Corporate Leadership Dynamics: Founders, Turnarounds, and CEO Succession

The Role of Leadership in Corporate Success

Iconic Founders and Entrepreneurial Leadership

Some organizations are defined by their leaders. Amazon is identified with Jeff Bezos, eBay with Pierre Omidyar, and Google is identified with Larry Page and Sergey Brin. Entrepreneurs and founders of their organizations, they are perceived to possess leadership qualities and pronounce on the issues of the day. They are often held up as role models.

The mercurial leadership characteristic of many entrepreneurs means that they might found and then sell a series of start-ups, rather than guiding them to the next, more mature stage. Unlike the examples above—corporations that operate on a global scale—others prefer to leave the day-to-day management of their companies to professional managers as their organization matures.

Leadership Challenges in Mature Corporations

Strategy, Resources, and Bureaucracy

Companies may become large by being successful, but they may also become bureaucratic and conservative. It's a cliché that for successful companies, change is a precondition of continued success, and the people who can lead that change are key.

Formulating strategy is a question of making choices (often described as “difficult”): deciding to do X rather than Y with resources that are, by definition, limited. The people who can make the right choices about how to use those resources are highly rewarded (the people who make the wrong choices are also sometimes highly rewarded with generous severance packages, but that’s another story).

Turnaround Leadership for Failing Companies

Failing companies require yet another kind of leadership: the type of leader who can turn them around. This third species of leader may not be suited to managing other types of change, preferring to move to another company in crisis.

Developing Future Leaders and Corporate Governance

Companies are increasingly thinking about how to nurture future leaders. In the US, corporate governance—the way that a company is run at the highest level—has become a key issue with shareholders. They have rejected the previous cozy arrangements, where directors appointed people they knew to the board. Now, shareholders demand much greater scrutiny over who is chosen and how.

The Importance of Executive Teams

This is part of the process of recognition that companies are led by teams of key managers. The qualities of the Chief Executive cannot be seen in isolation. There must be the right chemistry between the Chief Executive and other top people, and they must have the right mix of complementary skills.

CEO Succession Planning: Internal vs. External Candidates

Even so, picking the successor to the current CEO (Chief Executive Officer) is an extremely sensitive task. Key considerations include:

• Will it be someone from within the company, perhaps someone groomed to take over by the current boss?
• Or do you use a headhunter (specialized, highly paid recruiters) to track down someone, perhaps from a completely different industry, and bring them in to shake up the existing order?

If your new CEO leaves after six months in the job, perhaps after what the papers describe as “irreconcilable differences” or a boardroom battle, the company and perceptions of it will suffer, and so, probably, will its share price.