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Tag >> career/management
Companies all too often stick with losing ventures despite signs of trouble, critics contend. But they acknowledge that it is often difficult to determine just how long is too long.
Still, the experts point to AOL, Google, Gillette, Michelin and Research In Motion as recent or current examples of companies that have refused to pull the plug, or delayed doing so, on products and services where margins, market share, relative growth rates and or other competitive benchmarks indicate that they would be better off investing the money tied up in them elsewhere.
The loss of one key person can be bad enough. The loss of three at one time can be devastating.
Just ask US Highland. This past week, the designer and manufacturer of motocross, supermoto and other specialized motorcycles lost president Mats Malmberg, COO Chase Bales and CFO Damian Riddoch, when their plane crashed into a wooded area near Tulsa, Oklahoma.
The market reacted immediately to the July 12 announcement. Shares fell 54 cents, or 44 percent, to 75 cents.
No doubt, the company, which in April named Bengt Andersson its new chairman, will feel the impact. It said it expected to name the executives' replacement the following day-July 13-- but as yet have not.
Such incidents bring home the need for succession planning. Whether due to an accident, unexpected departure or illness, having someone ready to step right in is critical.
Surprisingly, succession planning is often put off. However, this could cause a crisis at a company.
In fact, in a recent survey of CFOs by Robert Half Management Resources, 83 percent of those surveyed said they have not identified a successor for their positions. "It is critical for organizations to recognize that if they lose that CFO they should have at least one or two viable options for immediate succession," says David Nosal, chairman and CEO of executive leadership solutions at Nosal Partners, who placed CFO Jeff Epstein at Oracle and CFO Paul Tufano at Alcatel-Lucent.
"The last thing most entrepreneurial leaders are thinking is 'Who will take over if something happens to me?' adds Ken Luer, a corporate law partner with Ervin Cohen & Jessup. He adds that often the same thing that has driven the company to success--the dominant force of the CEO--leaves a vacuum with no clear successor having the perceived authority and leadership experience to step in and manage the company through its crisis."
The ramifications of not having a seamless CFO succession plan can be significant. In a small, early-stage company, where financial stability is the name of the game and credibility with investors is important, the sudden loss of a CFO can be devastating. The uncertainty may scare off investors, make vendors/suppliers a bit hesitant to do business with you, worry about the sustainability of the company, and of course whether they will get paid. Uncertainty just stirs unrest.
In a large public company, the financial markets will need to understand first why a CFO left (if not by death or incapacitation), and more importantly, the CEO and board's strategy for finding a replacement. The financial markets can view the sudden exit of a CFO as an early sign of instability, lack of performance, or even more significant issues, underscored by the collapse of US Highland's stock price on news of the plane crash.
So, how should companies prepare for a potential sudden departure of a key executive? Boards should have a few contingencies--successors who are "ready now," "ready in one year," or if urgent, "backups" to serve in the interim, explains Janice Ellig, Co-CEO of executive search advisory firm Chadick Ellig.
Paul McDonald, executive director at Robert Half recommends companies identify critical positions that should never be left vacant and determine which senior-level managers may leave in the next few years because of retirement or other factors. Note which senior or mid-level managers, with professional development, might be qualified to take on those roles.
Also, determine the personal and professional qualities required for success. Look for opportunities for stars to gain visibility and hone functional expertise and decision-making skills. Broaden the pool. People who are next in line for promotions are not necessarily the best leaders. Search for high-potential candidates everywhere, not just up and down the job title chain.
Says Lois Melbourne, CEO of Aquire, a workforce planning firm: "Make it a team effort. Succession planning is not just an HR effort. While the HR department facilitates discussions, it is critical that the executive team, business leaders and others within the organization remain an active part of the succession planning process."
This proxy season is shaping up as one of shareholder revolt, as more and more directors fail to receive the support of a majority of owners.
While the Corporate Library, a corporate governance research firm, is still collecting data, early indications suggest that many more directors will fail to win support from less a majority of their shareholders than in previous years.
Shareholders recently voiced fresh dissatisfaction with director R. Bruce LaBoon, who is also "of counsel" at Locke Lord Bissell & Liddell, a law firm that provides services to the company.
In its proxy statement, the company cliams that the "attorney fee arrangement with Locke Lord is negotiated on the same basis as arrangements with other outside counsel and is subject to the same terms and conditions."
As companies emerge from the recession, they are looking for new ways to grow. Ingenuity is key, and a number of companies are looking to their customers to help them drive innovation.
In the past two years, Masco Bath has turned the traditional product-development process on its head, reaching out to customers to help design new shower and bathing systems, rather than rely on in-house staff. The initiative called, Voice of the Customer (VOC), was the brainchild of president Chris Yankowich, as a way to cut costs and increase user satisfaction.
Corporate governance can make or break an IPO, according to advisory firm KPMG. Governance topped the ranking of biggest headaches faced by companies preparing to go public, recent KPMG surveys found. And Aamir Husain, national leader for IPO Services at KPMG, says that corporate governance can be such an issue that it can kill an IPO.
The work involved in improving corporate governance can be overwhelming and complex. There is compliance with SarbOx, quarterly reports with the SEC, the annual 10k, robust auditing and internal controls -- numerous systems and processes that need to be in place.
Non-profit boards are on the hot seat, much like their corporate counterparts. They are receiving greater scrutiny from policy makers, the public and the Internal Revenue Service. While the spotlight is on the board's role in ensuring compliance with the law and preventing fraud, of equal importance is leading their organizations at a time when obtaining revenue growth and controlling expenses are priorities.
Change is afoot in the non-profit governance arena. Take for example the National Foundation for Credit Counseling (NFCC). Last fall, its Member Agencies voted to change the organization's governance-transitioning from a Board of Trustees comprised exclusively of Member Agency representatives to one with a majority of at-large national thought leaders.
Companies are either surprised by the say-on-pay provision in the financial reform bill or dismissing its importance, judging from a new Towers Watson survey.
It found that only 12 percent of respondents said they are very well prepared for the say-on-pay legislation, while 46 percent said they were somewhat prepared. Some 22 percent said they didn't know if their companies were ready.
The current proxy season is giving hope to social and environmental shareholder activists they will eventually prevail on management to adopt their resolutions.
Those favoring socially and environmentally sound policies are winning historically high levels of support. While they're non-binding, increasing support for them puts pressure on managers to respond.
Michael Dell got the bees buzzing when he recently said he has considered taking his company private.
Dell has more than $11 billion in cash and investments on its balance sheet, but that doesn't tell the computer maker's whole story. "Growth has dried up, their sales have flat-lined around $60 billion, and the competition is stronger," said Andre Zdanow, chief market strategist at Charles Vista.