January 15, 2009, 9:43 PM — Legendary CEOs like Apple Inc.'s Steve Jobs are almost impossible acts to follow. Most of the sequels have disappointed the stock market, with some flopping so badly that they were scrapped to make room for the return of the star attraction.
"When an iconic CEO leaves, the new guy almost always has a hard time," said Marshall Goldsmith, author of "Succession: Are You Ready?"
Even so, companies should try to lessen the likely letdown by drawing up a logical succession plan that prepares an heir to fill the yawning void created with the loss of someone like Jobs.
Apple's succession planning is being put to the test. Jobs, 53, a survivor of pancreatic cancer, is going on medical leave through June to deal with a "complex" health issue. While Jobs intends to remain chief executive during his hiatus, Chief Operating Officer Tim Cook will steer the ship in the interim.
If things go smoothly during the next six months, it wouldn't be a surprise if Cook is promoted to CEO and Jobs ? assuming he regains his health ? moves into some kind of advisory role, said Dennis Carey, author of "CEO Succession."
"I think Apple's board probably has been looking at succession planning more intently and religiously than most companies," said Carey, who is a senior client partner for the executive recruitment firm Korn/Ferry.
Microsoft Corp., Apple's longtime nemesis, provided a textbook example of how to pass the baton correctly in its recent leadership transition from co-founder Bill Gates to his right-hand man, Steve Ballmer.
Gates turned over the CEO job to Ballmer in 2000, but remained as Microsoft's chairman before leaving the Redmond, Wash.-based company entirely last June ? a departure he telegraphed to investors two years in advance. He remains chairman of the Redmond, Wash.-based company.
Microsoft has remained among the world's most profitable and powerful companies with Ballmer at the helm, although its stock has plunged by 30 percent since Gates' exit last summer. The ailing economy would seem to have more to do with Microsoft's stock market losses than any misgivings about Ballmer.
Other major companies that have shook off the loss of a celebrity CEO without much difficulty include chip maker Intel Corp., whose profits rose the first few years after Andy Grove passed the reins to Craig Barrett in 1998. IBM Corp. also has done well since Sam Palmisano took over in 2002 from Louis Gerstner, the executive credited with essentially saving Big Blue from ruin. Both Barrett and Palmisano were carefully sized up before they had to step into those big shoes.
But it usually doesn't work out so well, even if a successor has been groomed for the role. David Pottruck learned this as he moved up the ranks at stock brokerage Charles Schwab Corp.
After running the day-to-day operations, Pottruck then became co-CEO with founder Charles Schwab before taking on the job himself in 2003. Just 14 months later, Pottruck was being shown the door so Charles Schwab could come to the brokerage's rescue. Schwab remained CEO until last October when he handed over the keys again, this time to Walter Bettinger II. Schwab's shares have fallen by more than 40 percent since that transition, a period marked by a steep downturn in the entire stock market.
Other founders who have stepped down as CEO only to come back to their distressed companies include Starbucks Corp.'s Howard Schultz and Dell Inc.'s Michael Dell. Both men still are trying to engineer turnarounds.
Jobs himself is a comeback CEO, although his return was more convoluted than most. He was fired in 1985 by John Sculley, the executive he hired to replace him, then returned more than decade later, when Cupertino-based Apple bought a company Jobs started during his exile.
As if replacing a legend isn't daunting enough, some CEO successors have had the rug pulled out by bigger forces.
Jeffrey Immelt, who replaced General Electric Co.'s Jack Welch as CEO in 2001, falls into this unfortunate category. Just four days into Immelt's regime, the terrorist attacks in New York and Washington torpedoed the economy. More recently, the credit crisis has hammered some of GE's financial subsidiaries, leaving the company's market value down by nearly $260 billion, or 65 percent, since Immelt took over.
"Jack Welch was good, but he was probably lucky, too," Goldsmith said. "Sometimes, the next guy is good, but not so lucky. This doesn't mean Jeff Immelt is going to be remembered as a bad leader. But he probably will never be iconic."
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