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MGST 451 > Chapter 7 > Flashcards

Chapter 7 Flashcards

1
Q

CEO Turnover Effect

A
  • Inversely proportional to performance
  • Top performing companies: 0.8% turnover
  • Bottom performing companies: 2.7% turnover
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2
Q

Reasons for CEO Turnover

A
  • M&A
  • Poor performance
  • Misconduct
  • Retirement
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3
Q

CEO theory turnover

A
  • independent oversight reduces agency cost and management entrenchment
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4
Q

CEO turnover and tenture

A

roughly 9.5 to 8.5 years between 2010 to 2014

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5
Q

What are the factors that make CEO jobs tougher?

A
  • technological development
  • Rapid changes
  • Global competitiveness
  • information overload from the internet
  • diverse workforce
  • meeting expectations
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6
Q

What is the supply side of sustainable leadership?

A
  • candidate characteristics

Successful: humble, feedback seeking, unselfish

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6
Q

What is the demand side of sustainable leadership?

A

Decision Makers’ Biases

examples: in-group bias, bandwagon effect, confirmation bias, escalation of commitment, overconfidence bias

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7
Q

Define labour market

A

refers to the process by which the available supply is matched with demand

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8
Q

The labour market for CEO

A

hard to judge skills
the number of people that can be in this position is tight

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9
Q

Labour pool

A
  • 66% of people hired from the outside fail within the first 18 months
  • a shrinking pool of talent due to widespread business
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10
Q

Who are the main committee in charge of CEO succession?

A
  • full board
  • nominaiting committee
  • governance committee
  • chairman and lead director
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11
Q

Succession planning

A

an effort to protect the organization’s capacity to perform key functions, sustain important relationships and fulfil its commitment during a leadership transition

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12
Q

Why does succession planning matter?

A
  • largest revenue and profit comes from effective talent management and talent outcomes
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13
Q

Benefits of Succession planning?

A
  • reduce cost
  • reduce anxiety and fear
  • prepare for CEO retirement situations
  • prepare for a crisis situation
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14
Q

The Succession Process

A

Relies on the involvement of board directions and senior management

  • takes about 3-4 months of up-front effort
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15
Q

External Candidate model

A
  • Recruits from external sources
    previously used by poor-performing firms
16
Q

Pro of External Candidate Method

A
  • tend to have more proven and experienced CEO
  • more free to make strategic changes
17
Q

negative of an external candidate

A
  • less familiar with the company
  • board has not evaluated performance first hand
  • leadership style might not translate well
  • usually more costly
18
Q

Internal Candidate

A
  • companies with strong performance use this method
  • less costly and CEOs receive less in the first year
19
Q

Heir Apparent

A

companies promote leading candidate to position of president and COO

20
Q

Pro of Heir Apparent

A

– board evaluates performance first hand
- customizable
- experience first hand and familiarity
- BRINGS CONTINUITY and smooth transition

21
Q

Con of Heir Apparent

A
  • increase complexity
  • responsibility needs to be clear and differentiated
  • risk of becoming lifetime COO
  • brings more of the same thing
22
Q

Horse Race

A

Two or more internal candidates competing

23
Q

Pro of Horse Race

A
  • board observes performance
  • does not commit to the preferred candidate
  • develop specific skills
24
Q

The negative of Horse Race

A
  • highly public
  • creates internal factions
  • brain drain from the loser
25
Q

Internal-Outside Model

A

company develops internal talent whilst evaluating outside candidates

26
Q

Pro Internal- Outside MOdel

A
  • internal talent development
  • levels the playing field
  • external validation assures the board the best CEO is selected
27
Q

Negative of Inside Outside model

A
  • requires significant planning and oversight
  • a breakdown in the process can lead to erosion of trust
28
Q

Interim CEO

A
  • ONE MONTH TO TWO YEARS
  • used in situations of emergency and reveals shortcomings of the planning process
29
Q

Director CEO

A

The director assumes the role of CEO

30
Q

Current board performance in succession planning

A
  • survey shows lack of preparedness
  • companies emphasize emergency rather than permanent succession
31
Q

Why do companies don’t have succession planning?

A
  • looks at it like talent management rather than risk management
  • internal development process is inadequate
  • overly differential to the current CEO
  • no consensus over skills and experiences required to be a CEO of the company

MGST 451 (9 decks)

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