The question of how much the next CEO resembles the current one is timely for more boards as they deal with ever-accelerating turnover in the ranks of company chiefs and with fast-rising challenges in a quickly evolving global economy. Thirty-seven of the CEOs of the 100 biggest companies in the consumer packaged goods business, for instance, and 12 chiefs of the top 50 retailers, have turned over in the last two years.
Sometimes boards have no choice but to go with a new kind of leader, as Fiat Chrysler Automobiles discovered when CEO Sergio Marchionne, a 66-year-old legend, died suddenly in July. Best Buy faced a different kind of crisis—and found success with their new leader, Hubert Joly. Here are two stories of unexpected CEO successions and how each company dealt with them.
A former accountant and lawyer before Fiat sucked him into the auto industry, Marchionne combined a penchant for risk taking with a command of the negotiating process to bring both Fiat and Chrysler back from the dead and combine them into a highly profitable maker of trucks and SUVs that has a chance at viability, even in one of the world’s most extremely competitive and fastest-changing industries. The plain-spoken Marchionne also wore black sweaters every business day and was a fiendish chain smoker who spent much of his sleeping time on transatlantic jets.
No one is like Marchionne. But in turning to Mike Manley, directors of the Auburn Hills, Michigan-based company selected a Brit who headed FCA’s most important brands, Jeep and Ram. Also, Manley had grown into leadership under Marchionne, helped develop strategic plans with him, understood his boss’s vision for the company and was widely considered the heir apparent when Marchionne was set to retire in early 2019—even if Manley is a low-key former engineer, product planner and distribution specialist and prefers a sportcoat.
Earlier this year, there were rumors in the Italian media about the FCA board considering a Vodafone executive to succeed Marchionne and reports about fighting within the controlling Agnelli family about who the next CEO should be. “But I personally think they made the right choice” in Manley, says Michelle Krebs, analyst for Autotrader.com. “He spent every day since 2009 either with Sergio or on the phone with him. And he knows the company inside and out, maybe in some ways better than Sergio did.”
The opposite case—outright disaster—compels a board to move in a new direction. For example, Best Buy, the Minneapolis-based electronics retailing giant, was careening in 2012 after the Great Recession as the chain fell victim to “showrooming” by consumers who would come into its stores to get the 411 on goods—and then purchase them online from Amazon for a lower price.
In addition to his inability to pull Best Buy out of its swoon, CEO Brian Dunn had resigned amid allegations of using company resources to carry on an affair with a female employee. Then founder Richard Schulze, who knew of the misconduct but had failed to report it to the board, stepped down as chairman—and launched a hostile bid to reacquire the company.
Best Buy’s board easily could have gone the route of finding an unsullied Dunn lieutenant or bringing in a savvy veteran of the modern retail wars. But instead, directors selected Hubert Joly, a Frenchman who resigned his position as president and CEO of Carlson to accept the chief’s job at Best Buy.
At the time, Carlson owned hospitality and entertainment brands including TGI Fridays and Radisson Hotel Group, not bricks-and-mortar retailers. Joly had turned around the Vivendi video games operation, not a retail brand like Best Buy. A former McKinsey consultant, Joly was (and remains) a director of Ralph Lauren, a fashion design house, not on the board of some consumer electronics brand. Wedbush Securities analyst Michael Pachter called Joly “completely unqualified” because of a lack of retail experience. “It’s shocking to me,” he said.
But Joly’s lack of insiderish experience, and successes outside Best Buy’s vertical, were exactly why then Best Buy Chairman Hatim Tyabji advocated for his selection. “Hubert’s range and depth of experience in transforming companies is exactly what the company needs at the moment, as is his energetic, imaginative and experienced leadership in executing strategies,” Tyabji said at the time.
And, in fact, Joly has succeeded probably beyond Tyabji’s expectations. The new CEO launched bold programs to match Amazon’s prices, slash costs, rationalize the store network, invest in Best Buy’s own e-commerce operation and create new services such as “smart nurseries” that help parents electronically cosset their newborns. Best Buy’s sales, stock price and prospects have turned around dramatically.