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The Replacements: Why a CIO Needs a Succession Plan

For CIOs, succession planning may not be foremost on the agenda, but it should be.

If you get hit by the proverbial bus today, who takes your place tomorrow? Better have a succession plan.

For months, Marie Zanavich had watched quietly from the sidelines as one of her senior IT executives negotiated a contract. With several million dollars hanging in the balance, the executive had overseen all the details, working closely with both vendor and counsel.

The contract was very real, and yet it was also part of a test: Zanavich, the chief information officer at UIL Holdings Corp., a regional electricity distributor based in New Haven, Conn., wanted to know if this particular executive -- one of three potential successors she had handpicked -- had the chops to eventually take the job.

This particular test ended earlier this year when the executive walked into Zanavich's office, contract in hand, and asked her to review and sign it. Without asking any questions or so much as flipping through the pages, Zanavich pulled out her pen. She laughs as she recalls the reaction: "Aren't you going to read it?" the executive protested.

Zanavich decided not to let on that she had been monitoring her protégé's every move through the company counsel and that she had been tracking all the contract revisions over email. "If you've already brought this to me for my review and you think it's ready for my review, then I'm going to sign it," she told the stunned executive.

But Zanavich didn't get the chance. The executive quickly took back the contract, promising to return it within a week.

That retreat didn't put the executive out of the running. (Indeed, the finished contract needed only minor revisions.) But Zanavich's technique sent a message: As in love and war, all is fair in succession planning. When a CIO is looking for a successor, she may resort to many strategies, including pushing her protégé -- literally, her protected one -- into the spotlight and then yanking away the training wheels just to see what will happen next.

Succession planning is a long and difficult process with no guarantees. When it works, the CIO and the company have peace of mind knowing that the IT department will keep the lights on and the overall IT strategy on course, even if the CIO is suddenly taken out of action by promotion, vacation or the proverbial bus. That's because the CIO has groomed a successor who knows not only the business but also the other people who run the business, since he has worked with them and earned their trust during the grooming process.

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Companies can't afford to skip this step. Without succession planning, "you're playing the risk game," says Karen Rubenstrunk, senior client partner at Korn/Ferry International, an executive search firm in Los Angeles.

But it rarely works out as planned. For starters, some CIOs simply haven't given much thought to the need for a successor. They may be relatively new to the job, they may be busy or they may believe they're indispensable. The insecure may fear that putting a good successor in place makes it easier for them to lose their job. (For the record, this is rare. Rubenstrunk says she has never seen this happen.)

All told, only 19% of CIOs report that they do succession planning, according to Robert Half Technology, an IT staffing service based in Menlo Park, Calif. That is based on a poll of 1,400 randomly selected CIOs from U.S. companies with more than 100 employees.

Even when a CIO designates a successor, the odds aren't overwhelming that the person will get the job. Mark McDonald, a group vice president who is in charge of executive programs for research firm Gartner Inc., estimates that "probably 80%" of CIOs can point to a potential successor. But, he adds, "If you say, 'What's the probability that the person you named would actually succeed you?' it's under half."

This happens for several reasons: The successor gets tired of waiting and takes another job before his time comes; he isn't ready; he's ready but hasn't won the confidence of the other senior managers; or times have changed.

"It's very frequent that the [successor] who has been groomed is not the right candidate because the business context has changed," McDonald says. For instance, if a company has tried unsuccessfully to grow and the strategy wasn't successful, the company may need a CIO who has experience cutting costs. But that kind of successor might not exist, McDonald says, because "very often, CIOs groom someone like themselves."

Or, as is common at midsized companies, the company may have grown so fast that it needs a higher level of candidate. A company whose revenue ballooned from $100 million to $1 billion under its current CIO may pass over the internal candidate for an outsider who already has experience in larger companies.

All this makes succession planning a dicey proposition for potential successors. But even if they don't move on to become CIO, they benefit from added training.

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The Need to Delegate

Some CIOs are surprised when asked to name a potential successor because they don't think they need one. After spending most of their careers depending mostly on themselves, they are still learning how to delegate.

Michael Lehman, the CIO at Batteries Plus, a battery maker based in Hartland, Wis., remembers feeling this way. "I used to be much more in tune" with the daily details of the job, he says. He remembers being "too tactical, too involved. I couldn't take a vacation."

He's been with Batteries Plus for six years, during which time he's worked his way up from director -- the top IT position at the time -- to vice president to CIO. For the first several years, when the IT department had just a handful of people, everyone had to pitch in. Even as the leader, Lehman had a finger in almost every task, right down to installing PCs and performing application support. "There were so many moving parts and so many new people that, invariably, I had to get involved," he says.

Back then, the department had a flat structure. He had 11 people on staff, and about half a dozen reported to him.

Now that the company is larger, Lehman has reshuffled staff into more of a hierarchy. Today the department has three managers, including Lehman. The other two are the potential successors whom he hired from a consultancy. Each has a distinct set of responsibilities. "We've gotten some standards in place," he says.

"You have to have the right reporting structure to even have anybody you consider to be a successor," Lehman says, "and we've only done that as of this year. It's taken six years. If I'm hit by a bus now, the world won't end here. For the last five years, I couldn't say that."

What to Look For

The next problem is predicting how, or if, promising junior executives might evolve into the kind of people who could run an IT organization. When making this assessment, many CIOs fall into the trap of looking for younger versions of themselves.

But as it turns out, managerial skills evolve over time. The skills that make a good junior manager are totally different from the skills that work well in the upper ranks. For instance, successful junior managers can make quick decisions based on minimal information, according to "The Seasoned Executive's Decision-Making Style," a Korn/Ferry report published in Harvard Business Review this year. But successful senior managers are the opposite, the report finds. They take time to absorb and analyze more information and more input from others before reaching their decision.

Korn/Ferry concluded that managers must evolve their thinking if they want to move up.

They must be the kind of person who can move from "having to do everything themselves and manage on a minute-by-minute basis to somebody who's very good at setting the big picture of what needs to be done and then stepping back and letting the work get done by other people," Rubenstrunk says.

Zanavich emphasizes so-called soft skills when identifying potential successors. "It's about being comfortable making presentations to senior executives. It's knowledge in how to play politics at the senior-executive level," she says. And so, as she did with the candidate working on the contract, she pushes her candidates -- they know who they are because she's had frank discussions with them -- into uncomfortable situations that will challenge them.

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Good Things Come in Threes

If finding someone with those characteristics seems tough, consider that you should probably find several. Two potential successors are certainly better than none or one. But for CIOs who have bigger staffs, Gartner's McDonald recommends picking three candidates. "Always build them in threes. Chances are, one will get hit by a bus, one of them will quit and you'll still have one left," he says.

At UIL, Zanavich has taken her HR department's advice not only to pick three but also to pick candidates at different career points. One could take over now, another could take over in another year and a third candidate might be ready in five years.

Of course, Zanavich has a lot of raw material to choose from: With just less than $1 billion in annual revenue, UIL requires an IT department of about 100, plus 25 contractors.

CIOs at smaller midsized companies have a much harder time finding candidates. For every CIO like Lehman, who managed to find two potential successors among a staff of 11, there's a CIO like Fernando Gonzalez, who has had difficulty finding even one among his staff of 30 at Byer California, a privately held garment maker based in San Francisco with about $300 million in annual sales.

Gonzalez explained to his top lieutenants that he needs to find someone who can take over when he retires, which he figures might be five or six years from now. "I've been very open. I've explained to them that I have to do succession planning. And no one's raising their hand."

Gonzalez approached one candidate head-on, asking, "Do you want to be groomed to be in my position?" She declined but left open the possibility that she might change her mind.

Gonzalez figures that parts of the job are unappealing. "The more you expose people to the CIO leadership role, the more they realize it's a position where you are about problems," he says. "Every day is about problems. Most of your decisions are gray ones. Some people are going to be happy with your decisions, and some people are not. It's not a position where you're going to be loved, cared for and admired."

His job contrasts sharply with the lower ranks partly because he has pushed the concept of service, which means his managers have been taught to please and appease. For them, the customer is always right.

"But at the C level, the customer isn't always right," Gonzalez says. As CIO, he finds himself occasionally telling internal customers things like, "You may think it's critical to the company, but it's not. I don't want to get into an argument or debate. That's the decision. I have the other C's supporting me. That's the way it is."

When Gonzalez looks below, he doesn't see many managers who could take that stand if they had to.

In his hunt, Gonzalez is also grappling with a generation gap. He's been a CIO for 25 years. When he was starting his career, his passion and hobby were the same: computers. So it went for others his age. "We didn't have other hobbies," he says. Yes, he laughs, he is a nerd.

Now, he sees a generation of IT workers who chose the field because it's a good way to earn a living. When he asks job candidates about their hobbies, they say they ski. In a way, that's good, he says, because it makes them more well rounded than his generation. Still, he laments what has been lost. "In interviews, you don't hear the word 'passion' anymore," he says.

Maybe the way Gonzalez executes his job intimidates his staff, we suggest. This prompts a major pause. Gonzalez begins thinking aloud. "Maybe I'm presenting myself as a finished product" who never makes mistakes, he says. "I'm not even close to being a finished product." But his staff does not know that, he says, because he's sheltered them.

What's more, since Gonzalez himself logged more than two decades as CIO before taking the job at Byer 2 1/2 years ago, he wonders if he has been expecting his much younger candidates to have the same level of experience. "I'm at the end of my career. I'm going to retire in five to six years. But the person who steps into my job doesn't have to be at the end of [his] career," he says. "Maybe I've been looking for me."

There is one easier method. CIOs who are having trouble identifying successors can hire search firms to do it for them. These firms use interviews and questionnaires to assess the leadership skills of executives, as well as how well these executives fit into a corporate culture. Such assessments can cost anywhere from a few thousand dollars to more than $50,000. Companies can start their assessments years in advance or on an immediate, emergency basis.

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Political Grooming

Once a potential successor is identified, grooming follows. None of the CIOs we interviewed were concerned about their potential successors' technical expertise. Instead, their aim was to hone their candidates' communication and political skills.

Gonzalez recalls that in a previous CIO job, for a billion-dollar-a-year manufacturer, it took some time to refine the way he tested his protégés. Once, he asked one of his candidates to make a presentation to the board of directors and alerted the board that this was part of the grooming process.

The presentation was supposed to be brief, but Gonzalez had asked the candidate to cover a lot of material. When the board asked questions, the candidate answered at length. After 20 minutes came the dreaded drumming of the fingers. Later, Gonzalez says, "The board really chewed me out. They said, 'We don't have 20 minutes to groom your successor.' The board was mad at me for wasting their time."

After that, Gonzalez made sure to narrow the scope of a candidates' presentations and limit them to three or four minutes. "If it starts to wreck, I'd get up and say, 'Let me add a little bit.'" Later, after the candidate was excused or at the next meeting, Gonzalez would apologize for any missteps. "I'd say, 'Hey, folks, thanks a lot. I appreciate you giving him the opportunity. I've still got some work to do on him. ... Thanks for helping me groom him.'"

Gartner's McDonald knows one CIO who took a much more conservative approach to face time. This CIO met with his president every other week. But when he brought the president's feedback to his senior staffers, they were often skeptical. Tired of translating, he started inviting his top three lieutenants to that meeting so they could hear the concerns firsthand. But he told them to remain seated at the back table on the other side of the room and not to speak unless spoken to.

Over time, the CIO began to ask these three for an increasing amount of input, and as he did, the president got to know them. Now they all sit at the same table. "The president is getting a sense for the skills of these people," McDonald says.

The biggest mistake CIOs can make in grooming successors is to assume that they are doing enough, Korn/Ferry's Rubenstrunk says. "Unless you and [HR] are working very closely together on a program that assures that people are being stretched out of their comfort zones, given additional responsibilities and broadening their experiences, you're probably not doing enough," she says. "Whatever it is, you're probably not doing enough."

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Timing Is Everything

While it's always a good idea to develop bench strength, a CIO should be careful about how and when a potential successor's identity is revealed. Without definite plans to leave his job within 18 months, a CIO should keep his candidate's name as secret as possible. Otherwise, things can go awry. First, by naming a candidate too early, "you've basically painted a big target on that poor person's back," McDonald says. When things go wrong, other senior managers "may not go after the CIO who has lots of organizational credibility," he says. Instead, they'll use the proxy as a punching bag.

Second, the longer the CIO stays, the more people will think that his named candidate isn't good enough to take over. Finally, if a candidate has to wait too long, he may get antsy and leave -- or push the CIO to do so.

At the other extreme, it's possible to out a candidate too late. If his name is made public less than a year before the intended takeover, he won't have a chance to build credibility by developing and delivering on a year's worth of IT budget, McDonald says.

Gonzalez struggles with the problem of how to plan for a transition that may not take place for a long time. After all, it will be at least five years until he retires. That may be one reason why he has a dearth of willing candidates.

"How do I find somebody who's going to hang around five, six years until I'm ready to fold it up and move on?" he asks, not exactly rhetorically. "Most of the time, if I find someone, they're expecting to move on in two or three years. They'll wait two or three. But how do you ... groom them and have them hang around five-plus years? I don't have the answer."

At his previous employer, the large manufacturer, Gonzalez was able to keep candidates engaged by rotating them through different jobs. He sent candidates off to run businesses in Europe and Asia. At the much smaller Byer, there are fewer opportunities to keep the challenges fresh.

Until he finds an answer, he has a short-term solution: He's developed relationships with some outside consultants who could take over on an interim basis.

Zanavich faces similar timing challenges. She's been a CIO for 12 years and in IT for a total of 26. "I'm probably approaching retirement at some point in the future," she says. Her three potential successors know that, since she has told them as much during their performance reviews. But she can't tell them when she'll leave.

She tries to keep them engaged by giving them new responsibilities, assigning them to cross-functional teams. Even so, she realizes that they may be ready to make a move before she is.

"Should one of these individuals decide they're not going to wait and they're ready to move on, I think that's absolutely phenomenal," she says -- particularly since there is no guarantee that any of them will actually succeed her.

Zanavich's boss, Jim Torgerson, confirms that the company must keep its options open. "On one hand, you want to develop the people" you have, says Torgerson, who was promoted to chief executive of UIL in July. "On the other hand, you always keep the option of looking elsewhere. You may want to bring external candidates in to get new people with new ideas into the company." If one or more of UIL's potential CIOs do jump ship, Zanavich will find new ones. "You look to make sure that pipeline keeps growing," she says.

 

Joan Indiana Rigdon was a contributing writer for CIO Decisions. To comment on this story, email editor@ciodecisions.com.

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