IBM, Apple: Stark Contrasts in CEO Succession

 
 
By Jeffrey Burt  |  Posted 2011-10-26
 
 
 

IBM, Apple: Stark Contrasts in CEO Succession


IBM and Apple, both hugely successful companies that are undergoing a change in top leadership, are a study in contrasts when looking at their CEOs and how they're replacing them, according to analysts.

Apple for more than a decade was led by the charismatic Steve Jobs, who co-founded the company in the 1970s, was kicked out in the 1980s and returned in the 1990s to lead it to incredible heights, making it the most valuable company in the world. Jobs was the driving force behind such ground-breaking products as the iPod, iPhone and iPad, and his passing earlier this month threatens to leave a significant hole in Apple's future.

At IBM, Sam Palmisano has guided the company for about the same amount of time, pushing the tech giant into such areas as cloud computing and analytics, and driving its Smarter Planet initiative. Under Palmisano's leadership, IBM has pursued high-margin technologies-shedding such commoditized businesses as PCs-while weathering some difficult economic times.

Now both companies are moving forward with new CEOs. Former Apple COO Tim Cook has taken the reins at Apple-he was appointed CEO in August, after Jobs resigned due to his deteriorating health-while Virginia Rometty, IBM's senior vice president and global sales leader, will take over at Big Blue Jan. 1, 2012. However, while Jobs' passing has shaken Apple and generated some angst in the industry over how the company will fare going forward, IBM's selection of Rometty-and the positive feedback it's received in the industry-is an example of IBM's historically strong succession planning, according to analysts.

It also shines a harsh light on the recent difficulties at rival Hewlett-Packard, which now is operating under its third CEO in a year and fourth in just over a decade, starting with Carly Fiorina, who was followed by Mark Hurd, Leo Apotheker and, now, Meg Whitman. And unlike IBM, HP has gone outside the company to find its CEOs, all of whom met with varying degrees of success.

"IBM has one of the strongest institutionalized succession plans of any company in the world," Rob Enderle, principal analyst at The Enderle Group, said in an email to eWEEK. "This is largely why it is one of the few firms that has lasted a century. It got off plan in the '90s, but Sam put it back on plan and Rometty's selection was consistent with this century-long program."

That contrasts sharply with Apple, whose identity was tightly tied to Jobs, according to Enderle and Charles King, principal analyst with Pund-IT Research.

"The differences between Apple and IBM in leadership/change couldn't be starker," King wrote in an email. "Apple was (and likely would still like to be) a company led by a lone, powerful, charismatic chief executive. The fact is that executive succession plans are a fact of life in corporations-no one lives forever. Apple's refusal to create or put into place a formal plan, even after Jobs' health became a matter of public record, was frankly at odds with the best interests of its shareholders."

Will Lack of Planning Hurt Apple?


 

Enderle said that lack of planning could make things difficult for Apple going forward.

"Apple was incredibly dependent on Steve Jobs, who made himself indispensable, and his executive office was made up of a team of people who together covered the critical skill set," he wrote. "He actually worked against training a replacement because he was afraid of being prematurely replaced, so Apple is now left with a huge hole where Jobs used to be."

That said, Apple only now is entering its post-Jobs phase, and it's too early to say how the company and its customers will respond. The day before Jobs' death, Apple launched its latest iPhone-the iPhone 4S-which reportedly sold 4 million units in its first weekend. And while Cook may lack the charisma of his predecessor, he worked closely with Jobs and has a deep understanding of the company.

However, IBM is now most likely in better shape, thanks to a corporate culture that seeks out potential CEO candidates from within the ranks and spends years preparing them for the moment that they're appointed to the top slot, according to the analysts. Enderle, who has participated in IBM's succession process, said the company looks for executives who can manage the breadth of IBM's businesses, are successful in the jobs they're given and can build consensus.

"It is a rigorous process and it includes detailed training from recognized leaders in various disciplines in a variety of industries for breadth," he said. "The combination of experience and very unique training builds an executive with the capabilities and tested skills to run a company like IBM. While this doesn't assure success-the CEO job is unique-it makes it very likely, and over a century IBM has generally proven the process works."

That is the path that has brought Rometty to the CEO chair, according to King.

"Rometty worked in roles and business units across the company, and has deep insight and responsibilities related to virtually every major IBM strategic effort of the past decade or more," King said. "Along with being a terrific choice to replace Sam Palmisano, Rometty is a great example of IBM's managerial excellence and the company's deep executive bench."

According to Roger Kay, principal analyst with Endpoint Technologies Associates, the fact that the announcement of Rometty's ascension surprised few people in the industry is a testament to IBM's executive practices.

"In fact, this is hardly any news at all, since IBM is nothing if not planned," Kay wrote in an Oct. 26 column on Forbes.com. "Palmisano knew the trajectory of his reign at IBM almost from the time he started. This is what you call an orderly transition. ... IBM likes predictability, as do its customers, and this transition has been envisioned for a long time. Palmisano spotted Rometty early and has groomed her for eons." 


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