Bob Iger’s return as CEO of global media titan Disney was one of the biggest surprises in the corporate world in 2022.
On first stepping down as chief executive in 2020, Iger hand-picked Bob Chapek, Disney’s then head of theme parks and resorts, as his successor. But after a poor set of financial results in Q4, its share price slumped - and Chapek was ushered out and Iger hastily reinstalled.
The stock price of Disney jumped 10% on the news. However, the question remains over who should replace the seemingly inimitable Iger – who was responsible for the acquisitions of Pixar and Star Wars and oversaw Disney’s transition into the streaming age – the second time around. This is a particularly pressing issue for Disney as Iger, who is 71, has only agreed to serve as CEO for two more years.
Leyla Tindall, managing director of Robert Half Executive Search, believes a successful succession plan should start years ahead of any leader’s tenured departure. “This is something that Disney appears to have got wrong,” she says. “Usually, a clear internal plan with a good range of candidates is put forward, both in terms of skills and their likeability among peers and the board.”
In the case of Disney, Iger’s reputation within the company, coupled with his transition to chair, meant that his personal recommendation took precedence. While the chair is usually the person responsible for interviewing and hiring a new CEO, they should maintain some independence when considering candidates.
Randall Peterson, academic director of the Leadership Institute at London Business School, believes that this was the company’s first mistake. “Succession needs to be a group effort, not simply the responsibility of one individual,” he says.
Disney’s board has once again turned to Iger to help them identify his long-term replacement. Peterson recommends that, this time, they look to hire for the challenges ahead, rather than past successes. He adds: “The best results are achieved by looking at the match between business needs and candidate skills. It is very easy to believe that if a person is successful in one domain that they will always be successful. The evidence runs very much counter to that idea.”
Consider external candidates
Too often, businesses look to length of tenure rather than reviewing a candidate’s skills and drive for future success, according to Tindall. Focusing on a single candidate “exacerbates the chances of the skills mismatch that Disney eventually saw come to fruition,” she adds.
Tindall therefore advises that businesses run an external benchmarking process to ensure that candidates outside the business are also considered. “Having only one candidate exposes the firm to greater risk if the individual being prepped to take over leaves themselves,” she says. “It also limits the business to just internal talent, without cross-comparing the external candidates who could add greater innovation.”
However, Rachel Davis, co-CEO of talent solutions and executive search firm Armstrong Craven, notes that “it is not uncommon that external headhunts don’t end in a replacement”. When in a hurry to find a new CEO, businesses can often turn to a “backup option”, who is simply available at the right time, rather than being the best person for the role.
In order to limit the chances of this happening, it is important for businesses to always have a number of potential candidates in their succession pipelines. Although Disney’s internal pipeline may have needed time to replenish, due to the promotion of Chapek, Davis warns that “embarking on a lengthy executive search process from scratch is just too risky and damaging to any business”.
“By adopting a talent pipelining approach, companies can ensure they are plugged into and have relationships with leadership talent external to their organisation ahead of need, removing the reactive nature of an executive search,” she adds.
Fortunately in Disney’s case, they could turn to one of the most successful leaders in the company’s history, who had 15-years experience in the role. But this is not an option for many businesses and it is unlikely Disney will be able to pull off the same trick in a few years’ time, should Iger’s subsequent replacement also prove unable to fill his shoes.
“Developing a truly sustainable business requires you to always be thinking about who might be better suited to take over from you to inject fresh innovation and change when it’s needed,” executive coach Terez Rijkenberg says. “This way of thinking requires a CEO who is mature and self-confident enough to realise that they are replaceable and at some point in the future it will be best for themselves and the business to move on before staleness sets in.”
Identify possible candidates
Iger himself admitted he had become “a little bit more dismissive of other people’s opinions than I should have been” on leaving his position as chair of Disney in 2021, describing it as “an early sign that it was time”. In his second stint as CEO, Iger will not have to rely on signs to know when it is time to leave. Disney’s stock price has already returned to a similar level to when Chapek was in charge and a main part of his remit will be to help solve the succession problem he has helped to create.
The need to boomerang Iger back into the CEO position has also raised alarm bells for shareholders, some of whom see it as a sign that there is a dearth of leadership talent within the company. Rijkenberg recommends that any CEO should start “grooming their team with the skills needed to take over from you on day one”.
“Start identifying those that rise to challenging situations and harness resilience in tough times early,” she says.
While succession planning is never easy, especially when identifying a replacement to a transformational CEO such as Iger, the key is preparedness. By identifying those that are able to rise to challenges and have the potential to take the company forwards, businesses can avoid hiring a Mickey Mouse candidate.