Succession planning pays off

Posted by on May 1, 2012 in Trends, Uncategorized

Though he says he isn’t going anywhere anytime soon, Steve Roell, Chief Executive Officer of Johnson Controls, Inc., recently told the Milwaukee Journal Sentinel he spends a considerable amount of time on succession planning.

From the story: “…He calls it employee development — evaluating the top 100 or so executives in the company on a matrix of nearly three dozen personal attributes and strengths that are needed to be a global leader for the multinational corporation.”

Succession planning is vitally important to a company’s success — and it’s among the services IntoGreat provides. A recent study released by international consulting firm, FTI Consulting, examined 263 CEO transitions at global public companies from 2007 to 2010. Researchers found that planned CEO successions led to a smaller range of stock price movement from the day of the announcement of an executive transition to more than six months later. As the study notes:

“.. The reputation of a CEO is a critical factor in investor decisions to buy or sell a company’s shares. In fact, on average, nearly a third of investment decisions are based on perception of the CEO. As a result, leadership transitions put a significant portion of the investment decision at risk as opinions of the new leader are formed.”

The study also found that investors care deeply about the reputation of a CEO when they’re deciding whether to buy or sell shares. On average, nearly a third of investment decisions are based on the perception of the CEO, according to FTI’s research.