09 Feb. 2012 | Comments (0)
In 2012, the leadership successions of greatest significance will likely not take place as the result of presidential elections in the U.S., France, or Mexico, but rather as the result of events in emerging economies. In October, China's 18th Party Congress will meet to anoint the country's next generation of leaders (PDF). Looking beyond 2012, the current generation of political leaders in the Middle East, Central Asia, and Africa are aging, bringing the issue of succession to the fore. In Saudi Arabia and Kuwait, both the Ruler and Crown Prince are in their 70s and 80s. Kazakhstan, Uzbekistan, Uganda, Cambodia, and Cameroon have all had the same leader for over 20 years.
The succession process is a crossroads in a country's development trajectory. For governments, particularly those in emerging economies, smooth successions play an outsized role in the continuity of reform agendas, the confidence of key stakeholders, and the stability of investment regimes. Disorderly successions, in contrast, can trigger damaging battles for control, an exodus of both financial and human capital, and even a shift toward the failure of the state.
These emerging economies have a pivotal role to play in the future of the global economy. The Gulf states, for instance, hold over 40% of the world's known oil reserves and over $2 trillion in foreign assets. The next generation of public sector leaders in many of these countries cut their teeth in the business world. On their return, they often take up key roles in legislatures, executives, and bureaucracies. These leaders should look to the private sector for guidance when it comes to ensuring smooth leadership successions. Why?
First, the political succession process in many emerging economies — from parliamentary democracies with dominant parties, such as Singapore and South Africa, to nondemocratic polities, such as China — often closely resembles the process of selecting a new CEO within a business. A small group of senior leaders, not dissimilar to a board of directors, selects a new leader to govern on their behalf in consultation and with the tacit approval of key stakeholders. As a result, succession planning techniques developed in the private sector are often applicable to public sector institutions.
Second, businesses are acutely aware of the problems associated with disorderly successions. Reliance Group, India's largest private company, was split into two in 2005 following a power struggle between the Ambani brothers after their late father, Dhirubhai Ambani, died without leaving a will. In the U.S., Yahoo has struggled to convince investors that it has a clear strategy or a long-term CEO to implement that strategy since Carol Bartz's sudden departure last fall. Businesses can provide public sector leaders with a much broader range of case studies of both well-managed and poorly-executed succession events.
Third, as a result of the reduction in average CEO tenure over the past decade — in 2011 a CEO of a global company could expect to stay in post for just six years (PDF) — many large public companies have professionalized the succession planning process. P&G, for example, takes a holistic approach to developing a roster of future leaders, rotating its senior executives every three to five years in order to ensure broad exposure and encourage leaders to develop a cross-functional skillset. At GE, succession planning and clear selection processes are institutionalized throughout the company. In the annual "Session C" reviews, the CEO meets with leaders from across GE's business units to understand the future leadership pipeline. In contrast to these companies, governments in most emerging economies have not invested time in succession planning as their current leaders have aged. However, the recent focus on succession planning in the C-suite has meant that businesses have developed a number of best practices which can be adapted and adopted by these governments.
Effective succession planning alone is certainly no panacea to the challenges facing the governments and citizens of economies in transition. But every emerging economy has a crop of talented leaders passionate about making a difference to their home countries, and proper preparation is imperative. The next generation of public sector leaders need to immerse themselves in the techniques of the private sector if they are to learn to succeed at succession and secure a place in tomorrow's global economy.
This post is part of the HBR Insight Center, The Next Generation of Global Leaders.
This blog first appeared on Harvard Business Review on 2/2/2012.