Business Strategy Executive Succession
All too often when a company is founded by a dynamic entrepreneur, such as Steve Jobs with Apple, and he leaves the company or passes away as in Mr. Job`s case, there is a void left in the company and corporate performance declines. In addition, according to "How Has CEO Turnover changed?" "Kaplan and Minton, 2008) annual CEO turnover is 17.4%, meaning the average tenure of Chief Executive Officers in less than seven years. Thus Executive Succession is an important consideration for Boards of Directors.
1) Discuss Executive Succession in general from the aspect of how companies go about it and the effect that executive turnover has on corporate performance. List any sources that are used.
2) Review the attached article from the Wall Street Journal from Oct. 7, 2011, "Apple`s Game Plan: Avoiding Culture Shock" attached below. Based on information in that article, as well as additional research on your part, answer the following questions below regarding Apple, which may apply to other companies as well as Apple.
Obviously, Steve Jobs was no product designer or software developer. So what critical functions did Steve Jobs have as CEO of Apple? Name at least six different key roles he played as Apple`s leader. Specify at least six different key things he did on a day-to-day basis that set Apple apart from other firms. Of the six or more tasks you have listed, which ones can be "codified," that is, which ones can be formalized in such a way that they can be adequately carried out without Steve Jobs himself actually performing them? On a scale of 0-100, to what extent do you think Apple can confidently succeed in performing them without actually having Steve Jobs to do them?
OCTOBER 7, 2011
Apple`s Game Plan: Avoiding Culture Shock
How to Preserve a CEO`s Ethos? Company Had Nearly Decade to Prepare; Gathering a `Top 100` and Starting a University
By GEOFFREY A. FOWLER And JESSICA E. VASCELLARO
Apple fans across the globe marked the death of Steve Jobs with public expressions of condolence rarely seen for a corporate chief executive. Pictured, a memento left in Tokyo.
The day after Steve Jobs`s death, Apple Inc.`s stock price barely budged. It was an outcome nearly a decade in the making.
Since at least 2004, Mr. Jobs and Apple`s board of directors have been putting into place a plan to maintain the legacy of his management style and his decision making, according to former Apple employees.
A memento in London.
Among Mr. Jobs and the board`s moves: slowing the flow of departing executives to build a bench of talent and installing programs ranging from annual retreats for the company`s "top 100" managers to an in-house "university" that codified Mr. Jobs`s work over the years into case studies.
By the time Mr. Jobs died on Wednesday, much of the infrastructure and institutional knowledge was in place for Apple to continue on, despite fears that a company that depended so acutely on its co-founder`s vision and personality would immediately flail without him.
Apple`s stock fell 88 cents, or 0.23%, to $377.37 at 4 p.m. in Nasdaq Stock Market trading.
The corporate culture that Mr. Jobs worked to instill, and now leaves behind, encourages creativity within a formal structure of product development and launches, according to former Apple employees. That is in contrast to the start-up free-for-all feeling of a younger company like Google Inc. Apple`s secretive culture is top down, driven by the demands of senior executives and defined by a belief that what people are working on is important.
Apple "is an army... everyone has a role," said Andy Miller, who sold the wireless advertising company he co-founded, Quattro Wireless, to Apple in 2010 and recently left Apple to join venture-capital firm Highland Capital Partners.
"The rare thing [Apple] had on their side was time," said David Larcker, director of the Corporate Governance Research Program at Stanford University. Since Mr. Jobs` health unraveled over nearly a decade, Apple`s board had years to evaluate and groom executives, such as current Chief Executive Tim Cook, and develop ways to convey the company`s culture and business lessons to new executives, he said.
Much of the planning for Mr. Jobs`s legacy happened without explicit discussion, said former Apple executives. Avie Tevanian, Apple`s chief software technology officer who left in 2006, said Mr. Jobs didn`t talk about succession regularly but believed that talent would remain that as long as Apple maintained the right culture.
Apple`s Inner Circle
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Apple`s CEO Tim Cook spoke in Cupertino, Calif.
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A keyboard of an old Apple computer was placed outside the Apple store on the Fifth Avenue in New York Thursday.
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Mr. Jobs`s thinking was "let`s provide a really good place to work and be successful and you will always have a deep bench of people," said Mr. Tevanian, now a managing director at private equity firm Elevation Partners. Mr. Jobs worked at keeping people around, he added, especially key executives who were often heavily recruited.
In the years following Mr. Jobs` return to Apple in 1997, turnover at the top was high, especially with executives who didn`t meld with the co-founder`s notorious temper.
But following Mr. Jobs` first health-related leave of absence in 2004 for pancreatic cancer, Apple`s management team stabilized. Executives had an unspoken desire to build a team that had a long-term track record, according to a people familiar with Apple`s thinking.
Chief among Mr. Jobs`s talent picks was Mr. Cook, 50, who joined Apple in 1998 to help make its manufacturing more efficient. He temporarily ran Apple in 2004 when Mr. Jobs was on his first medical leave.
A year later, Mr. Jobs appointed Mr. Cook as chief operating officer, signaling to other employees that he was priming a successor. Later that same year, Mr. Jobs allowed Mr. Cook to join Nike Inc.`s board, a move that other executives said they took as a sign that Mr. Jobs was grooming top talent.
Discuss: Share your memories and thoughts about Steve Jobs`s legacy.
Each of the three times that Mr. Jobs took a medical leave from Apple, Mr. Cook took on more responsibility, said people familiar with his leadership. Even when Mr. Jobs was holding the CEO title, he left many day-to-day details about running the company to Mr. Cook, preferring to focus on the bigger picture, according to former Apple employees.
Like many other tech companies, Apple attracts and keeps top talent with stock programs that reward people for the success of their performance. But it doesn`t necessarily rely on benchmarking salaries with the rest of the tech industry, said Aaron Boyd of compensation-research firm Equilar Inc.
After appointing Mr. Cook CEO in August, for instance, Apple`s board gave him a compensation package that makes it hard for him to walk away, with 1 million restricted stock units, half of which vest in 2016, and the other half in 2021.
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According to an Equilar analysis, the award is the second-richest equity award in Silicon Valley in the last 11 years, after Mr. Jobs`s package in 2000.
Mr. Jobs built Apple`s culture to idolize product development and a sense of perpetual improvement, according to current and former employees.
Regular product post-mortems, where employees examine the successes and failures of new gadgets a few months after launch, embodied this spirit, said former employees.
Mr. Jobs also began rallying executives at the top of the company by assembling executives at an off-site meeting held annually or so called the "Top 100," according to people familiar with the sessions.
The group included a core group of Apple`s senior leaders and dozens of others invited because they were working on high-priority products. Together they would discuss topics like Apple`s retail strategy and hold internal product unveilings.
Participants were told that they were cultural keepers of Apple, and were responsible for propagating that culture to other employees, according to a people familiar with the meetings.
Starting in 2008, Mr. Jobs also launched an effort to codify the culture and business intelligence he built into its own in-house M.B.A. program. Apple hired Joel Podolny, then dean of the Yale School of Management, to serve as dean of a secretive program it calls Apple University.
In that role, Mr. Podolny has interviewed top-level executives and crafted case studies on key Apple business decisions, said people familiar with the program. Those classes have been optional, according one former employee.
"You feel like a kid coming out of "Rocky" ready to do battle," Mr. Miller said of Apple University, which he and the managers at Quattro participated in after the company was acquired.
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