Lessons for CEOs: How to retire gracefully

Most successful and ambitious business leaders feel persuaded that they have no competent successor, says R G Vilakudi.

Illustration: Uttam Ghosh/Rediff.com

There is considerable literature on how to identify talent and groom for succession.

Another event should occur simultaneously for succession - a successful departure by the predecessor. Both have to work in unison or else the succession wobbles.

Former Unilever chairman Mike Angus had once said, “The success of my judgement of a CEO candidate is visible only when the chosen CEO’s successor is functioning well.”

Reginald Jones took the top job at GE in 1972. During his much acclaimed tenure of nine years, GE outperformed the US gross domestic product (GDP) by over 25 per cent.

Jack Welch had been identified and groomed to take over, and he did so in 1981.

The Wall Street Journal commented that “a legend has been replaced with a live wire”. Jones receded totally from GE, and renewed himself as a director of Merck, General Signal and such companies; he joined the board of overseers of Wharton School.

On his part, Welch dismantled the GE structure built by Jones to prepare GE for the demands of the new marketplace. Jeff Immelt succeeded Welch and the cycle continued.

Unfortunately, successful and ambitious business leaders feel persuaded that they have no competent successor.

Even if they don’t feel so, sycophants persuade them. Management academics point out that this is the result of that ambitious leader’s failure.

To quote two academics, James Champy and Nitin Nohria, “To feel threatened by one’s successor is a futile but remarkably common reaction to inevitable departure”(The Arc of Ambition, 2000).

Diverse stories abound to illustrate the importance of a successful departure by the existing leader.

Prakash Lal Tandon was the first Indian chairman of Hindustan Lever. He had joined the company in 1939 as a management trainee.

He retired slightly ahead of the company retirement age at 59 in 1968.

He built a new life as chairman, first of the State Trading Corporation, and then of the Punjab National Bank. He acquired a great reputation for re-firing rather than re-tiring.

When he departed from HLL House after his board farewell dinner, the chauffeur opened the door of his 1957 Dodge as usual.

“No, no, please, I have retired and will drive home in my Fiat car. Thanks,” according to an article (“Short of a Punjabi century, a glorious life, well lived” by R Gopalakrishnan, Business Standard, September 22, 2004) written about Tandon after his death.

In 1996, Louis Begley authored a novel titled About Schmidt. The book was made into an Academy Award-winning film in 2002, starring Jack Nicholson.

The story was about Warren Schmidt’s life after retirement from a managerial position in a life insurance company.

Schmidt finds it difficult to adjust to his new life. He visits his young successor periodically to offer advice and help, but his overtures are politely declined.

Seeking meaning in his new life, he sponsors a Tanzanian child after seeing a television advertisement about deprived kids.

In due course his wife passes away. His daughter wishes to marry a person whom Schmidt disapproves of, but he fails to convince her about his concerns.

Schmidt wonders how he will be remembered because he will soon be dead. Critics acclaimed the movie as “one of the finest during the year”.

There is an astounding story from a war-preoccupied America. On December 27, 1944, Montgomery Ward chairman Sewell Avery was physically carried out of his office by US Army National Guard troops in pursuance of President Roosevelt’s orders.

The well-known retailing and manufacturing company had supplied the Allied troops with tractors, auto parts and workmen’s clothing.

However, the chairman disagreed with a labour agreement negotiated by the Roosevelt government.

He was brazen in his defiance of the agreement, which the government considered essential during the national emergency.

After the war, Avery rejoined the company, but relied on strategies that had worked for him earlier.

Gradually, the company was overshadowed by Sears, Roebuck.

In 1955, the Montgomery Ward board ousted Avery from the company. Avery should have better judged his departure.

Another story is about Britain’s entanglement with the Middle East war.

British military historian Barney White-Spunner, wonders why history reveals “the same old British pattern of being unable to leave” (Partition, White-Spunner, 2017) as evidenced by a delayed withdrawal from India during India’s Independence movement as well as from Basra during the Middle Eastern war of the 1990s.

He writes with a touch of disappointment about the fabled British India administration, “… in 1932, the Indian peasant had the same income and standard of living as when the Mughal Emperor Akbar died in 1605, just after the East India Company was formed in 1599”. If only Britain knew when to depart, gracefully!

Even the Mahabharata story of King Yayati is illustrative. He was a fine and successful king, who worked hard for success.

Due to certain events, Yayati was cursed by a holy man to premature old age, but with a reprieve from the curse if he could persuade one of his sons (future successor) to swap age with him.

The youngest son agreed. King Yayati enjoyed the fruits of youth all over again.

Later, he realised, “Not all the food, wealth and women of the world can appease the lust of a man of uncontrolled senses.”