Only 27% of directors said their company “had adequate bench strength of insiders in its CEO talent pipeline,” according to PwC’s 2015 Corporate Directors Survey. The Walt Disney Company used to be one of these. Until April of this year, Disney seemed to have an internal successor in place to take over from CEO Bob Iger when he retired in June 2018.
However, as they say, the best-laid plans… Iger’s anointed successor was COO Tom Staggs, and in early April, he threw succession at Disney into turmoil when he unexpectedly stepped down.
Until then, CEO succession planning under Iger at Disney had gone smoothly. For approximately five years, there were two possible successors being groomed to take over the corner office. Staggs was one of them and Jay Rasulo was the other. The two had been given a variety of challenging assignments to test them and provide the breadth of experience so necessary to taking over as CEO. In fact, in 2009 they actually switched jobs, with Staggs becoming chairman of theme parks and resorts and Rasulo taking over the CFO role.
In February of 2015, Staggs was named COO, essentially elevating him to number two at the company. While it was not certain that he would eventually replace Iger, given this promotion, it was undoubtedly expected both within and outside of the company.
So what went wrong in the 14 months between his being appointed COO and leaving the company in what was delicately referred to as a mutual parting of ways?
How Jack Welch Got it Right
While much has been speculated about this situation, it may be insightful to look at another renowned succession at a different behemoth for enlightenment. GE and the transfer of power from Jack Welch to Jeff Immelt is often cited as a textbook case of great succession planning. In this situation, Jack Welch began his preparation about nine years in advance of his departure. He selected three contenders and then challenged and groomed them accordingly. A major difference in the succession strategies of Jack Welch and Bob Iger is that Welch kept his three potential successors in the dark as to his choice until the very last minute. He essentially informed the two who wouldn’t be getting the job the evening before GE announced that Jeff Immelt would become its new CEO. This swift transfer of power served to keep three highly qualified executives interested, ever-improving and substantiating themselves to compete for the top job.
Bob Iger, on the other hand, made his selection clear well in advance of the changeover. As a result, Jay Rasulo left the company, which is typical in such a situation. This left the bench bare and Disney somewhat at the mercy of Staggs. There was a risk of his not performing as expected and of course leaving the company for any of a whole host of reasons that come up in the normal course of careers and lives in general.
As it turns out, it seems that Staggs had recently been looking for some confirmation about his ascension to the role of CEO. Since he left the company, we must assume he didn’t receive the assurance he was seeking. So after all the planning, perhaps the succession was not as clear as had been hoped. Continued and/or continuous calibration and appraisal is good for a company, but the lack of alternatives is not. Timing and risk mitigation are essential elements in succession planning. As we see with the Disney story, it is a job far more complex than simply selecting who seems to be the best contender.