5 Top Corporate Succession Fails

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Pirate Bold. Wikimedia Commons, public domain

In spite of the fact that succession planning is identified as a critical and strategic component of HR management, even major international corporations often get it wrong. Here is a quick review of what we consider to be some of the more damaging succession fails in the past few years.

J.C. Penny

Ron Johnson was brought in to J.C. Penney as CEO to preside over an attempted company makeover. While he was busy abolishing price markdown sales in favor of a “Fair and Square” pricing strategy and attempting to turn traditional retail stores into something more like Apple outlets,  J.C. Penney’s stock dropped from more than $40 in March of 2013 to less than $20, with a third-quarter loss of $203 million. After a short and painful tenure, Johnson was let go and replaced by his predecessor, Myron Ullman, III.

RIM/Blackberry

Embattled by shrinking sales and market share, Blackberry (the company formerly known as RIM) changed its name and brought in Thorsten Heins to execute a turnaround. Heins, with a strong track record at Siemans, was the candidate put forward by founders Jim Balsillie and Mike Lazaridis. Instead of revitalizing the company, however, Heins failed to inspire, made a number of strategic errors, and watched the stock continue to slide during his brief tenure which, according to hedge fund investor Eric Jackson, “turned out disastrously.”

Nokia

Stephen Elop left his role at Microsoft to take on the role of CEO at Nokia in September, 2010. One of his first actions was to issue a company-wide memo entitled “Burning Platform,” which suggested that the company was in dire straits if it did not embrace significant change. This somewhat demoralizing beginning was followed by plummeting revenues and profits culminating with an 81% slide in share value. Elop concluded his time with Nokia by negotiating the sale of its mobile division to Microsoft and accepting the role of Vice President, Devices & Services with his former employer.

HP

Hewlett Packard has the dubious distinction of cycling through multiple CEOs, none of whom has been able to turn around the company in crisis. After 6 years as CEO, Carly Fiorina was forced by the board to resign in 2006 in response to inconsistent profits and concern over her handling of the Compaq acquisition. She was succeeded by Mark Hurd who focused on cost cutting during his time as President and CEO. In addition to the loss of thousands of jobs, HPs culture of employee autonomy and innovation were also casualties of Hurd’s bare-bones approach. After 4 years, Hurd resigned following a sexual harassment investigation.

HP’s next President and CEO was Léo Apotheker, a former SAP co-CEO who lasted less than one year before being fired. During his short tenure, HP lost more than $30 billion in market capitalization. In January of 2011, Meg Whitman was appointed President and CEO of HP with a promise to refocus on HP’s strengths. Unfortunately, in May 2013, Bloomberg named Whitman the "Most Underachieving CEO" after HP underperformed the market by 30% during her tenure. The HP story may yet have a happy ending as Whitman’s strategies are apparently beginning to take hold. Perhaps the revolving CEO door at HP has stopped turning for now?

The Silk Road

Although the Silk Road occupies a distinctly different business category from the previous succession fail examples, it was such a spectacular example that we had to include it. To provide some context, the Silk Road (not the HCM software) is an online anonymous platform of exchange for buying and selling just about anything—including illegal drugs and weapons. Here is a brief summary of this complicated and unique succession fail:

Pirate flag of Jack Rackham. Wikimedia Commons, public domain.
  • On October 2, 2013, the FBI arrested Ross William Ulbricht, identifying him as the founder and chief operator of the Silk Road, although he was known only as the "Dread Pirate Roberts” online.
  • Charging Ulbricht with suspicion of drug trafficking, soliciting murder, facilitating computer hacking, and money laundering, the FBI shut down the Silk Road and seized assets in the form of Bitcoin worth approximately $3.6 million.
  • As one might expect from a crew of pirates, a little illegality was not going to stop such lucrative trade. On November 6, 2013 Forbes  reported that Silk Road 2.0 was up and running with a new Dread Pirate Roberts at the helm. The new “CEO” promised business as usual with heightened security. 
  • Sometime in November (perhaps after a pirate power struggle), Dread Pirate Roberts II abruptly gave up control of the site to another successor with the screen name Defcon.
  • On February 13, 2014, Defcon announced that Silk Road 2.0's escrow accounts had been hacked and the all the bitcoins in escrow (approximately $2.7 million) had been stolen.

From an FBI takedown to pirates hoist with their own petard, the Silk Road story of succession is surely one of the most bizarre.

Succession Planning not Succession Panic

What all of these succession fails have in common is a lack of planning. All were reactionary, based on either a sudden crisis or cumulative problems that had been allowed to fester within these organizations. The challenge with reactionary succession decisions is that they amount to fire-fighting instead of fire prevention. And, if you’re always putting out fires, something has already burned.

Not only does pro-active succession planning ensure that well-prepared leaders are available to step into the breach when a leadership gap emerges (or is initiated by the board…or the FBI!), it also strengthens the overall leadership team so that such breaches are less likely to occur. If everyone in the organization understands that leadership is a joint accountability and each executive is actively developing a successor (or two), the chances of an ineffective CEO irretrievably damaging the company are reduced.

 

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