Ignore ‘fat-cat’ hysteria and focus on succession planning

HR departments need to ignore the hysteria over ‘fat-cat’ salaries for senior executives when preparing their succession planning, according to the head of business consultancy Harrogate Consulting Group.

The number of forced resignations of CEOs in the UK has risen from 1% of total terminations to 5% since 1995, leading to outcries about ‘payment for failure’.

However, HR teams have to look beyond the risk of bad publicity if they want to get the best candidates, Gary Dibb told delegates.

“You have to start with empathy – new CEOs have to look after their interests too,” he said.

CEOs would not join if they didn’t have an insurance policy that they could fall back on if things go wrong and compensates them for the upheaval for them and their families, said Dibb.

“Punitive financial arrangements will not bring in the right people,” he said.

When entering the process of succession planning he offered key tips to consider. These included giving the board control of the process rather than just the CEO, not allowing a “personality surplus to overshadow a skills deficit” and being aware of the skills necessary.

“Truly great chief operating officers and finance directors can turn into bad CEOs,” he said.

Having made the decision, HR teams need to offer as much support to a new CEO as possible, Dibb added.

“No-one understands the loneliness at the top until they get there,” he said.

Coincidentally, it emerged last week that telecoms equipment manufacturer Marconi paid out 7.2m to chief operating officer Mike Donovan, the man who oversaw the sacking of 20,000 workers.

Unions described the payout as a “slap in the face”, but the company said Donovan had done a good job and the payout was not a reward for failure.

Quotes from the conference

“Don’t try to be perfect – you don’t have the time.”
Jacques Espinasse, chief financial officer, Vivendi Universal

“I am always suspicious of businesses that have their own people strategies – people should be one part of the overall company strategy.”
David Longbottom, HR director Dixons

“When I joined [the company] HR was known as the BPU – business prevention unit.”
Sarah Mitchell, vice-president international human resources, Warner Bros Entertainment

“Don’t let CEOs stay on too long. It’s a bit like Elvis, although that problem was soon solved.”
Gary Dibb, managing director, Harrogate Consulting Group

“Often the right people are those that say the emperor has no clothes. But often they say the emperor has no clothes and the emperor asks them to leave the bus for doing it.”
A delegate who shall remain nameless

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