Target is the latest major US brand to replace its chief executive, following other recent examples such as Ford, General Motors, and Symantec. Though the circumstances vary widely across those examples, experts tell PRWeek there are general rules for communicating a smooth transition in a company’s top job.
Target and Symantec did so partly in response to corporate crises that shook investor and customer confidence. Others, such as Ford, made changes at the top due to more favorable events, like the CEO’s retirement.
Regardless of the circumstances, there are a number of "golden rules" to follow when announcing succession plans. The guidelines can help corporate communicators navigate leadership transitions, which are becoming more frequent because of the shrinking average tenure of the CEO, according to a decade of research from The Conference Board.
The outgoing chief executive should serve as a bridge
At a town hall meeting last week, which the automaker streamed online, Ford said COO Mark Fields will succeed Alan Mulally when he retires on July 1. Mulally is widely credited for turning around the iconic automotive brand while other Detroit-based rivals were bailed out by the federal government, so there was the risk of turning the event into a celebration of his career.
With that in mind, corporate PR pros were impressed by the restraint.
"Even in a great situation such as Ford where you have a phenomenal CEO in Mulally, you don’t want to dwell too much on what he has done in the past," explains Marian Salzman, CEO of Havas PR North America. "The announcement really needs to be about conveying the vision of what is next."
She notes that "Ford celebrated Mulally, as they should have, but in a way that also explained how he laid the groundwork for what will come."
PR pros say the outgoing CEO should whenever possible serve as a bridge to new leadership, even in cases where he or she is leaving under less-than-ideal terms.
Target announced the departure of president and CEO Gregg Steinhafel on Monday, about five months after a massive data breach during the holiday shopping season resulted in the theft of 40 million debit and credit card numbers. The departure demonstrates that the discount retailer wants to wipe the slate clean.
But the company’s board also issued a statement in which it thanked Steinhafel, itemized his accomplishments, and noted that he "created a culture that fosters innovation and supports the development of new ideas." He will serve in an advisory capacity during the transition to a new leader.
Scott Farrell, president of global corporate communications at GolinHarris, says, "You shouldn’t see major differences in the announcement between Target and Ford. But when a CEO departs under less-than-desirable circumstances, there is a knee-jerk reaction by some to no longer show respect for that person."
"You don’t have to put the outgoing CEO on a pedestal. But companies should not try to completely erase a body of work [because of some blemishes during their tenure]. That is short term and foolish," he explains. "You have to show a certain respect for the past, and that’s important in terms of internal stakeholder relations."
Convey character as well as credentials
Analysis by The Conference Board shows that many succession announcements focus on the incoming CEO’s qualifications.
While PR pros say that is important, it is equally critical to convey the character of the incoming leader given the rise of corporate transparency and accountability.
"Companies have to recognize that today they have a social contract both internally with employees and externally with the community at large," says Rob Baskin, president and GM of the Atlanta office of Weber Shandwick. Baskin has worked on CEO transitions for clients and during his 15-year tenure at Coca-Cola.
"People want to get a sense that they know the new CEO, and so that is why it is important that companies allow stakeholders to observe the new leader," says Baskin, who applauds Ford for streaming its event.
The experts interviewed by PRWeek note that both GM and particularly Ford did well to address the character of their new leaders. Ford chairman William Clay Ford, for instance, didn’t simply note that Fields had lead the company’s North American division, he did so in a way that demonstrated the incoming CEO’s grit and passion for the business.
"[Fields] took over North America, which was a basket case before even [Mulally] got here," Ford said during the town hall. "People thought he wouldn’t stay to see it through. But they underestimated his resilience and how much he loves this company."
Plan, plan, plan
According to the 2014 edition of The Conference Board’s CEO Succession Practices, 69% of companies provided stakeholders with at least some advance notice of a CEO succession, up from 43% in 2012.
On average, corporations provided two months of notice, although the range was from two weeks to as long as six months. The report noted that this reflects an increased importance of succession planning, "and the development of an external communication plan [as] a fundamental aspect."
PR pros agree that succession plans are more critical than ever. They say they can help to mitigate some of the communications challenges that can occur when corporations unexpectedly lose a CEO and have no heir apparent. Also gone are the days of announcing a CEO’s imminent departure to, in effect, kick off an internal competition for the top spot, a strategy made famous by GE’s Jack Welch in 2001.
"You don’t want to create uncertainty about who will win that battle to become CEO because that can be a dangerous thing," says Farrell. "Top talent may leave the company because they don’t know who to put their chips on, and shareholders may decide to hold back on investment decisions until they know the new CEO’s management style."
In December, former General Motors CEO Dan Akerson surprised stakeholders when he announced his retirement. He moved up his departure to help care for his wife, who is battling cancer. But because a succession plan was in place, GM simultaneously appointed EVP Mary Barra to the role.
"Stakeholders feel like they’re in good hands when a company demonstrates it has planned for succession even when it is not expected," says Salzman. "As a result [Barra] also came off as a competent choice."
The shrinking tenure of the CEO
The average tenure of a departing CEO last year was 9.7 years, the longest it has been in a decade, according to the 2014 edition of The Conference Board’s CEO Succession Practices study.
"But 2013 was really an outlier year," the study’s researcher, Melissa Aguilar, tells PRWeek. "It is not reflective of the overall trend."
In the past decade, the average tenure of a CEO at S&P 500 companies has declined, from 10 years in 2000 to 8.1 years in 2012. That trend is expected to continue, despite the blip in 2013 attributed in part to retirement delays caused by the financial crisis. This hypothesis is supported in part by the fact that the average age of departing CEOs was up last year.
"Generally, we have seen shorter tenures, and there are a number of factors for that," notes Aguilar. "Tenures may be voluntarily shorter because of the increased pressure of these positions; more private-equity firms have created employment opportunities for CEO-level talent; and boards are being held more accountable. They may be dismissing CEOs more quickly who are performing below expectations."
In 2013, almost 24% of CEO turnover was due to dismissal, down from a 10-year high of 31.4% in 2012.