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Why Corporate Kenya Needs to Take CEO Succession Strategically

  Aug 25, 2015
 

By: Dr. Fred Ogola.

Corporate Kenya has had its ups and downs in recent years. There have been stories of highly successful firms such as Safaricom, the most profitable company in Kenya, and East Africa Breweries Ltd. More recently, we have seen Kenya Airways (KQ) post losses that have shocked the region.

CEOs who were at one point the darlings of their industries have fallen from grace. Titus Naikuni, for example, had his last term in KQ clouded by loss-making. Evans Kidero, who at one point transformed the sugar industry, is now facing his share of blame for the collapse of Mumias Sugar Company. Jonathan Ciano, who transformed Uchumi Supermarkets from total collapse to a great hope for the nation, exited acrimoniously.

However, former CEOs such as Michael Joseph and Martin Oduor-Otieno left when the crowd was still clapping. This raises the question: is there a link between a CEO’s tenure (CEO’s succession planning), strategy and organisational performance?

The good book affirms that there is time for everything: a time to plant, and a time to uproot what is planted. So, what determines which kind of CEO to hire — the time to plant a new one and the time to uproot the current one? It depends on performance and organisational needs at the time.

REVENUE MIX

It is an undoubtable fact that we all have biases. This being the case, it is possible then to have ‘management bias’. This makes one look at the problems of an organisation with the lens of one’s background.

When there is customer attrition, a CEO with a marketing background will see the need to add product lines and boost branding. An IT-oriented CEO is likely to believe there is need for a systems-upgrade to make employees more productive, effective and efficient. A human-resource one will most probably call for culture change programmers’, improved compensation, training and development. A finance CEO will work on pricing of products, while accountants are trained to use historical information, but not futuristic.

This answers the question as to what kind of CEO to plant in an organisation and when.

If the return on assets is low and the bottom-line is bad, then it is time to hire finance and accounting CEO rather than a marketing one, since the latter may focus on growing the top-line (revenue mix) as opposed to focusing on the issues affecting profitability.

We can learn something on this from Corporate America.

The trend in the US is that a CEO’s tenure and management are tied to the organisation’s performance and strategy. If a CEO who has a marketing orientation helps the company grow through a massive expansion strategy (top-line growth), the next CEO is usually from either operations, or finance and accounting to focus on the organisation’s bottom line.

Moreover, most CEOs have their tasks clearly spelt out for them, and the tenure assigned depends on the duration of expected delivery. For instance, if the board decides that the company ought to expand into new regions in the next three years, it hires a three-year-tenured CEO.

Is this Corporate American practice sound in Kenya and in Africa at large, where retirement isn’t really African? How could a young CEO such as Oduor-Otieno retire, yet President Mugabe (Zimbabwe) is still soldiering on, President Museveni (Uganda) is too young to go home and President Kagame (Rwanda) has almost declared that no one has been prepared to take over?

Just as we had a Nelson Mandela in the political arena, we also have Mandelas in the corporate world.

Kenya has had some notable trends, though few. Oduor-Otieno, for example, took over KCB and launched a regional expansion strategy that succeeded. However, he did not hold on; he left the bank in the hands of Joshua Oigara. The late Reuben Marambii turned loss-making National Bank profitable by disposing of non-performing assets, and then retired so that the current leadership could grow the lender.

The task rests with the board of directors of Kenyan companies. Allow CEO tenure and succession planning be linked to strategy and performance if corporate Kenya is to flourish.

The writer is MBA academic director and senior lecturer, strategy and execution, Strathmore Business School.

Story courtesy of: bizbeat@standardmedia.co.ke

 



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