In the current economic climate there is an increasing tendency to turn to internal candidates in the search for a new CEO. They will have already have proved themselves in a senior executive role, will have a strong understanding of the complexities of the business, and be able to provide continuity in maintaining the company’s culture, often making it more cost-effective and less disruptive than appointing an external candidate.
In recent months we have seen this trend with a number of high profile internal appointments to the CEO position, including Burberry’s Christopher Bailey, Sainsbury’s Mike Coupe and Dixons Carphone Group’s Andrew Harrison.
It seems of the top internal positions, COO offers the best starting point for becoming CEO. According to a recent Forbes report, some three quarters of today’s Fortune 500 CEOs were appointed internally, of which more than half were promoted from COO. This is supported by research from EY which reports that 40% of COOs see themselves in a CEO or MD role within five years while 53% of their C-Suite peers believe their current COO is likely to lead the company in that timeframe.
Michael Cairns, former COO and now CEO of Publishing Technology plc, the leading provider of world-class software and services to the global publishing industry, shares his approach to preparing for and succeeding at the CEO role.
1. COO / CEO relationship
Your relationship with the CEO is the most important one you will develop within the company and you will need to get this right. If you cannot win the CEO’s trust and endorsement, the route to the top will be short. This relationship can be a hugely powerful when functioning at its optimum. By working closely together you can learn from the CEO from the outset which will allow you to identify where your skills need to be developed and work at improving these under his or her leadership. By setting out different roles and responsibilities early on you will quickly recognize how your skill set complements those of the CEO.
2. Thinking strategically
As a COO you are focused on the day to day issues of the business. Whenever possible you should find the opportunity to demonstrate your ability to think strategically. By supporting the CEO and advising on whether a strategy can be implemented at the operational level, you are helping them to define the approach that underpins their vision. More importantly, you are demonstrating your understanding of and ability to contribute to these strategic discussions, which, according to recent reports [actually by EY], some 70% of C-Suite executives consider to be an essential skill for the top role.
By thinking in this strategic way you will be more accustomed to establishing the long-term agenda and key target milestones of the business, helping you to instil the confidence of the Board once you are appointed.
3. Communicating externally
The operations role is traditionally viewed as internal, rather than client or stakeholder facing, however the increasingly competitive and tough economic business environment means that communicating operational excellence is becoming a requirement for many companies. The result is that today’s COOs need establish themselves as more than just an operations specialist, they also need to take on visible leadership roles and effectively manage client and key stakeholder relationships to perform their job effectively.
By developing these skills you will be prepared for the challenge of becoming the public face of the company when you will be required to communicate with and manage a far wider group of stakeholders, including investors. A recent report by the School for CEOs, which provides the practical tools for senior executives in the move to the CEO position, cited exposure to investors and external management and communication as the two aspects of the CEO role that required most preparation.
4. Avoiding micromanagement
A good COO will constantly review the efficiency of processes they have implemented into a business, refining as necessary to ensure optimum performance. As a result, on making the leap to CEO, you may find it difficult to take a step back and extract yourself from the minutiae of the day to day operations.
By surrounding yourself with a team that you can promote as you move up through the business, you will already be familiar with their working practises and you will have a thriving working relationship in the same way that you had with your superiors.
5. Gaining exposure to the boardroom
As a COO you may not be a board member or have direct exposure to the C-Suite and you will be unaccustomed to investing time and effort into building relationships that do not directly impact the day to day running of the business.
To compensate for this, where possible, it is important to invest in building relationships with the board as your dealings with them will be fundamental to your success as a CEO and you will quickly gain a good understanding of how they perceive you and your role or vision for the company, help you to gain their confidence.
At a public company, governance is also an area that you will have had little exposure to. At the CEO level, you may find yourself overwhelmed by regulation and paperwork and you will need to quickly free yourself from this. However, the real challenge will be around managing the softer, often complex relationships between the committee and board members.
6. Managing time
Another key skill you will need to develop will be time management. Harvard Business School research shows that CEOs spend up to 60% of their working life in meetings, with a further 25% on phone or conference call and at public events. As a COO working at the heart of the business, you may find the transition to a role where your routine lacks the structure and activity you are used to difficult to manage.
A School for CEOs, which trains senior executives to deal with the transition of stepping up to the top job, cites that 12% of newly appointed CEOs view self-management as the element of the job requiring most preparation. The CEO role also lacks the guidance and support that as a COO you may be used to and you will require discipline, strength of character to the ability to stick to your priorities.
It is a much considered fact In order to successfully make the move to CEO you will need to master the art of networking outside of the business. As COO you will have focused on managing internal relationships and politics to ensure the smooth daily running of the company but in the CEO role you will be required considerably increase your public profile.
8. Business qualifications
Recent reports suggest that there is a shift away from COOs with a more technical background to commercially aware operations executives with business degrees or MBAs, a qualification increasingly held by younger executives in their 30s and 40s. These qualifications provide a solid commercial background and help prospective CEOs become a well-rounded business person and prepare them for the more strategic requirements of the role, particularly those moving from an operations background.
MBAs are, however, often considered to be too grounded in academia and it can be argued that they don’t prepare future CEOs for the challenges of the boardroom and the management of the often difficult relationships at this level.
Although there are difficulties that may be encountered from internal appointments, research shows that CEOs hired from within deliver better business results and are likely to hold their position for a longer period of time.
Whichever route your business takes, the key issue is around succession management and it is more important than ever, with the increasing complexities businesses face, that your business has a process to identify and train motivated and qualified individuals to ensure the continuing success of the company.