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When would an unfiltered CEO be successful?

Unfiltered CEOs are recruits from outside the company. Both filtered and unfiltered leaders have their value, depending on the circumstances of their recruitment.

Published: 27th January 2022 01:34 AM  |   Last Updated: 27th January 2022 01:34 AM   |  A+A-

In the previous month, I had written about two kinds of CEOs—filtered and unfiltered. Filtered CEOs are those who have been through graded sieves of organisational development within that company. For example, in HUL, I was a filtered leader. However, this was not so in my case in Tata. Efficient filtration enables production of a strong suite of internal leaders for the future. Apart from HUL, examples are SBI and ICICI in banking, McKinsey in Consulting, and TCS and Infosys in software. Senior positions in competitors of these companies are often held by alumni of such firms.

On the other hand, unfiltered CEOs are recruits from outside the company. Both filtered and unfiltered leaders have their value, depending on the circumstances of their recruitment. In this article, I propose some success factors for an unfiltered CEO.

The first success factor requires the board to establish whether that industry is in the throes of turbulent change or whether their company is in crisis. The second success factor is to create adequate distance between the predecessor and new appointee. These arise because an unfiltered leader is a recruitment risk compared to a filtered leader. She may turn out to be an ‘extreme’—either very successful or unsuccessful. The unfiltered CEO may be on either extreme of the talent bell curve.

Lou Gerstner’s appointment at IBM was an example of success of an unfiltered leader. In 1992, John Akers, a 30-year veteran at IBM, was CEO and chairman. IBM was going through a crisis of sales, profits and cash flow. The board decided to bring in an outsider, an unfiltered leader. Lou Gerstner, an MBA from Harvard and alumnus of both McKinsey and RJR Nabisco, was sought out. Gerstner initially was not keen: he was neither a technology person nor did he think it was possible to save the steeply declining IBM. The headhunter persisted—with the additional blandishment that Bill Clinton would call to persuade Gerstner because the then US President wished to save IBM, an American icon. Gerstner relented and joined IBM, and Akers made a clean exit from the company. The story of how IBM was saved is narrated in Gerstner’s book—’Who says Elephants Can’t Dance?’ This is the happy story of an unfiltered CEO who succeeded.

Now consider the unhappy stories about Ramesh Sarin at Voltas and Chris Viehbacher at Sanofi. The facts about both appear among the cases narrated in my 2019 book, ‘Crash’.

Voltas was an unwieldy Tata company. For many years, the CEO was A H Tobaccowala, who ran Voltas bureaucratically, based on rules and procedures. However, the company was not in a turbulent technology area nor did it face an existential crisis like IBM. Nonetheless, the board decided to recruit ‘the best leader in the world’, an unfiltered leader.

Ramesh Sarin had been a filtered leader at ITC for several years. His strength was that he was a customer-focused manager. After Sarin occupied the corner office at Voltas, he found the shadow of Tobaccowala everywhere because the latter did not make a clean exit. He attended board meetings as non-executive chairman and leveraged his long-standing connections within the company to keep abreast of goings-on. Sarin’s strategy to transform Voltas from a rules-based company into a customer-focused firm met several obstacles. Sarin left the company before his five-year term expired.

Sanofi is an archetypal French pharma company, formed through several mergers and acquisitions. Jean-Francis Dehecq became CEO in 2004, followed by a research leader, Dr Le Fur, who had only a short tenure. By September 2008, the Sanofi board decided to look outside. The pharma industry was becoming increasingly global. The company was not in crisis, though its performance was sluggish. The Sanofi board recruited Chris Viehbacher, a German Canadian pharma veteran of 20 years with a superb track record and reputation from GlaxoSmithKline. In line with the mandate he believed he had along with his business instincts, Viehbacher implemented an agenda of global acquisitions and hired several international managers. Over the next six years, the company made acquisitions of $30 billion. Obviously, his management style was way different from the group of directors with a strong French influence. After six years, the directors thought it best to part company with Viehbacher. Chairman Serge Weinberg temporarily ran the company till Sanofi recruited Olivier Brandicourt, a French business leader who had served in Bayer Healthcare and Pfizer.

From these and other examples, it could be hypothesised that the success factors for an unfiltered leader depends on five conditions: 1) The company’s industry is in churn or turmoil. 2) The company requires speedy internal reorientation. 3) There is no suitable leader within. 4) Shape the CEO mandate to fit the strength of that chosen candidate and agree the boundaries within which the CEO is to perform. Ideally, the outgoing CEO should make a clean break with the company. 5) The unfiltered leader is not chosen because she is the best but one who fits the company’s needs best. This is an important difference.

In hindsight, had these criteria been explicit at the time of recruitment, maybe the outcomes may have been different. Many allied questions arise, fuel for future columns.

(The writer’s latest book title, ‘Pivots for Career Success—Unleashing People Power’, coauthored with R Srinivasan, has just been published. He was Director of Tata Sons and Vice Chairman of Hindustan Unilever)

R Gopalakrishnan

Best-selling author and corporate advisor

(rgopal@themindworks.me)



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