Inside the Mysterious World of Tech CEO Succession Planning
Software arch-rivals SAP and Oracle take starkly different approaches to CEO succession planning, as do 'frenemies' Microsoft and Apple. Who's right? Customers and analysts say more information on who will be steering the ship is better.
Wed, June 03, 2009
At SAP's 2009 Sapphire Show, Leo Apotheker gave no ordinary keynote presentation. In Apotheker's first opportunity to speak to the masses as SAP's sole CEO, he officially took the ceremonial CEO reins from retiring Henning Kagermann, his long-time friend and his co-CEO for the past year.
Apotheker's 75-minute opening address on SAP's newest BI app BusinessObjects Explorer also represented the culmination of a carefully orchestrated, years-long succession-planning process that the German ERP software giant follows.
The process first came together when Dietmar Hopp handed the reins to Hasso Plattner, who eventually passed them to Kagermann and now on to Apotheker. It's a process "not formalized in a way that someone ever wrote it down," says Herbert Heitmann, chief communications officer and head of SAP global communications. But somewhere along the way during the past 37 years of SAP's existence, Heitmann says, the CEO succession plan became inherent in SAP's "corporate DNA."
SAP's highly visible and lengthy CEO transitions serve several purposes, Heitmann says: To familiarize partners, analysts, investors, the media and its own employees with SAP's "management bench"; to acclimate the up-and-coming talent to life in the executive suite and, presumably, to see who sinks and who swims; and lastly, he says, to show that "this company is not dependent on any one individual in any capacity."
SAP's methodical and transparent process for its top spot stands in stark contrast to that of its chief competitor Oracle. For decades, Oracle has been reluctant to even hint at a potential successor for legendary CEO Larry Ellison, and heirs apparent have been reticent to talk about their futures, lest they become too much of a superstar for the ego-driven Ellison's liking and find themselves shown to the door.
By comparison, Microsoft's Bill Gates-to-Steve Ballmer transition closely mirrored SAP's strategy, while Steve Jobs' absence at Apple's helm (due to health issues) has created turmoil and unwanted media attention. Of course, each company keeps chugging along amid a global recession, churning out new products and making money. Life has gone on without Gates in Redmond, just as it has without Jobs giving keynotes.
This raises a prickly question, though: How much do these companies' grooming strategies or lack thereof really matter today?
Cult of Personality
Silicon Valley's story is laden with heavily-romanticized chronicles of tech-entrepreneur-cum-industry-luminary—where, in essence, the charismatic CEO is uniquely intertwined with the high-tech company and, sometimes, even the product. For better or worse, the head honcho is the brand. (See: Ellison, Lawrence J.; Jobs, Steven P.)
"Succession planning has not been a forte of high-tech," says Vinnie Mirchandani, a former Gartner analyst and founder of software-buying consultancy Deal Architect.
The quixotic notions of yesteryear have, however, run into modern-day, big-business realities—public companies with high-fallutin' boards of directors, interested shareholders, probing financial analysts and an always-on media universe living in a post-Enron world.
Not surprisingly, then, the first CEO transition in many high-tech companies is from adorable but befuddled entrepreneur to respectable business person (a.k.a. the grown up), "who is savvy in terms of communication, marketing and really being able to navigate ahead of the issues," says Ray Wang, VP and principal analyst at Forrester Research. "Customers worry about financial viability and stability first and then, of course, what the performance, functionality of the product on day to day basis."
So while succession planning may not be as sexy as, say, innovation, social media or green technologies right now, it does indeed matter. Just look at the undesired attention and financial duress that Apple has endured since Jobs' health issues surfaced: a roller-coaster stock market ride for Apple tied to every Jobs' announcement and unsubstantiated rumor. In that case, an argument can be made that Jobs' persona as "The Pirate of Silicon Valley" is having a negative effect on Jobs' role as "The CEO of Apple" and the company itself.
"Tech is still a young and entrepreneurial industry that most boards will not proactively push to say, 'Where is the succession plan?'" says Mirchandani. "And Wall Street almost does not want to hear that there is succession because so much is built around the personality of the entrepreneur."