successIon when FIndIng The rIghT ceo jobIs # Big iconic corporations often struggle in times of terrible business stress with the need to quickly find a great new CEO. Choosing the right approach and being prepared to implement it is one of the1 most important responsibilities that the board of a public company can have. How Ford landed Alan Mulally is a case in point. by john j.Keller and dennIs carey 50 Q 1 . 2 0 1 1 The Korn/Ferry Ins tit u T e he scenarios that catalyze the need come the communication industry’s most ferocious to find a new CEO are always differ- competitor. Verizon today can boast about having the ent, but the urgency is nearly always closest team to the 1927 New York Yankees in all of the same. The new leader usually has to pick telecom. up quickly from where the last one left off and Other companies aren’t so prepared or prescient take the business forward without loss of mo- as to have the CEO solution readily available in-house. mentum. That was the case when AT&T’s new Whether struggling with a devastating economy or CEO, James E. Olson, suddenly died of cancer rocked by scandal, these companies sometimes find in 1988 amidst the company’s emergence as themselves having to scramble to find a new leader a scrappy competitor following its massive from the outside. Such were the situations at Tyco breakup. AT&T had to rebuild as a new entity and fight and WorldCom. the likes of pugnacious MCI — and Robert E. Allen, When faced with having to go external, the then the president and chief operating officer, kept CEO recruitment can take several forms. The the mission going as Olson’s successor. most common way is to seek the help of Sometimes the stakes are epic, and the new CEO a trusted third party, such as an execu- may have to take the business through a crushing cri- tive search firm. A qualified recruiter- sis and turnaround, lest it vaporize à la Enron. Tyco advisor can provide assurance that and WorldCom instantly come to mind as those that the final decision is the right one avoided the euthanizing gas after finding outstanding through independent investiga- CEOs in Edward D. Breen and Michael D. Capellas, tion, assessment and external respectively. Breen especially has driven a transfor- referencing. mation that MBA students will learn from for years In the case of Ford, the search to come. process was somewhat unique and Could Ford Motor Company find such a leader? hybrid — pardon the pun in these That was the challenge posed to its board several years green car days. Ford’s process ago, and today most would say that it rose to the occa- largely involved key directors and sion in finding Alan Mulally. Ford was in decline and an encouraging chairman — and, to- facing irrelevance just as the global economy was ward the end, an outside search advisor to conduct about to collapse and take major companies with it. referencing on the finalist candidate. How out of all the great CEOs out there was Mulally Ford’s recruitment of Alan Mulally is a textbook picked? How did Ford’s board know — indeed, a direct case of world-class collaboration by seasoned directors, descendant of Henry Ford among them! — that this all former CEOs, spearheaded by a passionate gover- person would be the right choice? nance expert and board leader, Irvine O. Hockaday Jr., It is the very question that boards and CEO as well as a powerful, determined chairman, William search committees are faced with every day. The Clay Ford Jr. question becomes monumentally critical when a It was Bill Ford’s die-in-the-ditch commitment to search must be conducted in haste and under tre- rescuing his company as well as his family legacy that mendous stress. especially and courageously saved the day for Ford and Some of the best companies have conditioned ensured it a prosperous future under a new CEO. themselves methodically to avoid the last-minute Dire Straits succession crisis and mint their CEOs. These busi- nesses have set up outstanding executive develop- The Ford search story takes place in 2006. The road was ment programs, aimed at spotting great talent when becoming increasingly treacherous for the American it enters the company, and which enable these future auto industry. Ford’s two biggest competitors, GM and leaders to rise with regularity and with the kind of Chrysler, were staring at potential bankruptcy, which broadening competencies that define a superb CEO. would end up occurring two years later. Bill Ford had Think of the leaders that came from Jack Welch’s informally tried to reboot things on his own, even game plan and education programs at GE, or Ivan G. sounding out other auto leaders to take Ford’s reins, Seidenberg’s personal attention to executive develop- including reportedly Renault-Nissan’s fabled leader ment and advancement at Verizon. Seidenberg’s Veri- Carlos Ghosn. zon has become a focused, determined risk taker in There was no way Bill Ford, or his directors led the past decade, throwing off its staid Bell ways to be- by Hockaday, would allow Ford to run aground, let (all) Nip Rogers 52 Q 1 . 2 0 1 1 The Korn/Ferry Ins tit u T e alone go bankrupt. Bill Ford decided to tough it out, about his own contribution to bringing Mulally to with an eye toward getting the company’s finances Ford, and points out that his search committee part- sorted out and finding a new CEO. The board was in ners included John L. Thornton, former president full agreement. and co-COO of the Goldman Sachs Group, and Jorma Ford’s search had to be conducted quickly. The Ollila, the chairman and former CEO of Finnish cell- most storied American automaker couldn’t afford any phone giant Nokia. hiccups during this extraordinary time in American The Ford board met in extraordinary session to economic history. In identifying and hiring a new discuss the CEO project. They hashed out the issues CEO, Hockaday and his directors would have to hit the at Ford as well as the macroeconomic forces that were bull’s eye on the first shot. buffeting the industry. There was Ford’s high cost Fortunately for Ford, it had exceptional firepower structure, its balance sheet challenges, and its distrac- on its board. There was Hockaday, one of the most tions from numerous acquisitions, including Jaguar seasoned senior executives and governance veterans and Volvo (pushed by erstwhile Ford CEO Jacques in corporate America. The former CEO who had built Nasser). There were Ford’s ongoing union and pen- Hallmark into a major consumer brand and multi- sion cost challenges. There was the threat from for- media powerhouse, Hockaday also is lead director at midable players such as Volkswagen Group, the Japan Estée Lauder and until recently was the lead director Inc. contingent, and from lower-cost rivals such as at Sprint Nextel. He is characteristically modest Korea’s Hyundai, which was surging spectacularly. b r I e fi ngs on Talen T & l e a d e r s h I p Q 1 . 2 0 1 1 53 Indeed, running Ford would require a samurai The directors drew a deep breath and looked of tremendous ability and stamina and who also had around at one another. This was going to be a tall or- a global view of the world and its challenges. The di- der. No one manager could have all of this, but it rectors drew up a spec: The ideal candidate would be would be great to find one who had most of it. Should a CEO-ready leader who was world-class in terms they hire a search firm? of his/her life and career experience. Furthermore, In fact, the board had discussed hiring a search the candidate would have to be well-grounded in firm to be its full partner in the project and to conduct complex manufacturing design and operations and a search, but this idea was put aside at least temporar- highly conversant in technology and its importance ily when Bill Ford commented that he had some of in sophisticated equipment and products, such as to- the world’s great CEOs sitting around his boardroom day’s vehicles and those contemplated for the future, table. In addition to Hockaday, Thornton and Ollila, including electric vehicles and hybrids. there was Thornton’s former colleague, Robert Rubin, Finally, the leader would have to be a confident, who had been treasury secretary in the Clinton Admin- passionate and indefatigable manager. Someone who istration and is a former chairman of Goldman and a is tough, focused, and able to handle ambiguity and Citigroup director. (Ollila and Rubin have since left any major challenge the world could throw at Ford, the Ford board.) including one as formidable as what was soon to be- “Bill Ford said, ‘You guys must have the best rolo- come the worst economic meltdown since the Great dexes on the planet; you should be able to get anyone Depression. Ford’s turnaround would require a versa- to come to the phone. Why not talk among yourselves tile athlete who could sprint and run the long-distance first and come up with some ideas,’ ” recalled Hocka- race as well. day. “So that’s exactly what we did.” That was the spec, in any event. Then it was up to The board quickly agreed on a search strategy the Ford directors to go out and find a match or as near and formed a special committee to find the new CEO.