September 19, 2006 4:00 AM PDT
Choosing tech's heirs with care
But investors and customers should hope that someone inside those two Silicon Valley tech giants has done a lot more than just imagine a day when someone else is running the company. At some point, they'll have to deal with an issue nearly every tech outfit must face: What does a company do when the person who personifies it either cannot or does not want to remain the CEO?
Increasingly, companies are putting into play succession plans that they've been working on for years.
For every Apple or Oracle--where the potential heir to the chief exec's office is a mystery to the outside world--there are many other big tech outfits that have carefully and even publicly groomed the CEO-in-waiting. At many of these companies, CEO succession planning has been a meticulous process that's downright...old industry.
This year, tech companies have seen some major transitions. In April, Sun Microsystems co-founder Scott McNealy stepped aside as CEO, making way for longtime understudy Jonathan Schwartz to take the wheel. Bill Gates firmed up his post-Microsoft days in June, outlining plans for his last day at the company in 2008 as part of a gradual process that has unfolded over the past few years.
In fact, industry watchers say that lack of a publicly known succession line at some big tech companies shouldn't be all that surprising. What should be surprising, they say, is that in recent years so many big tech companies--Sun, Microsoft, Dell, Intel, Advanced Micro Devices and Symantec among them--actually have managed to pull off relatively smooth transitions to new CEOs. After all, this is an industry built by entrepreneurs who guide their companies with charisma, ideas and a good deal of hardheadedness.
"A lot of these companies depend very much on the personality and skills of just one individual, so the transition is not easy," said venture capitalist Mark Dubovoy of Leapfrog Ventures.
Much of the planning for future leaders takes place in ongoing conversations between the directors of a company and current executives, said Stephen Mader, vice chairman of executive search firm Christian and Timbers. Board members draw up criteria for their search by considering the current state of the company and its eventual goals.
This, of course, is a delicate matter, as most boards are loathe to share their decision-making process with the outside world before they are ready, Mader said. Not only do they not want to make the public think they are considering a change at the top, they do not want to set off a flurry of internal maneuvering for the job, he said.
"You're sucking the juice out of your organization while you're trying to run a succession," Mader said. Part of the problem is that only one person can win the spot as the heir-in-waiting. Those who fall short aren't the best fit for that company's CEO job, but are likely very talented executives who might choose to seek their fortunes elsewhere if snubbed during the succession planning process.
"General Electric can afford that, but your ordinary company can't, certainly not your typical technology company," Mader added. That said, McNealy, who adopted the Six Sigma management principles of former GE CEO Jack Welch, managed to pull it off.