This month, two FTSE100 companies announced a chairman exchange with Aviva’s John McFarlane departing to take the chair at Barclays. His replacement, Sir Adrian Montague, a seasoned chairman of companies from British Energy to Friends Provident, had been in the wings since January, when he arrived as non-executive director.
Barclays’ share price rose and The Daily Telegraph said that the reshuffle showed ‘seamless succession planning among Britain’s biggest companies’.
Earlier that week, however, DIY stores group Kingfisher had a less positive reaction after announcing that its chief executive Sir Ian Cheshire was to be succeeded by Veronique Laury, chief executive of the group’s French operation.
‘Previously she wasn’t on the main board, merely the group executive, nor was she even head of France,’ complained Jonathan Pritchard, an Oriel Securities analyst.
Welcome to the impossible job of organising and communicating chief executive and chairman succession.
For every succession announcement that goes down well in the City, there seems to be one that doesn’t.
Take Britain’s supermarkets. ‘The king is dead. Long live the king,’ commented The Guardian on J Sainsbury’s internal promotion of Mike Coupe to succeed long-serving chief executive Justin King this year.
Tesco, in contrast, caused consternation with its ousting of under-fire chief executive Phil Clarke and surprise hiring of Unilever’s global personal care boss Dave Lewis.
‘We know that Dave Lewis can sell soap. Can he really run Tesco,’ commented The Observer.
What did Kingfisher and Tesco get wrong that Barclays, Aviva and Sainsbury’s apparently got right?
‘The media hates being surprised and there’s a degree of expectation management that has to take place with most succession plans,’ is the view of Tim Burt, managing director of communications agency StockWell.
‘The Barclays’ announcement was heavily trailed. Nobody guessed who was going to be appointed. But when it becomes public that a search is taking place, the appointment of the eventual successful candidate isn’t subject to questioning over the rationale for making a change or the timing or what it means for the company’s operational future.
‘It’s much harder to manage either when somebody is resigning suddenly or being forced to leave. Then it becomes a case of communicating why the new executive has the credentials to maintain the growth story or turn it round.’
Each succession is different, however, and they are invariably multi-faceted.
‘There’s nothing quite as sensitive in the life of a company as the succession of the chief executive,’ says Alistair Smith, Barclays’ director of retail and business banking communications who handled the chief executive successions of Bob Diamond from John Varley and current chief executive Antony Jenkins from Diamond.
‘It is extremely important to an institution with a transition from one chief executive to another a significant event in the life of a corporation. And because it is about people, it also has a very important element for both the outgoing and the incoming executives,’ says Smith.
Others paint a picture of succession communications being about anonymously unruffling feathers, calming egos and seamlessly trying to ensure that a new appointee ends up smelling of roses.
‘The challenge where there’s a chief executive going and a new one coming in at the same time is that you have two senior stakeholders and both have to be happy with the process,’ says one communicator.
‘One needs to feel his legacy is suitably respected, lauded and praised, while the other has to feel confident he is being positioned as the right man to take things forward.’
Even in internal successions at companies with good performance, this is not as easy as it sounds.
‘You have to remember that members of the senior management team often have very interesting and quite complicated relationships between themselves,’ says one head of PR. ‘Succession brings those sharply into focus because it suddenly means it’s all about them, rather than about the smooth-running of the company.
‘The positioning is always that you have an orderly procession that’s terribly smooth with all executives quite happy about everything. But the reality is quite often that they’re all quite tense about it and some may be unhappy about what’s happening, the way it’s happening or its positioning.’
Despite all this, can some areas of chief executive succession and their communication be planned in advance?
‘The key thing is to be involved as early as possible,’ advises Louise Shield, head of communications at insurer RSA Group, who handled the communication of the succession of Simon Lee from Andy Haste and then Lee’s sudden replacement by outside hire Stephen Hester.
‘There are obviously areas of confidentiality but the earlier that a communications team can get involved, the better prepared it will be,’ she says.
‘Once you’re aware of a search, do lots of research and make sure you understand if there are any issues between an incoming chief executive and any journalist. You need to understand their history, the key information about them and their background and draft questions and answers for them.’
Shield also advises that communication teams spend time with new chief executives to understand their tone of voice and method of communication with the media.
In addition, she believes communications teams should not be afraid of ringing their opposite numbers at the company from which a new chief executive is arriving to discuss handover issues.
‘The key for us is to make sure that the key set of messages of our staff, customers, analysts and investors are integrated and that we have a proper stakeholder plan,’ she says.
Of course, many executive changes are unexpected and cannot easily be foreseen.
Anthony Frost, head of communications at Santander UK, this month had to deal with the sudden departure of UK chief executive Ana Botin to succeed her late father Emilio, chairman of the Spanish parent group.
He also recalls having to respond several years ago when the company’s previous UK chief Antonio Horta-Osario departed for Lloyds Banking Group, taking with him five executives.
‘If you have a move like Ana’s or Antonio’s that you weren’t expecting you’ve got to move very quickly to keep staff informed,’ he says. ‘You’ve clearly got to follow the regulatory code on announcements but the hard part is how you keep your staff informed and engaged, ahead of the media commentary.
‘You need to get a note out to staff very quickly so they understand what it means. You cannot anticipate these things.
You don’t know they’re going to happen and you have to keep staff informed about what’s happening and why.
‘To me, succession communication is all about how you deal with internal communications and make sure that whatever happens, staff don’t see it as a kneejerk but as part of a smooth plan.’
Frost advises keeping on file a succession communications template governing what to do in the event of having to make an emergency announcement.
‘You can fill in the blanks when you know the details of something but it’s important to have a template and a process,’ he says.
Part of the task, particularly when there is an enforced interregnum, is quelling unhelpful media rumours.
Nick Green, partner at headhunters MWM Consulting, believes communicators should stay as tight-lipped as possible. ‘Before it’s announced, playing out in the press who is going to be the next chief executive isn’t helpful to any of the protagonists or to the business,’ he says. ‘These things are not best done in the public gaze but it is increasingly becoming a sport for journalists to break big appointments. It doesn’t help the businesses themselves or the executives and we would advise companies to say as little as possible.’
Michael Sandler, chairman of Hudson Sandler, adds that even on the day of the announcement, it is well worth keeping new chief executives relatively quiet.
‘Nine times out of ten they’ll be in another job and can’t say anything,’ he says. ‘When a new chief executive takes over, they should say as little as possible for as long a time as possible. But you have to tell your shareholders that they will come back with a clear strategy once they have assessed the company.’
Other parts of a communicator’s job, however, start all over again when a new chief executive is appointed.
‘When it’s an internal appointment and someone goes from being one of the top team to top dog, they need to quickly grasp that everything they do is now interesting to people,’ says one in-house operator.
‘The media become interested in what their wife and children do with their time and there is a lot of coaching and support to get people to understand that they have forfeited a lot of privacy and may need to be more cautious in what they do.’
Another communicator advises finding out very early on which necessary important relationships a new arrival doesn’t have, and putting these in place fast.
If it sounds an exhausting schedule, communicators can at least take some solace from the fact that the average FTSE100 company chief executive now lasts about five years. This is a game of musical chairs that is best not played too often.