henry had a back-up plan for people and he had his management team develop back-up plans for each member of their respective teams. If Henry needs a COO, Henry would have to develop someone who could step into that role because my guess was that once David was named, Mark and David may interact differently. They may have worked together well in the past because neither knew who was going to get the nod.

I advised Henry to tell Mark, “You are not going to become the CEO but we want you here. Mark, you need to decide whether you want to stay with the organization but under a different leader.” Henry’s got to tell Mark: “I have tapped David but you better be sure you want to stay with the team. If your intention is to use us as a holding pattern until you find a new job, that’s fine; we’ll help you for three months. Otherwise I want a firm commitment from you that you are with this organization. Take three weeks and give me a firm answer with integrity one way or the other.”

Part of Henry’s dilemma and the reason Mark was his first choice initially was that at times David could light up a room and present charismatically. Other times, such as board meetings, he was silent. I pointed out to Henry that the CFO is supposed to be subservient to the CEO; that’s his role. “Be prepared to show the numbers; otherwise shut up. Don’t answer or volunteer information until I call on it or you need it.” That’s normal. That’s his role and it is ingrained in him. You want him to act like the CEO but he’s not the CEO. You want him to step forward and answer that question but with Henry in the room, that’s an unreasonable expectation. I told Henry, “As long as you run the business I am going to be hands off. But you can’t expect David to know when you’re sitting in a meeting that he ought to step forward and then step back when you disagree.

I advised taking an issue or a set of responsibilities and giving them to David and saying, “I want you to handle this completely, you take charge of this, I want the organization to see you are running it, I give you free hand to do this. You have to give him some major issue in the company and go for it. Keep me apprised of what you are doing but I want you to call the shots on it.” David needs some operating aspect of some part of the business which is in deeper distress than some of this other parts; so I advised Henry to ask David to take on some opportunistically challenging operations assignments. “David, I need you to do this role.” Again, not too far into this process Mark will be asking, “What about me?” That has to be addressed explicitly.

After assessing David and follow on discussions, I recommended Henry give David the title of COO and broad operations responsibility. Mark now reports to David and the two continue to learn and grow from their mutually satisfying, supportive relationship

David might have said he has not got the skill set that he needs to do the transactions the company needed to grow through acquisitions. Significant strategic planning from a people perspective was necessary before the company could successfully perform a growth through acquisitions scenario.

David wasn’t confident he had the skills either; he had never been tested but he wanted to stay and to continue working with Henry and David.

Henry and David had to develop a rapport where they could talk candidly about strategy. I recommended that David  develop a database of facts. He (and Henry) needs to determine what these facts mean for the company long term, for example, “This is the market share we have now, this is the total share of market in the U.S., and the trend says we are in a declining industry, and if this continues, we may need to alter the direction but we have to be careful going forward. Then together you may want to in Mark, and then you determine which direction it ought to take. Then David, Henry, and possibly Mark meet and create strategy. Ultimately any company will want to exit or acquire companies.

My recommendation was to go back to the fundamentals and focus on the people.

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Leslie Pratch, Ph.D. is a clinical psychologist with an M.B.A. in Strategy and Finance and a B.A. in Religion from Williams College. She works with boards of directors and private equity investors to select and develop executives. She can be reached at (312) 464-7919 or email her at leslie@pratchco.com or visit www.pratchco.com.