Blog Post

Apple and the CEO Succession Plan

Steve Jobs Transition

A few weeks back, Steve Jobs returned to his duties at Apple (s aapl). During his absence, Apple appears to have operated effectively and efficiently. Few people asked the question, “What will Apple do without Steve?” because the question was getting a dress rehearsal. But now that Steve is back (meaning, one day, he will “leave” again), I believe that the investors, financial analyst and the media will once again begin to ask about Apple’s succession planning.

So, what is succession planning and why is it important to Apple?

Succession planning is a talent management process. For key employees, those whose positions within Apple are too critical to be left vacant or staffed by someone who doesn’t have a clue about the task at hand, the board of directors is responsible for identifying and developing a talent pool. These leaders-in-waiting will be used to ensure effective continuity and growth of the company.

Succession planning is a primary concern for Apple’s shareholders. Many institutional and individual investors have chosen to hold Apple’s stock for the long haul. They want to know that the company is planning predictably over that time frame as well.

So why is this important to Apple?

Over the last year, the state of Steve Job’s health has raised a chorus of questions about Apple’s succession planning. What would happen to Apple if Steve was no longer able to do his job as CEO? Is Tim Cook the next “Steve?” Why isn’t the board making a clearer statement about this issue? These question create uncertainty, and investors don’t like uncertainty (as can be seen by the January lows in Apple’s stock price).

The question of succession planning goes beyond just figuring out who will be the next CEO. Transitions in leadership can be disruptive. Selecting a candidate from within the company may provide continuity. However, internal candidates who are not selected may choose to take their chances elsewhere. Selecting a candidate from the outside usually results in the new person bringing in his/her “people” — who possibly displace existing staff. The board’s challenge is to find a leader that works well within the existing corporate culture and, at the same time, brings something exciting and new to the table so he/she is not seen as “Steve 2.0.”

Apple may be able to learn a lot about leadership continuity from companies like Intel (s intc) and Microsoft (s msft).

Over the last 40 years, Intel has maintained a high level of growth and innovation as it has transitioned through five chief executives. Paul Otellini, Intel’s current CEO, worked at the company for more than 30 years before taking the reins, and his top executives have spent their entire careers at Intel. Grooming and predictability are the hallmarks of the Intel approach. For those analysts that think Apple currently has a “deep bench” of capable executives, the Intel approach may be the best option.

On the other hand, the transition of Bill Gates at Microsoft was a planned affair that took more than eight years to complete. A phased, long-term approach would give Apple an opportunity to bring new executives into the spotlight and provide the kind of certainty that both customers and investors are looking for.

Over the next several months, as Steve gets back into a more normal work schedule, I suspect that we will have greater visibility into Apple’s succession planning. My hope is that the company combines the best of the Intel and Microsoft approaches.

5 Responses to “Apple and the CEO Succession Plan”

  1. Ted T.

    “On the other hand, the transition of Bill Gates at Microsoft was a planned affair that took more than eight years to complete.”

    Yeah and look how well that’s working for them. I’ll bet they wish they had any one of a number of top Apple managers instead of Steve Ballmer. Lets face it, other than to a bunch of speculators, all those transition plans are meaningless. What matters is that Apple has excellent management beyond Steve Jobs. And that Jobs himself, while he is still breathing, wants to be at Apple. A transition plan is meaningless if Jobs isn’t going anywhere.

  2. Rolf Raess

    The “Madoff’s” pushed him out…(80ies); where are they now? Deep in forest!
    Where is the man, not making money as his first goal; but instead, has inspirations for the computers future? I think genies do not grow on trees. Apple with SJ has a huge fundament today, which will stay quite a while…
    Like reader «Brian» I see it, too.

  3. Uh, he didn’t ‘leave’ before, the corporate suits pushed him out. I am quite certain that anyone taking over for him next time will be doing things acording to Job’s example, rather than ridiculing it as happened before.