Note to readers: Henry Unger wrote this column in 2009.
Companies big and small don’t do succession well.
“The CEO succession process is broken in North America and is no better in many other parts of the world,” author Ram Charan wrote in Harvard Business Review.
Locally, you only have to look to Coke and Home Depot to see how two of our most important companies failed to get it right when they were replacing legendary leaders several years ago. Thankfully, they learned from their mistakes and moved on to better leaders.
It’s no picnic at smaller family-owned firms, either. The reasons are many, including ego and the loss of talented people who bolt after they lose the CEO horse race to another heavy hitter.
I decided to see if Truett and Dan Cathy at Atlanta-based Chick-fil-A had any answers. They run sort of a hybrid company — family-owned, but larger than most with $3 billion in revenue. Arguably, they straddle both parts of the business world to a degree, although they are clearly a private firm.
I thought I’d find Truett, at 88, a ceremonial chairman and CEO. Boy, was I wrong.
“I don’t have the baton yet,” said Dan, president and chief operating officer. “I’m not CEO. My dad reminds me of that regularly, which is fine with me. … He has his hand on some of the levers.”
Recently, Dan said, the executive team needed his father’s approval to hire 11 additional people for the corporate staff this year and another 25 next year.
“We were pleading with him,” Dan, 56, recalled. “He’s a study in extremes. … He’s incredibly cheap and incredibly generous.”
Truett eventually approved the hiring. And he still has the last word on other key issues, such as debt, expansion and new menu items.
“Why would I want to retire from what I enjoy doing?” Truett asked rhetorically. Whenever that retirement happens, Dan will take the reins, confident that the key executives he has worked with will be with him.
“We’ve been together as a team for 30 years,” Dan said. Aside from Truett, Dan and his brother, Bubba, the other four members of the executive team are not family members.
The Cathy clan believes in grooming execs from the inside, day in and day out. They don’t wait for a crisis. They obviously don’t believe in an age limit, like many public companies do.
And hamburgers will be on the menu before headhunters get a call to find a CEO for Chick-fil-A from the outside.
“Internal is the key,” Dan said. “You get deeper insights into the business and a good hand-off.”
But how do you guard against becoming too complacent or unresponsive to big changes swirling around your company?
Chick-fil-A has an advantage, Dan said. It operates in the super-competitive fast-food industry, as opposed to a sector with only a few dominant players.
“You’re always about continuous improvement, because of the level of competition. It’s a fractured industry,” Dan said.
But it’s not a fractured family. The third generation is already working at the company. Dan’s son, Andrew, is in California, recruiting owner-operators. He’ll probably wind up at headquarters by the end of next year.
But there’s no guarantee he or any other Cathy will succeed Truett and Dan in the top job.
“We need the most talented people leading the business,” Andrew said.
Is that why they’ve had 42 straight years of rising sales?
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