Chris Ryan | OJO Images | Getty Images
The recent news out of Starbucks that Kevin Johnson will be stepping down as CEO on April 4 and founder Howard Schultz will again be leading the company puts the critical process of CEO succession planning back into the spotlight.
Selecting the right leader for an organization is arguably the most important job of a board of directors. Mellody Hobson, the independent chair of Starbucks‘ board, said directors knew of Johnson’s desire to step down a year ago and that a new CEO would be in place by the fall.
Even the most innovative strategies or the best financials are not enough without the right leader at the helm. Now, changes in the wake of the Covid-19 pandemic coupled with rising stakeholder activism are reshaping succession planning. The ability to manage rapid digital transformation, flexible and remote schedules, and the overall changing nature of work means boards are having to rethink the skills they’re looking for in a top leader.
Directors are also needing to replace CEOs more often during their own board tenures. In 2020, 56 S&P 500 CEOs resigned, an increase of 30% over the prior decade, according to data from executive search firm Spencer Stuart. Of those who quit in 2020, 20% did so under pressure, up from 13% a year earlier.
Yet too often, boards are caught unprepared when a CEO retires, steps down, or is forced to leave. “If you believe that the primary responsibility of the board is getting the right leader in place, and it is, then a company should never be caught by surprise when a CEO has to be replaced,” says Maria Moats, leader of PwC’s Governance Insights Center. “There should always be an emergency plan in place.”
One of the reasons why succession planning often turns out to be such a painful process, she says, is just simple human nature: it can be an uncomfortable conversation.
Talking to a newly installed CEO about the process of replacing him or her is not what most board members relish about the job. A PwC survey shows that the single biggest reason why directors struggle with more timely and effective succession planning is because the current CEO is performing as expected and therefore there’s little urgency to focus on the process.
The other barrier standing in the way of better succession planning is often board priorities. When a company is early in a CEO’s tenure, there are a number of competing business initiatives that are critical for the board, says Stephen Schwanhausser, global managing partner at Heidrick & Struggles.
“If a board isn’t prescriptive about about succession planning early in the process then it becomes harder to have these conversations the closer they get to the point of change,” he says. “Boards have to plan it out far enough in advance that they can do it thoughtfully and clearly while also managing all the other priorities in the business.”
Moats says the easiest way to prioritize succession planning is for the full board to review its plan at least once a year. The goals of the process, details of the candidate development process, and the timelines for each step the board will take should all be part of the planning process.
This is also where the chief human resources officer comes in. “If the board owns the CEO succession planning process, then the CHRO owns the talent management role in the company,” Moats says. Involving the CHRO gives the board an opportunity to look at candidates one level below the CEO. If an internal candidate is selected as the new CEO — as is often the case, Moats says — the CHRO will understand the impact on other senior executives and what it will take to retain top talent. In a highly competitive jobs market this is an especially important point, Moats adds.
A recent PwC survey shows that hiring and retaining talent throughout the organization (and not just the C-suite) is the top priority of 88% of directors surveyed, outranking digital transformation initiatives and new product development.
Cynthia Stoldt, CEO of Aherne Executive Search, says she is witnessing that priority shift in her company’s CEO searches. “Because employee retention is so critical now, everyone is paying very close attention to the way transitions are carried out,” she says.
She cites as an example a recent CEO search she did for a consumer company. The organization was experiencing double-digit growth and was able to avoid layoffs throughout the pandemic and beyond. “Employees there felt very secure and motivated,” Stoldt says.
For personal reasons the CEO needed to resign and Stoldt’s firm was charged with finding his replacement. “This leader was very confident and energizing and we needed to replace him with someone who would instill that confidence in a way where the company would not lose any of their other top-tier talent,” she says. Stoldt says looking for that kind of “stylistic fit” was probably something she would not have prioritized in years past.
“The searches now are all being done with an eye for retaining top talent,” she says.
As CEO tenures shrink and stakeholders demand that companies represent the values they hold dear, it’s up to boards to find the types of CEOs who can best reflect these changes.
“The next generation of employees are demanding very different things from their leaders,” says Schwanhausser. “That puts a different kind of pressure on the CEO role and requires boards to rethink the kinds of leaders they’re going to be choosing.”
To join the CNBC Workforce Executive Council, apply at cnbccouncils.com/wec.
3 rules to follow for a successful open relationship from therapist
Open relationships among celebrities — Shailene Woodley, Angelina Jolie, and, perhaps most notably, Will and Jada Pinkett Smith — have been conversation fodder for years. The dynamic is often dismissed as a Hollywood arrangement that can only be maintained by iron-clad NDAs.
In recent years, though, non-monogamy has become increasingly mainstream. About one in four adults is interested in having an open relationship, according to 2021 YouGov poll of 23,000 Americans.
Opening up a relationship can actually strengthen it, says Avital Isaacs, a therapist at Manhattan Alternative Wellness Collective, a mental health practice that serves queer and trans people, non-monogamous people, and sex workers.
“In a monogamous relationship, there is a typified kind of foreclosure,” she says. “The relationship is defined by what you don’t do and it can feel like a real reduction of self. There is less that you are actively doing with your partner.”
Non-monogamy allows you to explore more experiences that you otherwise might not have in a monogamous relationship. It can also help remind someone that their partner is desirable. “Seeing them go on dates with other people may inspire a sense of wanting to earn this person’s love and care,” Isaacs says. “For some people, that’s a big motivator, instead of taking each other for granted.”
An open relationship tends to work best if you navigate it thoughtfully, says Megan Hanafee Major, a therapist who works with couples, marriage, gender, and sexuality based in the greater Chicago area.
“Most successful open relationships follow general rules around boundaries, communication, and goals,” she says.
If you’re interested in exploring an open relationship, here are Major’s three tips to get you started.
1. Define which kinds or relationships are OK
Decide if any types of relationships or people are “off limits,” Major says. “Communicate if you or a partner has a primary relationship that will take priority, and think about what type of information you share with other partners.”
Maybe being open means physical intimacy but not emotional. Whatever it is, you need to communicate your boundaries.
“Take time to think about personal boundaries as well as relational ones,” she says. “Know that it is OK to adjust these if needed, but respecting others’ boundaries and expecting them to do the same for you is a must.”
2. More communication is always better
In any relationship, communication is paramount. In an open one where expectations are even less clear you need to be more conscious about what you’re negotiating with your partner, Isaacs says.
“When you’re in a monogamous relationship you’re doing the framework provided for you based on our society and culture,” she says. “We prioritize and understand romantic relationships to be exclusive. If you’re in an open relationship, our cultural structures and systems are not designed for you.”
That can put you in uncharted waters.
For example, she says, you get a “plus one” at a wedding or a holiday party, not a “plus whoever you’re in a relationship with.”
Major agrees that when you’re bucking societal norms and creating a more unique dynamic between you and your partner, clear communication becomes even more necessary. “Personally, I am of the mind that more communication is nearly always better than less,” she says.
Be specific when discussing the parameters of your relationships. “Communicating to partners about expectations, logistics, like time commitments, and desires, allows trust and vulnerability to build and hold over time. Not only will this help manage any misunderstandings that arise — they are inevitable — but will show your partners that you value them, their thoughts, and their time.”
3. Know what your goals are and communicate if they change
Make sure you, your primary partner and potential new partners are all on the same page.
Some questions you can ask yourself, Major says, include:
- Do you hope to spend time doing specific activities?
- Would you like your partners to know one another?
- Are there certain things that you want to explore sexually or romantically?
“Goals may be different from relationship to relationship and are bound to change over time,” says Major. Being clear about them can alleviate hurt feelings and mixed messages down the road.
Florida Gov. Ron DeSantis declares emergency as storm is expected to hit Florida
Florida Governor Ron DeSantis campaigns for Republican Senate candidate J.D. Vance during an event run by Turning Point Action in Youngstown, Ohio, U.S., August 19, 2022.
Gaelen Morse | Reuters
Florida Gov. Ron DeSantis has declared a state of emergency for 24 counties as Tropical Storm Ian gathers strength over the Caribbean and is expected to bring heavy rain and hurricane-force winds to the state next week.
DeSantis issued the order Friday encouraging residents and local governments to make preparations as the storm moves toward the state. He has also requested a federal pre-landfall emergency declaration.
“This storm has the potential to strengthen into a major hurricane and we encourage all Floridians to make their preparations,” DeSantis said in a statement. “We are coordinating with all state and local government partners to track potential impacts of this storm.”
The National Hurricane Center said Ian is forecast to rapidly strengthen in the coming days before moving over western Cuba and approach Florida next week with major hurricane force.
John Cangialosi, a senior hurricane specialist with National Hurricane Center in Miami, said it is currently unclear where Ian will hit hardest in Florida and said residents should begin preparing for the storm, including gathering supplies for potential power outages.
“Too soon to say if it’s going to be a southeast Florida problem or a central Florida problem or just the entire state,” he said. “So at this point really the right message for those living in Florida is that you have to watch forecasts and get ready and prepare yourself for potential impact from this tropical system.”
The governor’s declaration applies to Brevard, Broward, Charlotte, Collier, DeSoto, Glades, Hardee, Hendry, Highlands, Hillsborough, Indian River, Lee, Manatee, Martin, Miami-Dade, Monroe, Okeechobee, Osceola, Palm Beach, Pasco, Pinellas, Polk, Sarasota and St. Lucie counties.
Meanwhile, strong rain and winds are lashing the Atlantic Canada region as a powerful post-tropical cyclone made landfall there, with forecasters warning it could be one of the most severe storms in the county’s history. Fiona made landfall in Nova Scotia before dawn Saturday.
More than 500,000 customers in Atlantic Canada have been affected by outages. Ocean waves pounded the town of Port Aux Basques on the southern coast of Newfoundland, where entire structures were washed into the sea.
Britain’s lurch to Reaganomics gets thumbs down from markets
Truss has now put the country on an economic road completely at odds with most, if not all, major global economies.
Hannah Mckay | Reuters
LONDON — New U.K. Prime Minister Liz Truss may have talked big on “trickle-down economics” during her campaign trail this summer, but no-one could have predicted the swathe of tax cuts unleashed just weeks into her Downing Street tenure.
Billed as a “mini-budget” by her Finance Minister Kwasi Kwarteng, Friday’s fiscal announcement was anything but with a volume of tax cuts not seen in Britain since 1972.
Truss — whose “Trussonomics” policy stance has been likened to that of her political idols Ronald Reagan and Margaret Thatcher — has now put the country on an economic road completely at odds with most, if not all, major global economies as inflation boils over and a cost-of-living crisis barrels into Europe.
It’s been seen, even by some of her advocates, as a political and economic gamble with Truss yet to face the wider British electorate in a nationwide vote — unlike her predecessor Boris Johnson.
Market players immediately predicted that Britain would have to scale up its bond issuance and significantly increase its debt load to pay for the cuts — not typical of the low-tax Conservative governments of the past.
U.K. bond markets went into a tailspin Friday as investors shunned the country’s assets. Yields (which move inversely to prices) on the 5-year gilt rose by half a percentage point — which Reuters reported was the largest one-day rise since at least 1991.
And with bonds tanking, sterling was also sent into freefall after hitting 37-year lows against the dollar in recent weeks. It ended Friday down nearly 3.6% against the greenback. On the week it lost 5% and is now down 27% since just before the 2016 Brexit vote.
Wall Street banks are now seriously considering a break lower to parity with the U.S. dollar — for the first time in history — and many commentators have likened the pound to an emergency market currency.
Left-leaning The Guardian newspaper called it “a budget for the rich” on its front page Saturday, while The Times called it a “great tax gamble.” The right-wing Daily Mail newspaper called it a “true Tory budget” while Kwarteng himself said it was a “very good day for the U.K.,” declining to comment on the currency moves.
ING analysts said in a research note that investors are worried that the U.K. Treasury has now effectively committed to open-ended borrowing for these tax cuts, and that the Bank of England will have to respond with more aggressive rate hikes.
“To us, the magnitude of the jump in gilt yields has more to do with a market that has become dysfunctional,” ING’s Senior Rates Strategist Antoine Bouvet and Global Head of Markets Chris Turner said in the note.
“A number of indicators … suggest that liquidity is drying up and market functioning is impaired. A signal from the BOE that it is willing to suspend gilt sales would go a long way to restoring market confidence, especially if it wants to maximise its chances of fighting inflation with conventional tools like interest rate hikes. The QT [quantitative tightening] battle, in short, is not one worth fighting for the BOE,” they added, referencing the Bank’s move to normalize its balance sheet after years of stimulus.
ING also noted that the U.K.’s long-term sovereign outlook is currently stable with the big three ratings agencies, but the “risk of a possible shift to a negative outlook” could come when they are reviewed (Oct. 21 and Dec. 9).
Deutsche Bank analysts said, meanwhile, that the “price of easy fiscal policy was laid bare by the market” on Friday.
“[Friday’s] market moves suggest that there may be a credibility gap,” Sanjay Raja, a senior economist at Deutsche Bank, said in a research note.
“A plan to get the public finances on a sustainable footing will be necessary but not sufficient for markets to regain confidence in an economy sporting large twin deficits [the U.K.’s fiscal and current account balances],” he added.
“Crucially, with fiscal policy shifting into easier territory, the onus may now fall on the Bank of England to stabilise the economy, with the MPC [Monetary Policy Committee] having more work to do to plug the gap between expansionary fiscal policy and tightening monetary policy.”
—CNBC’s Karen Gilchrist contributed to this article.
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