Succession Planning: Shifts in Executive Seats
Written by Barb Arth, Senior Analyst, Bersin & Associates
CEO replacement is white hot and has dominated news headlines in recent months. In November, longtime Ford executive Dianne Craig became Ford of Canada’s president and CEO, succeeding David Mondragon. In October, long-time IBM executive Virginia Rometty succeeded CEO Sam Palmisano, who is retiring at the end of this year. In September, after ousting Leo Apotheker, HP named Meg Whitman to be CEO. In August, former chief operating officer Tim Cook succeeded his iconic predecessor, the then-ailing Steve Jobs, as Apple CEO. (Jobs subsequently died in early October from pancreatic cancer.)
With changes at the top of so many high-flying companies, the topic of succession management and corporate governance is au courant. Having a visionary at the helm is an asset but also a liability. What happens when they fade out? Will your organization stay competitive? Will it even be able to survive? Bersin & Associates’ research shows that only 19 percent of the large organizations we recently surveyed (for our upcoming High Potential Leader research study) have a business-integrated strategy to identify and develop high-potential leaders. Nearly half the companies we surveyed have only an ad-hoc or locally-managed approach, or no approach at all. Yet, the demand for leader talent, particularly C-suite talent, is on the rise.
Whether CEOs or other top leaders leave because of retirement, illness, or the lure of a better offer, responsible Boards of Directors are asking company executives about future staffing strategies -- and they should be. The board’s role, after all, is that of a watchdog to ensure business continuity and viability.
Filling the shoes of a company’s visionary is challenging even with the best succession management playbook in place. Without it, it is nearly impossible. Grooming executives is an art that needs to be planned, methodical, and targeted. The process should begin at least two years before a new executive needs to be in place. It starts with defining the purpose, priorities, and challenges of the executive-level role and considering talent demand and supply constraints and availability. Next, through the use of pre-defined criteria, high-impact organizations identify potential successors and design targeted development plans to include high-value experiences such as coaching, mentoring and action-learning. Experiential assignments may include job rotations, special assignments, cross-functional assignments and stretch assignments that take the executive beyond his or her comfort zone.
In the case of IBM, Palmisano was given a broad range of top jobs, before his predecessor, the legendary Lou Gerstner, gave him responsibility for managing the company’s day-to-day operations as president. For example, Palmisano at various times ran IBM’s services, PC and enterprise systems groups. At Apple, Jobs groomed Cook in a similarly disciplined way. Cook, a former IBM executive, started his career with Apple in 1998 as senior vice president of operations. Subsequently, Jobs gave him responsibility for Apple’s worldwide sales and its Macintosh division. Seven years later in 2005, Cook was named COO in a careful and deliberate move that positioned him as Jobs’ right hand person.
Through the lens of their respective, well- defined development approaches, IBM and Apple took the steps necessary to ensure successful transitions into chief executive positions within their respective organizations. Gerstner and Jobs personally oversaw and improved the opportunities for their successors to absorb the organizational DNA that had been carefully constructed over the years to keep the company processes replicable.
In other words, Gerstner and Jobs drafted the frameworks that allow their successors to continue the triumphs of the companies they had built. Strong succession plans are the very means by which CEOs, and the successors that they groom, break down fiefdoms, institutionalize thought leadership, create inclusive culture, build collaboration and global connectedness, and regularly turn out insanely great products, solutions, and services. They allow successive generations of top leaders to keep a company competitive, thriving, and game-changing.
I suspect that by now, you are benchmarking your own organization against these best-in-class succession management standards that these high-flying companies adhere to. How high are you flying? Are you ready for take-off?
Six issues at the top of tax and finance leaders’ agenda
New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.
According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.
And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.
Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.
Trend 1: Businesses seek more strategic counsel from tax
Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.
According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”
Trend 2: Tipping point for resourcing models
Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.
Trend 3: Digital tax administration is moving faster than expected
in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.
"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."
Trend 4: Data simplification and lower-cost resourcing are top priorities
Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.
At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”
Trend 5: Skillsets are shifting
Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.
Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact
Trend 6: 2020 brought productivity improvements
Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.