The efforts of many leaders to reach the top begin with initiatives displayed in childhood that continue unabated through adolescence into adulthood. Lyndon Johnson and Margaret Thatcher are illustrative. As adults, they obtained their reputations as successful leaders in one situation and then transferred that reputation for successful leadership to other similar situations. They and some others gained sufficient esteem and experience in their early efforts to succeed as leaders in almost any situation they entered (Bogardus, 1928; Cowley, 1931). Success in one political office served as a stepping-stone to other offices. But failure in one office could destroy one’s political career (Burns, 1978), although before Abraham Lincoln was elected president, he suffered a number of defeats in earlier campaigns for lesser offices. The persisting effects of charismatic founders can dominate an organization’s culture long after the founders are gone. Salaman (1977) illustrated this effect in a small, successful manufacturing firm that continued to be influenced by a charismatic leader even after he had retired and was no longer on the scene.
Although tasks and goals can be different from situation to situation, some amount of interpersonal competence is required from any leader. So there is likely to be some amount of transfer of who emerges as leader in different situations. In the same way, personal characteristics, such as energy, intelligence, assertiveness, task orientation, need for power, and other personal traits promote the persistence of the same persons emerging as leaders in a variety of times and places. Since considerable consistency is found in intelligence and various personality traits from childhood to adulthood, consistency will also be found in children’s trait-associated tendencies to become leaders and their potential to become leaders as adults. For example, C. M. Cox’s (1926) analyses of the biographies of 300 outstanding military, religious, and political leaders frequently found above-normal behavior traits in their childhoods, such as the desire to excel, intelligence, insight, self-esteem, and forcefulness—traits usually related to leadership. Analyses that followed subjects from early childhood to retirement found that conscientiousness and mental ability predicted career success, while neuroticism was contraindicated (Judge, Higgins, Thoresen, et al., 1999).
The persistence of an individual’s attempts, success, and effectiveness as a leader across situations and time periods may be augmented by a consistent “ability to perceive the needs and goals of a constituency and to adjust one’s personal approach to group action accordingly” (Kenny & Zaccaro, 1983, p. 678). It is also strengthened by the continuous power that a leader may hold during the various stages in a group’s development (Quiggins & Lashbrook, 1972). In 36 firms, Miller (1993), as expected, found that long-tenured executives accumulate power and legitimacy. Their long-term followers respond more favorably to them. Persistence in leadership is further bolstered by the implicit beliefs of followers that regardless of the environmental complexities to be faced, more persistence is a virtue in leaders and shows their sense of responsibility (Graves, 1985). Such persistence in leadership behavior is often seen as characteristic of successful chief executives, manifested in their consistent support of a theme, shifting attention to that theme, granting authority down the line to support the theme, encouraging experimentations about the theme, and developing and maintaining contacts about it throughout the system (Peters, 1980). Such persistence may pay off. Staw and Ross (1980) found that marketing managers whose scenarios revealed a persistence in the same strategy as situations changed were evaluated more favorably by practicing administrators than managers whose scenarios showed that they tended to shift strategies to try to accommodate transient changes in conditions. Nevertheless, by 2006, the persistence of President G. W. Bush to “stay the course” in Iraq and his continuing support for many of his policy advisors despite their many mistakes had lost him much of his popularity with his party and the public.
The political behavior of newly appointed CEOs and how they restructure control within the organization, protect their own position, and implement strategy reflected their leadership in previous positions (House & Singh, 1987). Helmich (1974b) established that the origin and style of successors to 140 presidents of manufacturing firms influenced the changes and improvements that occurred in the organization. The task-oriented leadership behavior of the successors was greater than that of the predecessors, particularly during the early days of the successors’ tenure. Zhang and Rajagopalan (2003) observed that strategic change was less likely in manufacturing organizations led by CEOs with long tenure in office. Some began by holding meetings with their new people; others did not. Some were more aware of the social dynamics involved in the succession; others were not. Some might bring allies and assistants with them; others entered the new post alone (Grusky, 1969). Some utilized the formal system and depended on their own authority, with a resulting increase in tension; others relied more on informal contacts to learn about what was needed to guide future actions (Gordon & Rosen, 1981). The personal learning opportunities for the successors were also likely to be of consequence (Hall, 1986). Some failed to consider individual, group, and organizational dynamics, which resulted in conflict, defensiveness, and organizational regression (Oskarsson & Klein, 1982). In a study of 227 successions over a 25-year period (Vancil, 1987) noted that the CEO served also as board chair, shared leadership with the future successor or board chair in a dual arrangement, or was a member of a team of executives. Or else the new CEO was a symbolic figurehead without real power.
Although there is persistence in leadership, systematic changes occur as a function of age. That is, the requirements for success as a leader are likely to mirror the developmental stages of the leaders and the led. Early on, immaturity, raucousness, and playfulness are required. Later, these characteristics are replaced by demonstrated task and interpersonal competence. The playboy Prince Hal turned into the persuasive and determined King Henry V.
These changes have been demonstrated in studies of children at various ages. For example, observations of the spontaneous play of nursery school children by a one-minute sampling procedure indicated the existence of two approaches to leading others: persuasion and coercion. Such authoritative leadership behavior continued to be seen among three-to-five-year-olds by Barner-Berry (1982) in the ongoing informal leadership of a child even after the succession of a new formal leader. The emerging leader was also readily observed in primary school at an early age (Mey, 1936). At this age, children attempt to become leaders to satisfy their desire to influence others. Such emergent leaders tend to be tyrants or stimulators. But later, attempts to organize become more common. With continuing maturation, consistency in attempts and successful leadership increase, while rivalry decreases among would-be leaders (Toki, 1935). Increasing age brings further changes in the behavior that contributes to the success of a leader. Tryon (1939) found that among 12-year-old girls, the leaders were daring and humorous, but among 15-year-old girls, the friendly, enthusiastic, happy ones were more successful leaders. Among European adolescents, the emphasis on coercion was observed to change with maturation to a persuasive appeal to ideals (Winkler-Hermaden, 1927). Horrocks and Thompson (1946) studied the friendship choices of boys and girls aged 10 to 17 by administering sociometric tests two weeks apart. They discovered that the fluctuation in the choices of boys and girls of the same age did not differ. However, older boys and girls tended to name the same individual both times as friends, while younger children showed less overlap on the two lists. These results suggested that socio-metric choices tended to stabilize in later adolescence.1
I. J. Levi (1930) obtained a correlation of .19 in the leadership activity of the same group of students in elementary school and later in high school. But the correlation was .52 when these children’s leadership performance in junior high school was compared with their performance in high school. And D. P. Page (1935) found that the first-year leadership rank of cadets at West Point correlated .67 with fourth-year leadership rank.
Several early studies also determined that leadership in elementary school, high school, and college was predictive of later leadership in adult business and social activities. Courtenay (1938), for example, found that leadership in extracurricular activities as an adolescent was more highly related to various criteria of success as an adult than was scholarship or academic achievement. In other words, leadership, rather than scholarship, was the best predictor of later leadership.2 Williams and Harrell (1964) reported a significant correlation of .24 between leadership in undergraduate activities and later success in business five years later, as measured by the salary level achieved. Roskens (1958) found significant correlations, ranging from .37 to .63, between college leadership and postcollege leadership. At the same time, postcollege leadership was not highly related to grades in college or to parents’ occupational status.
Russell, Mattson, Devlin, and Atwater (1986) obtained a correlation of .18 between high school leadership, as measured by a self-report biodata questionnaire, and subsequent peer ratings as a midshipman leader at the U.S. Naval Academy. Similarly, Yammarino and Bass (1989) found that grades for military proficiency of students at the U.S. Naval Academy correlated with the successful patterns of leadership behavior of the same personnel as shipboard lieutenants as much as eight years later, but their academic grades at the academy were not correlated with their subsequent leadership performance.
As early as 1904, Terman (1904) reported an experimental verification of the consistency of leadership behavior in schoolchildren from one problem to the next. Borgatta, Couch, and Bales (1954) observed that new experimental groups were more effective if they contained “great men” who had been identified in former groups for their ability, assertiveness, and social success. The “great men” continued to be influential in the new groups. Highly esteemed, active, able individuals continued to succeed as leaders in groups with different members that were faced with similar tasks. Blake, Mouton, and Fruchter (1954) reported that the leaders’ contribution to the groups’ decisions and dominance, as rated by different observers in different situations, yielded consistent individual differences among raters, despite the variation in the situation and the groups’ composition. They also noted that as the task and groups were altered, self-ratings and others’ ratings were most consistent when they were concerned with leadership and interest. They were less consistent when they were concerned with the rated effectiveness and satisfaction of others.
Borgatta, Couch, and Bales (1954) found that initially effective leaders tended to emerge as leaders in group after group to which they were assigned. Bass and Norton (1951) analyzed test-retest performance in initially lead-erless discussions held a week apart. The test-retest measure of successful leadership was .90. Carter, Haythorn, and Howell (1950) studied the emergence of leaders in groups of college students who were performing the same task again after about four months. The test-retest correlations depended on the nature of the task. They ranged from .39 for discussion tasks to .88 for motor coordination tasks.
Rosenberg, Erlick, and Berkowitz (1955) studied small experimental groups that were required to cooperate in tilting an apparatus in such a manner as to move a small ball up a ramp. The persistence of leadership was highly significant among the various regroupings of members. Gordon and Medland (1965a) obtained peer nominations and ratings in small military units before and eight weeks after the reconstitution of the units. Peer nominations for leadership correlated .80 to .90 between the two situations.
Attempted leadership also showed consistencies across different task conditions. Hemphill, Pepinsky, Shevitz, et al. (1954) found an average correlation of .45 between assessments of attempted leadership by the same members of experimental groups engaged in four different tasks: reasoning, instruction, assembly, and strategy. This consistency across tasks depended on the similarity of the tasks. For example, as groups developed, the same successful leaders reemerged as the same developmental tasks needed to be completed. Sterling and Rosenthal (1950) reported that when leaders and followers changed roles in different phases of their groups’ development, the same leaders tended to emerge as similar phases of development recurred.
The consistencies in leadership behavior found among developing individuals and groups and in small experimental groups were also observed among supervisors, managers, and other institutional leaders across times and places. Furthermore, those who were more effective in one situation and time were likely to be more effective at other times and in similar kinds of locations.
Consistency of Leadership Behavior. Holloway and Wolleat (1981) examined the interaction styles and supervisory behavior of trainees and concluded that individual preferences for different kinds of supervisory interactions were stable. Over a three-month period, Greene (1976a) reported rate-rerate coefficients of .60 and above for contingent reward behavior and for contingent punitive behavior by supervisors. Similar results were found for contingent reward by Szilagyi (1980b) and Sims (1977) over 3-, 6-, and 12-month intervals. Sakamaki (1974) studied the descriptions of 339 Japanese first-level bank supervisors and second-level bank managers by their more than 1,800 subordinates and colleagues. The managers remained in the same positions in the two successive years. Rate-rerate correlations of .35 and .74, respectively, were found for their leaders’ orientation toward performance. The corresponding correlations for orientation toward maintenance leadership were .53 and .59.
Similar evidence about the consistency of transformational and transactional leadership was obtained for a small sample of executives with a six-month test-retest analysis of their subordinates’ descriptions of their behavior (Bass & Avolio, 1989). The mass of case and anecdotal evidence available on world-class leaders also supported the contention that leadership behavior is consistent across times and similar situations.
Persistence of Effective Leadership. Considerable evidence is available concerning the tendency of the same leaders to be effective, given the same task requirements with new work groups. The impressive set of field studies of first-line supervisors is illustrative. H. Feldman (1937) studied 22 work groups that shared in savings on operating costs. One year after the project began, supervisors of groups with high savings in operations were assigned to groups with low savings, and vice versa. The order of merit of the supervisors remained practically the same despite the change in assignments. Many of the differences among groups were associated with the leaders—not with the groups they were leading. The supervisors’ assignments were then shifted by chance, and the same results occurred. The relative order of performance of the groups depended on who led the groups. The groups with previously weak savings records that were subsequently led by high-savings leaders later had strong savings, while those with previous strong savings that were subsequently led by low-savings leaders later had weak savings. In the same way, J. M. Jackson (1953b) arranged for the supervisors of telephone line crews with high morale to change places with the supervisors of crews with low morale. A retest of the crews four months later showed a significant shift in the scores for morale, with the previously low groups scoring high and the previously high groups scoring low. Each supervisor tended to receive a score in his second group that was similar to that obtained in his first group. No such significant changes occurred in a set of control groups. Wyndham and Cooke (1964) also studied work groups in which the supervisors exchanged places. They found that the performance of previously ineffective groups improved under previously effective supervisors, but the performance of previously effective groups declined under supervisors of previously ineffective groups.
F. L. W. Richardson (1961) studied work groups in which the only way found to improve productivity and morale was by transferring troublesome leaders out of their groups. N. A. Rosen (1969) obtained ratings of workers’ preferences for eight supervisors in an upholstering shop. Supervisors who were high and low in preference then changed places. The greater the workers’ consensus in the first and tenth weeks that the new supervisor “is our leader,” the greater was the increase in productivity and cohesiveness in the eleventh and sixteenth weeks. The findings suggested that the new supervisors were evaluated in terms of their ability to help the group. In another experiment by N. A. Rosen (1970b), large changes in the preference for supervisors were associated with large gains in productivity following reassignment. Small changes in preference were associated with small gains or losses in productivity.
Borrowing from the general psychology of transfer, Bass (1960) developed a model to account for the conditions in which the positive and negative transfer of leadership behavior occurs. Among the major propositions were that positive transfer (transfer that facilitates performance) from an old to a new situation will be greater the more the new situation is similar to the old one and the more the new situation calls for the same leadership behavior as the old one to attain goals. Negative transfer (transfer that is detrimental to performance) will be greater the more the new situation, different from the old one and requiring new modes of leadership, is responded to with the old ways of behaving to achieve goals. The new situation is responded to as if it were similar to the old, when it actually is not. It is perceived as requiring the old ways of leadership behavior, when actually new ways are necessary.
The transfer of leadership and management at lower levels becomes increasingly difficult from one situation to another as the positions call for different technical knowledge, different human relations skills, and different required participation in planned change. Successful positive transfer requires recognition of the differences in the organizational norms. Positive transfer is easier at higher levels but may have ineffective results if the new situation turns out to have different requirements from the old one. A senior executive with the needed conceptual and organizational skills is able to transfer leadership from one organization to another but may still suffer from negative transfer effects due to differences in markets, products, traditions, and technologies (Yukl, 1998).
As many as 70 U.S. Army generals retire annually to enter civilian life at an age and with the skills and experience commensurate with the civilian executive levels into which they move. Ordinarily, the transfers are successful, despite the failure to prepare adequately for the transfer by careful self-analysis and an analysis of the situation into which they transfer (Whelan, 1981).
Like George Marshall before him, Colin Powell, who retired as a general and Chief of Staff, was appointed civilian Secretary of State in 2001. Starting with George Washington, many generals have been elected president. Like many military leaders before him such as Douglas MacArthur, retired general Wesley Clark sought the presidential nomination in 2004. Considerable experimental evidence confirms the positive transfer of leadership.
What transfers positively, say, if one examines the move from high-level military leadership to civilian leadership? Hill (1984) mentioned these characteristics: (1) contacts with top government and foreign officials and specialists; (2) relevant experience in dealing with boards and staffs; (3) effective skills in presentation, persuasion, and communication; (4) experience in strategic planning and decision making; (5) emphasis on clear definitions of authority and responsibility; and (6) experience with integrating operations, such as planning with research and development. Dwight D. Eisenhower illustrated the transfer that is possible from a successful military career to performance as university president and president of the United States.
But military-civilian differences may also be a source of negative transfer effects for military officers taking senior civilian executive positions.
1. A less authoritarian and more collegial style is required.
2. Civilian employees have a great deal more latitude (say, to strike) than do military personnel.
3. Delegation and coordination in civilian business and industry require much more than giving orders and expecting unqualified compliance.
4. The lack of cost control in the military and the profit orientation of civilian firms may be problems for ex-military leaders.
5. The ex-military leader may lack experience in assessing and making calculated marketing risks.
The career of Ulysses S. Grant illustrated this negative transfer. Grant was successful as the commander of the victorious wartime Union Army, although he had previously been a repeated failure in business. Later, he was also a failure as U.S. president (McFeely, 1981).
Administrators in one specialty readily transfer to another position in the same specialty area. For example, deans of medical schools who change jobs move into other dean-ships or vice presidencies at their own or other medical schools. A few return to faculty positions, retire, or take up administrative posts outside medical schools (Wilson & McLaughlin, 2001). Some scientists and technologists who wanted to transfer eventually into management positions revealed that they were motivated by needs for upward mobility, power, influence, dominance, security, and respect.
What is learned about leadership of sports teams can be transferred to leading work teams. Healthy competition among members may contribute to overall team performance if they work together effectively and do not try to undermine each other (as candidates frequently did while seeking the 2004 Democratic Party nomination for U.S. president). As shown by professional hockey teams, early experiences of success are encouraging and predictive of better subsequent performance. Taking time out in team sports for feedback, learning, and review benefits subsequent performance. The more time team members have together, learning about one another’s roles and team processes and how to anticipate one another’s actions, the more team performance is benefited (Katz, 2001).
However, specialization may result in negative transfer effects. Kotter (1982b) noted that when general managers adapt themselves to one specific context, they will find it difficult to transfer to a different context. For a general manager in one organization and industry to become a general manager in another organization and industry requires the ability to learn new things rapidly and to establish new relationships.
Experience as a manager, per se, is not what is important. Rather, whether the transfer of experience will be positive or negative depends on the relevance of the experience of the old position to the new position. Kennedy (1985) found that while time in service and the number of previous positions held added less than 1% to the accuracy of predicting successful leadership performance as a military officer, the assessed relevance of the previous positions added 20% to the accuracy in predicting successful leadership performance.
Positive transfer of attempted and successful leadership has been seen when groups move from one similar situation to another and if the issues they face are similar. Even if the membership changes, the same leadership may persist.
Effects of Similar Tasks. Katz, Blau, Brown, and Strodtbeck (1957) reported that groups exhibited a tendency to return to the same leader when the task performed in time 2 was similar to that performed in time 1. As reported in Chapter 6, Bass and Norton (1951) reported a correlation of .90 between successful leadership displayed by members of leaderless group discussions held a week apart. The composition of the groups and the problems discussed were the same. When one discussion was an examination and the other was not, the correlation remained as high as .86 (Bass, 1954a), but the correlation dropped to .75 when two members of each group of seven were coached between the test and retest situations on how to lead (Klubeck & Bass, 1954).
An examination of situational data collected in the screening of candidates for the Office of Strategic Services (OSS, 1948)3 further illustrated the effects of similar tasks. Positive transfer was evidenced by the increasing correlation of leadership ratings of candidates’ performance on other situational tests with their rated performance in leaderless discussions as the other situational tests became more similar to open discussions. The correlation with leadership in discussions was .30 with leadership in cooperatively constructing a giant toy, .47 with leadership in solving a problem of crossing a brook, .48 with leadership in a personal interview; and .56 with leadership displayed in a debate.
As posited by the transfer model, the transfer of leadership behavior decreases when tasks differ from an old to a new situation, especially when a change from a purely intellectual activity to purely manual-mechanical activities is involved. Thus, Carter, Haythorn, and Howell (1950) found that although leaders in reasoning tasks also tended to emerge as leaders in intellectual and clerical tasks, they did not do so in mechanical tasks. Leaders in mechanical tasks tended to emerge as leaders in motor coordination tasks, but not in intellectual tasks. In an earlier study, Carter and Nixon (1949a) found a tendency for the same person to emerge as leader in clerical and intellectual tasks, but not in mechanical tasks. Thus, no transfer or even a negative transfer seems most likely when the transfer of leadership is from group tasks of the “head” to tasks of the “hand.”
Effects of Similarity of Issues. The positive transfer of successful opinion leadership was reported by Jacoby (1974), who found that opinion leaders’ influence overlapped in different areas. The degree of overlap of influence increased with the increase in the similarity of issues about which opinions were sought.
Effects of Changes in Membership. As long as the task stays the same in a new situation, recomposing the group membership does not seem to reduce the positive transfer effects greatly. Various experimental attempts have been made to determine whether the same individuals will emerge as leaders when members are reassigned to new groups with different combinations of leaders and followers. Bass (1949) found a correlation of .72 between the initial leadership status attained by group members in leaderless discussion groups and leadership status attained in reassembled discussion groups. Bass and Wurster (1953a) obtained correlations ranging from .51 to .66 between measures of leadership status in groups that differed in the composition of members and the problems to be discussed. Even when, in addition to changing the groups’ composition, a year instead of a week intervened between the test and retest, the tendency to emerge as a discussion leader on the test and the retest correlated .53 (Bass & Coates, 1952). Arbous and Maree (1951) obtained a median correlation of .67 between the extent to which administrative candidates displayed successful leadership when they were appointed discussion leaders and the extent to which they displayed successful leadership in initially leaderless discussions. Similar research by Carter, Haythorn, Meirowitz, and Lanzetta (1951) yielded a correlation of .55. When, in addition to changing the composition of the membership, the type of discussion problem was varied systematically, the correlation in consistency of success was still .58 (Bass & Coates, 1953). Nevertheless, subtle effects can be seen when the composition of the members of a group is changed. Cloyd (1964) found that the same members tended to perform the same function in successive groups but that different functions, if needed, could be performed by the same members. An analysis of leaders’ comments in discussions that had different purposes indicated to J. T. Wood (1977) that the same leaders can be successful in a variety of discussion situations with divergent goals, members, and constraints if they adapt their oral behaviors to meet varying goals and compensate for failures at previous meetings. Other members also readjust.
Members adjust for each other’s behavior when they find themselves in new groups. For example, Haythorn (1952) combined and recombined the members of experimental groups. Members were rated on aggressiveness, initiative, confidence, submissiveness, sociability, leadership, and the like. Haythorn found that when one member in a group was rated high on one of these variables, other members were all rated low. It appeared that when one member exhibited a high degree of a given behavior, the other members attempted to adapt to the situation by reducing their behaviors in the same area of role performance. Similarly, Bernstein (1964) removed the dominant male from a group of rhesus monkeys. During the month he was away, the remaining males increased their dominance and social activities. Upon his return, the dominant male assumed his former position and the social activities of the other males were reduced.
Effects of Changing Task and Organizational Location. Bass (1960) analyzed the results of eight studies that reported 18 correlations between successful performance in initially leaderless group discussions and successful performance as a leader in real life. Although the median correlation was .38, the 18 correlations ranged from −.25 to .68. Correlations were higher, the more similar the real-life situation was to a leaderless group discussion. In the study mentioned earlier, Sakamaki (1974) found that the performance (P) orientation scores (according to subordinates) of 121 first-line Japanese supervisors who were not transferred correlated .35 from one year to the next. For maintenance (M) orientation, the rate-rerate correlation was .53. For nontransferred second-line supervisors, the respective correlations were .74 and .59. But for 133 transfered first-line supervisors, the corresponding correlations dropped to .03 and to −.07; and for 19 transferred second-line managers, the corresponding correlations dropped to .29 and −.08. The lack of consistency in leadership orientation for the transferred supervisors compared with those who did not transfer could be attributed to a change in the composition of the subordinates who rated them, as well as to a change in their position and social context. Misumi and Mannari (1982) clarified the importance of the similarity or difference between the old and new situations of transferred supervisors. When 67 Japanese bank managers were transfered to jobs with similar work content and social context, they tended to exhibit the same P and M orientations, as revealed in rate-rerate correlations by subordinates of .56 and .42, respectively. But when 23 other bank managers were transferred to different kinds of departments in different branches, the ratererate correlations dropped to .10 and −.06, respectively.
For Henry Ford, the automobiles he produced could be any color as long as they were black. The very successful Model T was black, but the public finally turned to his competitors for cars in different colors. Early success in situation fixates the behavior of the rigid, stubborn leader, making him or her less effective in a new, different situation that requires a new approach to problems. For example, a technical supervisor who has been a successful leader in a situation that demands precision exactness may fail to deal with the challenge of decision making in the absence of complete information when promoted to the position of general manager (Pearse, Worthington, & Flaherty, 1954). Similarly, many examples can be found of a business executive transferring his successful profit-making practices to running a government agency with disastrous results (e.g., Fishman, 1952). The political appointees of the Environmental Protection Agency (EPA) and the Federal Emergency Management Agency (FEMA) provide illustrations.
Negative transfer can also occur for the career bureaucrat. Measures are adopted in keeping with past training. Under new conditions, not recognized as significantly different, the very soundness of the training leads to the bureaucrat’s adoption of the wrong procedures. Furthermore, continued success in day-to-day routines makes the bureaucrat unable to change or see the need to change when the conditions under which the bureaucracy was organized change (Merton, 1940). Negative transfer may explain the ill-fated attempt at administrative reform in Zaire in 1973, in which the local chieftaincies were changed by rotating the chiefs outside their areas of origin. The failure of the policy was attributed by Schatzberg (1982) to the lack of timely consultation. Nonetheless, it would seem that there must have been considerable negative transfer because of the loss of legitimacy, understanding, and applicability of a chief’s approach when he was moved from his home area to another.
Maladaptation. As might be inferred from Fiedler’s (1967) Contingency Theory,4 shifting leaders from situations that are favorable to them and in which they have experienced effectiveness to situations that are unfavorable to them is likely to produce negative transfer. The leaders’ earlier success can result in their continuing to attempt the same leadership in the new situation, with a consequential decrement in effective outcomes. The garrison commander may not do as well when in a front-line command. The effective leader in emergencies may be unsuccessful and ineffective elsewhere. Elkin, Halpern, and Cooper (1962) observed that individuals who emerged as leaders in experimentally created mobs were not popular under other circumstances. Likewise, what is likely to make a leader effective in the early stage of development of a sensitivity training group seems to reverse in later stages of development. Data from 158 members and leaders of 20 such groups showed that trainers who were considered to have little need for control and affection tended to elicit the most favorable reactions during an early period of a group and the most negative reactions at a later time (Schutz & Allen, 1966).
Negative transfer occurs when a new situation requires values different from or opposite to those fitting the old situation. Thus, the political appointments of conservative private sector executives to administer public housing programs to which they were ideologically opposed resulted in their corrupt and wasteful violations of the barest minimum standards of public service (Montgomery, 1989). A well-documented case of negative transfer of leadership was that of a school district superintendent in a midwestern suburban community. She gained a statewide reputation in educational and business circles as an energetic, innovative, and visionary leader who had converted the threat of a budgetary crisis into an opportunity to make improvements in the district. Her transformational leadership had a dramatic impact on the district. Her charisma resulted in some of her followers becoming cultlike. However, when she subsequently served for two years as state commissioner of education, none of the successful transformational leadership was seen. No cult-like following developed. No attributions of extraordinary talents and abilities were heard; no strong bonds of affection were forged with constituents. Instead, there was strong criticism of her leadership style and actions. What had worked well in a school district in crisis was counterproductive in the larger state system (Roberts & Bradley, 1987). Lombardo, Ruderman, and McCauley (1987) examined what “derailed” the promising careers of junior executives who had failed after promotion to senior levels. Derailment occurred for some who liked to work alone and couldn’t build a staff if placed in a senior position. Some lacked a strategic perspective, were too controlling and results-oriented, and had trouble starting in new and more complex situations. Some who were conceptually strong and creative lacked sufficient attention to detail and follow-through.
The process of succession is an examination of the transfer process from another vantage point. Antecedents that promote the more effective replacement of one leader by another and the consequences of replacing one leader with another provide a further opportunity to see how the positive and negative transfer of leadership may occur (Gordon & Rosen, 1981). This implies that leaders make a difference to the performance of their groups and organizations, although as was noted in earlier chapters, organizational variables may be more important (Pfeffer, 1977). Meindl and Ehrlich (1987) argued that the effects of leadership on organizations were a romantic fiction, a misperception of cause and effect, which attributed the success or failure of organizations to their leaders. Nevertheless, who succeeds as leader is important to group and organizational performance, even though other variables may be more important (Thomas, 1988). Succession planning has been a major strategy for many boards, CEOs, and their organizations since before the 1970s. Some new practices are emerging (Beeson, 1998) to form an effective pipeline of potential CEOs. At each successive career stage, each potential successor needs to develop skills, use time effectively, and adjust values in meeting different leadership challenges and managing others. At each transition, fewer old tasks and more new ones need to be handled (Charan, Drotter, & Noel, 2001).
House and Singh (1987) pointed to the importance of the executive succession process—a phenomenon in all groups and organizations that survive. In the succession process, much power is transferred, along with control of the organization’s relationship with its outside environment. A change of executives is often associated with major changes in the organization (Virany, Tushman, & Romanelli, 1985). The succession is a focal point of political processes within the organization (Zald, 1965). Decisions about the succession express the particular political preferences of the organization’s constituencies (Pfeffer & Salancik, 1974; Salancik & Pfefer, 1974). The change of leaders is often accompanied by a change in the political environment that casts the replaced leader in an unfavorable light (Rockman, 1984). It is no wonder that most incumbent chief executives give top priority to the question of succession (Bruce, 1986). Except for a major reorganization, the retirement of the chief executive probably causes more job changes down the line than does any other event.
The average tenure in office of chief operating executives in industry appears similar to that in higher education and hospital administration. The median tends to be little more than five years, but the mean is much longer (weighted by those in office for a lifetime). The expected mean term of office often used to be close to 10 years (Wilson & McLaughlin, 2001). The median was shortened to seven years in the 1990s and in 2005 was closer to four to five years. If the successor comes from within the organization, there may be a wave of other promotions at lower levels. If the successor comes from outside, the organization that supplied the successor must find a replacement, so it, too, will be engaged in a succession process. The rate of succession increases with the rate of organizational acquisitions, expansion, mergers, takeovers, and bankruptcies.
There has been increased concern about the need for accountability of top executives for corporate performance and ethics and their appropriate selection and compensation in alignment with stakeholder interests. Replacing a CEO of a poorly performing firm is an effort to regain stakeholder confidence (Puffer & Weintrop, 1995). A survey of 711 Australian human resource business professionals indicated that the purposes of succession management programs were to improve business results and to meet new skill requirements. Efforts were linked, to a considerable degree, with strategic business plans, a broader management strategy, and unique organizational needs (Taylor & Ross-Smith, 2003). Each organization needs to tailor-make the process to fit its culture and support its systems and resources (Berke, 2002).
Some CEOs, like many political leaders, refuse to retire. Their “personal identity is so intertwined with … [their] role that retirement represents a personal void.” They will have to give up power, status, and perquisites (Sonnenfeld, 1988, p. 264). Term limit rules have to be enforced, or countervailing power will be required for the succession. Saddam Hussein was removed by military force. Coalitions of revolutionaries force resignations. Castro overthrew Batista. In the United States, following the institutionalized rules, the electors from each state choose the next president. Boards of directors, representing the shareholders, legally choose the next CEO, although as will be discussed later, corporate succession in the United States has to be seen as matters of politics, power, shareholder interests, governance rules, government regulations, and laws. In Japan, organizational rules represent the interests of the employees and institutionalized changes in CEOs are more frequent (Kim, 2000).
Although Flament (1956) and Pryer, Flint, and Bass (1962) reported that experimental groups tended to remain effective as long as they did not change leaders, in the political arena, in particular, the choosing of new leaders is an occasion for renewal. In both capitalist and socialist countries, innovations, new policies, new priorities, and revised budgets usually accompany the succession of new leadership. Some leaders may be chosen as caretakers. When a change of leaders is mandated, such as at the end of four or eight years for a U.S. president, the successor may be chosen to provide continuity. Thus, Blake and Mouton (1985b) showed that four twentieth-century U.S. presidents who chose their successors tended to choose a leader similar to themselves in management style. But the styles of the nine successors who were not chosen by the previous president tended to be different from those of their predecessors.
A change in management because of poor organizational performance is a way in which the organization attempts to be adaptive (Helmich & Brown, 1972). Failure to change the leadership will reduce such adaptivity. Failing firms have lower rates of succession than do non-failing firms (Schwartz & Menon, 1985).
In choosing the top managing successors of an organization, one is likely to be contributing to changes in the organization’s strategies and to what is to be valued by the organization. In searching for successors for the chief executive, organizational renewal is sought. There may be a need to dip down into the next generation of managers with less seniority to find the leadership required for such changes. The organization’s structure is likely to be affected by the succession. For example, Hambrick and Mason (1984) hypothesized that if the successors are highly educated professional managers, the organization is likely to see them introduce more thorough planning systems, complex coordination devices, budgeting details, and complex incentive-compensation schemes.
Succession is an opportunity for organizational members to participate in a process that may significantly shift the organization’s direction. The expenditure of time and effort in the process reaffirms the importance of the position to the organization and adds to the power of the position (Pfeffer, 1981b). Succession offers opportunities for coalitions of interests within organizations to communicate, exercise preferences, and negotiate the organization’s future (Gephart, 1978). According to Boeker’s (1997) study of 67 semiconductor producers, the movement of senior management from one organization to another brings managers into the new firm with prior experience with different products and strategies, reflected in the new firm’s market entry decisions.
Between 1957 and 1981, corporations tended to concentrate on choosing successor CEOs with the same career specialization as before. However, between 1981 and 1997, they were more likely to choose successors from different career specializations, probably to help reduce organizational inertia and to reflect the need for change (White, Smith, & Barnett, 1997). As Trow (1960) noted, it is difficult to sort out the antecedents from the consequences of the succession in leadership. Many successions are routine, due to rules regarding retirement or disability. From an examination of 13 CEO successions in the 1990s in firms such as Corning and Glaxo Well-come, Spitzer and Evans (1998) inferred that successions worked well if thinking about the succession began with the accession of the previously selected executive, the process was well defined and articulated, the board of directors was involved early, the field of candidates was not narrowed too quickly, and the candidate was first placed and observed for style, values, and vision in a chief operating role for a period. At Ameritech, formerly part of Bell Telephone, the installation of the new CEO was accompanied by the creation of four planning teams of younger executives to assist in the necessary organizational and personnel developments (Tichy, 1996).
In the 1980s, the average CEO could expect to be in office for a decade. But in the 1990s and 2000s, succession events due to dismissals increased substantially as a consequence of poor organizational performance. Increasingly, CEOs were held accountable for an organization’s performance; although the evidence is not always supportive, the disruption caused by the succession may outweigh its benefits (Wiersema, 2002). Repetitive executive turnover and leadership discontinuity often result (Krug & Nigh, 2001, 2002). Poor profitability is likely to result in the selection of an outsider as the successor (Cannela & Lubatkin, 1993).
Numerous events affect the succession (Kesner & Sebora, 1994). For instance, product completion and new financing from outside investors may be the reason for a change at the top (Wasserman, 2002). Or the change may be induced by mergers or when one firm acquires another in a takeover. Senior managers in the acquired firm leave at higher-than-normal rates in the years following the acquisition (Hambrick & Cannella, 1993). On the other hand, internal reorganization and organic expansion reduce turnover of CEOs (Vermeulen & Berkema, 2003). There are other reasons that CEOs leave acquired firms and require successors. They may feel their status has been lost and want to avoid conflicts with the acquirers. Their age, tenure, and specific knowledge and skills may be of importance in the decision to be retained or dismissed (Buchholtz, Ribbens, & Houle, 2003).
The turnover of senior executives may be due to disabling ill health, death, or unexpected voluntary retirements and resignations for other personal reasons. When Campion and Mitchell (1986) compared 140 former executives and managers with 143 current ones in the same organization, the leavers reported less satisfying job characteristics, more problems of adjustment and socialization, unmet job expectations, and more job stress than did those currently in the organization. House and Singh (1987) listed personal traits that help to reduce such turnover: psychological hardiness, optimism, vigorous involvement, commitment, the need for achievement, and the ability to cope with stressful conditions. Particularly important contributors to voluntary resignations are the executives’ perceptions of their own lack of power to influence their organization and their felt need for such power. Firms that lack internal consensus exhibit more internal conflict, resulting in higher rates of executive turnover than in organizations with internal consensus. Turbulent environments are antecedents of executive turnover. Such turbulence doubled annual voluntary resignations of chief executives between 1974 and 1984 (Weschler, 1984).
Rules of Succession. Herrity (2003) looked at the institutionalized rules in the largest publicly traded U.S. firms between 1975 and 1994 and concluded that the rules were determined by the power and competing interests of the executives, board members, owners, and other stakeholders. But based on an analysis of 216 insider and outsider successions in 108 firms between 1960 and 1990, Ocasio (1999) noted that the boards of directors were both enabled and constrained in their selection process by the institutionalized rules for succession. They relied on the rules as well as past precedents and the availability of internal candidates in choosing a successor.
Determinants of Choice. Santora and Sorros (1995) observed that longevity, specialized competence, and loyalty determined the choice of the successor of a charismatic leader of 24 years. Campbell, Sessa, and Taylor (1995) reported that according to interviews with 327 executives about the succession process, candidates external to the organization were more prevalent but less likely to be appointed. Compared to rejectees, selected candidates were seen to fit the positions and the organizational culture better. They also were more likely to have better interpersonal skills and compatible values. However, they did not have more business or technical experience. They were more likely to be selected for political reasons.
Politics was also seen by Cannela and Lubatkin (2003) in 472 CEO successions in a Forbes list of 800 large publicly traded firms. The results indicated that between 1971 and 1985, poor organizational performance brought on a selection of an outsider successor mainly if there was no heir apparent and the incumbent lacked the ability to influence the selection of the successor. According to an analysis of 220 successions in industry by Zhang and Rajagopalan (2003), an insider was more likely to be chosen if there was an heir apparent. Welsh and Dehler (1988) observed the lobbying, bargaining, forming of coalitions, and other organizational politicking that was present in 36 colleges that were searching for a new dean. Deshpande, Schoderbek, and Joseph (1994) analyzed the promotion decisions of 197 managers and found that subordinates could influence the recommendation process favorably if they had organizational connections known to the manager.
The Search Committee. The particular representation of organizational members on the search committee for the successor enhances the status of their various constituencies in the organization. The quality of the committee’s search process adds legitimacy to the chosen successor’s leadership (Hollander, 1985). The search committee is an important source of information to the successor about the organization’s current normative expectations, values, and distribution of power (Birnbaum, 1987a). Less recognized is that meeting with outside prospects can provide new objectives, values, information, and methods.
Powerful boards of directors tend to favor a successor CEO who is an external candidate and more like them than like the incumbent CEO (Zajac & Westphal, 1996). More outside directors have been appointed to the search committee, presumably so the selection decision will be less influenced by identification with management (Sherman, 1992).
The Founder’s Influence. Compared to successions at later stages in a firm’s history, the first succession after the retirement of the founder is likely to be strongly affected by the incumbent founder. A founder is more likely to have a strong attachment to the firm, as well as large equity holdings that may control the firm. A founder’s values and ideology can exert strong influence on the succession, according to Wasserman’s (2001) event-history analysis of successions in 202 Internet firms. But successors may not cling to the same goals as tenaciously as the founders (DiMaggio & Anheier, 1990). Compared with the founders, the successors are more likely to have functional backgrounds in administration rather than technology (Drazin & Kazanjian, 1993).
The Predecessor. According to Sonnenfeld and Ward (1995), the self-concept of the departing chief executive could make the succession process easy or difficult for the organization and the successor. Departing executives varied in whether they saw themselves as having a heroic stature and heroic mission with a unique commanding role that could not be carried out by anyone else. Four types of departing executives were recognized: monarch, general, ambassador, and governor. The monarch, with both heroic stature and mission—such as Edwin Land of Polaroid—has to be forced out of office; a palace revolt may be required to replace the monarch. The general, with heroic stature but not mission—such as William Paley of CBS—leaves office reluctantly but might return as organizational savior to rescue it from the successor. The ambassador—such as Thomas Watson, Jr., of IBM—is heroic neither in stature nor in mission, leaves office gracefully, mentors the successor, and subsequently serves on the board of directors. The governor, like the ambassador—such as Stanley Gault of Goodyear—is not heroic, serves a limited term, takes other positions of senior leadership elsewhere afterward, and does not maintain continuing contact with the organization. Successors have many difficulties replacing monarchs and generals. On the other hand, ambassadors remain a source of advice and service to the organization, while governors often develop strong internal successors. Ambassadors who serve as mentors for their successors may obtain vicarious satisfaction and a sense of achievement from their successors’ successful performance (Lipman-Blumen, 1996).
Musteen, Barker, and Baeten (2003) surveyed 280 chief executives of nonprofit organizations. They found that long-tenured CEOs were likely to have less favorable attitudes toward organizational change.
The Heir Apparent. This is a future successor who has already been identified but not installed. The wait for the succession to occur depends on the power of the predecessor, the outside board members, and the heir apparent. Cannella and Shen (2001) studied what happened to 152 such heirs to the incumbent CEO’s position. A powerful incumbent CEO might stall the selection process indefinitely. If the firm is doing poorly, the heir might leave for another position elsewhere. On the other hand, powerful outside directors may try to keep the discouraged heir from leaving, or force the succession to occur. If the firm is doing well, the heir is likely to wait longer. Forty-three percent were actually elevated to CEO, but 20% left the firm. The traditional model of succession that is likely to be favored starts grooming a manager identified early on as a potential heir apparent. Years before succeeding as CEO of Exxon, one young plant superintendent was already being called the crown prince.
Grooming the Successor. Except when seeking to seriously refocus the organization, as when Lou Gerstner, a former marketing executive from American Express, was chosen as CEO of IBM, firms pursue traditional succession strategy and promote most of their chief executives from within the firm. Potential successors are assessed, developed, and coached for numerous senior leadership positions with opportunities for internal and external training. Individual career plans are matched with succession plans and monitored by top management (Gratton & Syrett, 1990). The traditional succession strategy has been increasingly jeopardized by societal and technological change, corporate mergers and acquisitions, globalization, flattening of hierarchies, early retirements, work family considerations, and the effects of the glass ceiling (the numbers of women matching those of men in middle and lower management but not in senior management).
Family Firms. Family-controlled firms are common throughout the world and almost the rule in many developing countries. Family members are crucial in the succession process and, as successors to top executive positions, must be committed to the business. The next generation of family members must be assessed by the family entrepreneurs for their interest in the firm. Some are committed through desire for the top posts, some out of a sense of obligation, some based on the opportunity costs of doing otherwise, and some based on need (Sharma & Rao, 2000).
Involuntary Change. Forced departures were seen by Sonnenfeld (1988) as due to organizational effects ranging from political scheming to mandatory retirement. Phan (1995) and Lee obtained mixed results when examining the forced exits of 26 CEOs in 255 successions reported between 1975 and 1991. CEOs who had to resign were in one or more of the following circumstances: (1) they were entrenched in social networks; (2) they were insiders rather than outsiders; (3) they had more personal prestige; (4) their board of directors was larger; and (5) they owned substantial blocks of the firm’s shares. The antecedent condition that most often precipitated an involuntary change of leadership was failure by the organization attributed to the leadership. Sometimes the attribution was accurate, but other times, the CEO was the scapegoat for the organization’s shortcomings. Considerable evidence supported the contention that an organization’s failure stimulated a change of its leaders. This was found in 172 top management successions in China in companies that also had fewer insiders on the board and had a dominant shareholder. The dominant shareholder was also likely to have a heavy influence on who was chosen as successor (Yue, 2003).
Effects of Poor Corporate Performance. According to an analysis of 240 firms by Puffer and Weintrop (1995), the poor performance of a firm’s securities resulted in forced retirement of a CEO and replacement with an external successor. Firms with solvency problems (in-creased debt-to-equity ratios) changed leadership more frequently than did firms without such problems (Pfeffer & Leblebici, 1973). The high turnover of 576 top managers in 31 Fortune 500 firms was associated with the firms’ poor financial performance (Wagner, Pfeffer, & O’Reilly, 1984). Osborn, Jauch, Martin, et al. (1981) demonstrated that the rate of executive succession increased with the firms’ volatility in profitability and unstable financial strategies. As with turbulent economic environments, the rate of succession was greater for organizations in more turbulent ownership, supplier relationships, and socioeconomic environments. While 45% of bankrupt firms changed chief executives, only 19% of a comparable sample of healthy firms did so (Schwartz & Menon, 1985). Increasingly, CEOs are held accountable for the poor performance of their firms. The rate of dismissals of CEOs of Fortune 500 firms doubled in the 1990s from what it had been in the 1980s. Such dismissals were signals to the stock market (Moliterno & Wiersema, 2003). Corporate raiders were a source of change in corporate control of firms with a history of poor financial performance. Hostile takeover activity by a raider was followed by changes in corporate officers and directors (Walsh & Kosnick, 1993). When persistent organizational problems remain unmanaged and when there is a failure to cope with critical contingencies, the chief executive loses support and is likely to be replaced (Thompson, 1967). Along with the declining performance of CEO’s and their organizations, increasing difficulties in management increase the rate of succession (James & Soref, 1981). Thus Helmich (1978), in a study of 54 petrochemical firms, found that the rate of presidents’ turnover was increased with mergers, acquisitions, and the increased dispersal of operations.
Strategic Influences. Virany, Tushman, and Romanelli (1985) concluded, from an analysis of the succession events of corporate-level executives in 37 firms, that although performance was most important in generating the change of executives, such changes were actually driven by strategic reorientations in high-performance firms. Consistent with this finding, Smith and White’s (1987) analysis of the succession of 370 chief executive officers in the 25-year history of 173 Fortune 1000 firms showed that the current strategy of the firm tended to dictate the career specialty from which the new chief executive was drawn. Graham and Richards (1979) reached similar conclusions for the railroad industry. It is not surprising that the increased movement of marketing executives into top management coincides with the firms’ increased focus on marketing. When there is increased emphasis on cost containment, accountants come to the fore. Increased strategic concern for production and the quality of products brings engineers into top management. The efforts to flatten and downsize organizations have led to more loss of jobs of managers proportionately than of employees in general and have been a major source of turnover of managers (Capelli, 1992). They transfer into staff positions, become consultants, start new businesses, find employment elsewhere, take early retirement, and/or join the ranks of the unemployed.
Other Institutions. The heads of educational institutions are less likely to be ousted because of the institutions’ poor financial performance. Instead, a change of president may more likely be a consequence of mismanagement of resources or extreme dissatisfaction of powerful political officials, trustees, alumni, or faculties. Financial failures may play a role in private profit-making educational institutions. Replacements of presidents, deans, and directors also may be initiated as a consequence of disability, competitive job offers, and changes in mission and programs (Cohen & March, 1986). The extent to which managers of baseball teams with the poorest season’s records are most likely to be changed is well known (Grusky, 1963a). Path analyses by Allen, Panian, and Lotz (1979) confirmed that poor records, rather than other related elements, resulted in the replacement of managers of baseball teams. In the same way, Hamblin (1958b) demonstrated that groups change leaders informally if the leaders do not have a way of helping the groups out of crises. Such changes in leaders will be accelerated if the members have complex rather than simple personalities (Schroder, Streufert, & Welden, 1964). Conversely, Goldman, and Fraas (1965) found that subordinates were more likely to choose leaders who had been more successful earlier with the group’s task. But Daum (1975) failed to find such results.
Organizational Influences. Among the possible antecedents of the rate of executive succession is the size of the organization. Grusky (1961) reported that the rate of succession of chief executive officers was directly related to the firm’s size. But when Salancik and Pfeffer (1980) examined the tenure of the chief executives of 84 U.S. corporations, the executives’ tenure was unrelated to the corporations’ size. Gordon and Becker (1964) suggested that the relationship of organizational size to the rate of executive succession was complicated by other factors. For instance, larger firms have more ready inside replacements and would be expected to exhibit higher rates of succession as a consequence. However, insiders who reach the top serve longer terms in their positions (Helmich, 1976). Kriesberg (1962, 1964) further suggested that the differences among industries and in technology have to be taken into account.
Salancik, Staw, and Pondy (1980) examined the turnover of the heads of 20 university departments. They found that turnover increased with a department’s size but was lower if the department had been more successful in receiving outside grants. Turnover was also lower in departments in which there was agreement about how knowledge in one area was relevant in another area, as reflected in the departments’ ability to organize long lists of courses in their curricula. Zhang and Rajagopalan (2003) completed an analysis of 206 manufacturing executives who left their positions between 1993 and 1997 and showed that turnover was lower if organizational sales growth and short-term profitability were greater. In another study, Pfeffer and Moore (1980) also found that the size of a department was of consequence. They also obtained positive associations between the length of tenure of its heads, departmental consensus, and the seniority of its faculty. Datta and Rajagopalan (1997) showed that for 134 CEO succession events in manufacturing, there was a modest association between their industry’s product differentiation and the length of successor CEOs’ organizational tenure. Industry growth rate had the reverse effect on CEO tenure.
Succession in higher education appears to be followed by similar stages in taking charge by the successor (Gmelch, 2000) as in industry (Gabarro, 1985): taking hold, immersion, reshaping, consolidating, and refining. Similarly, the choice of successor university presidents for their previous effective financial performance seems to becoming closer to the choice of new CEOs in industry.
Effects of Age. Differences in the age of top managers and others in a firm contributed to more rapid turnover of top management (Wagner, Pfeffer, & O’Reilly, 1984). Evidently, the increasing age gap, presumably due to older-than-ordinary senior managers, creates pressure to accelerate the succession process. Older CEOs who were turned out of office were more likely to take on advisory roles or to retire from any active role in the firm. Younger CEOs were more like to take on new active roles (Ward, Sonnenfeld, & Kimberly, 1995).
Concentration of Ownership. Although tenure was related to changes in profit margins, Salancik and Pfeffer (1980) found that it depended on the concentration of stock ownership. Tenure was unrelated to the corporation’s performance for owner-managed firms but was related positively to profit margins for externally controlled firms and to stock market rates of return for management-controlled firms. According to McEachern (1975) and Allen and Panian (1982), in general, the rate of succession was likely to be greater if the management was under external control than if it was freewheeling and in control of itself.
Effects of the Succession of Insiders or Outsiders. While bureaucratic maintenance is thought to be favored by the succession of an insider, more organizational change may be obtained by the succession of an outsider. A progression of insider successors is seen to slow adaptation (Carlson, 1961) and organizational growth (Helmich, 1974a). After bankruptcies, outside successors appointed as both CEOs and chairs of the board induce more strategic change, according to an analysis of 47 organizations (Dawley, Hoffman & Brockman, 2003).
Conflict inside the organization may be reduced by choosing an outsider. For example, upon winning their independence from Turkey in the nineteenth century, the Balkan countries—Greece, Bulgaria, and Romania—chose petty German princes as their new kings to avoid conflict among the leading indigenous noble families, as well as to obtain support from the great powers of Britain, Austria-Hungary, France, and Russia. Similarly, Birnbaum (1971) showed that state universities tend to recruit their presidents from the lower administrative levels of other state universities, rather than from their own universities or from nearby colleges in the state, thus both promoting the transfer of knowledge from elsewhere and restricting conflict inside their own universities. (At the same time, the main source of lower-level administrators was promotion from within the universities.)
Nevertheless, Lubatkin and Chung (1985) found no particular differences in the subsequent performance of successors who were insiders or outsiders. Likewise, Chung, Lubatkin, Rogers, et al. (1987) concluded, after comparing 80 appointments of insiders to 19 appointments of outsiders as chief executive officers, that although long-term profitability after a succession depended mainly on the firm’s profitability before the succession, rather than on the change of leaders, stock prices went up when outsiders but not insiders were hired by high-performing firms. However, only the exceptional new leader from the outside could successfully turn around the poorly performing firm.
Clearly, contextual moderating variables must be examined before one can reach conclusions about the extent to which better organizational performance results from a choice of an insider or an outsider. One needs to know if the outsider has a mandate for change, particularly to change top management and its strategies. One needs to know whether inside successors have been chosen by default because desired outsiders could not be recruited in the face of the organization’s poor history of conflict and performance (House & Singh, 1987).
The succession of insiders provides for the continuity of existing programs, management practices, and organizational stability (House & Singh, 1987). Lack of continuity is seen when outsiders are appointed to senior leadership posts in a new presidential administration. Its effects on the U.S. State Department were a loss of coherence in policy making (Bloomfield, 1984). A change of administration in the Environmental Protection Agency likewise promoted greater distrust between career employees and political appointees, less effective communication, and the inability to handle routine business or to improve the agency’s performance over time (Gaertner, Gaertner, & Devine, 1983).
In their survey of senior-ranking human resources officers in 235 Fortune 500 firms, Friedman and Saul (1988) confirmed that the appointment of outside successors to the post of chief executive officer resulted in more post-succession disruption and turnover of lower-level executives than did the appointment of inside successors. However, overall, outside and inside successors did not appear to have different effects on morale.
In an analysis of the impact of 477 successions, Lubatkin, Chung, Rogers, and Owers (1989) concluded that share price is generally depressed by the occurrence of a succession. However, the price of the stock is enhanced (indicating that investors are favorably impressed) when the successor is an outsider and the firm is above average in its performance. For the 15% of 136 successors in Friedman and Singh’s (1986) analysis who were outsiders, the market value of the parent firm’s shares increased. But the value of shares was unaffected if the successor was an insider. Insider-outsider effects of the predecessor were more complex. The forced resignation of a predecessor who was an insider had a more positive effect than forced resignation of a predecessor who was an outsider, although both events had positive effects. The voluntary resignation of an executive who originally was an outsider resulted in a much greater increase in the market value of the parent firm’s shares than did the voluntary resignation of one who was originally from the inside. Although the expected retirement of an insider had no effect, the expected retirement of an outsider did have a positive effect on the market value of the parent firm’s shares.
Welsh and Dehler (1986) questioned a random stratified sample of 960 faculty members from 40 professional colleges of business, education, agriculture, and engineering. They followed up the survey with telephone interviews and questionnaires three years later. They found that when consensus about issues was low among the faculty of a college, those colleges that selected a dean from the inside experienced greater turnover of deans. Conversely, when consensus was high among the faculty, colleges that chose a dean from the outside experienced greater turnover. The lowest turnover of deans occurred in colleges with high faculty consensus who selected a dean from the inside.
Management and Organizations Reasons for Choosing an Insider or Outsider. Insiders are expected to already know the organization well. Outsiders, chosen from elsewhere, are expected to bring in new ideas, knowledge, attitudes, and changes (Vancil, 1987). Some investigators have concluded that poor organizational performance moves an organization to choose an outsider more often. Other investigators have concluded the opposite. Still others have found middle-range organizational success to be most conducive to choosing an outsider. The differences may be explained partly by the nature of the organizations involved and the measures of financial success or failure (Puffer & Weintrop, 1995). In 85 firms, Schwartz and Menon (1985) found that external successors were appointed in 65% of those that were failing and 44% that remained in business. Allen, Panian, and Lotz (1979) found that outside succession was more disruptive to the performance of a baseball team than was bringing up a new manager from the inside. Nonetheless, there was a greater tendency to go outside for a new manager when the previous year’s performance had been poor. In the same way, Virany and Tushman (1986) showed that of the 59 minicomputer firms that were performing poorly tended to make more senior management appointments from the outside than did those firms whose performance was better. Likewise, Otten and Teulings (1970) found, in an analysis of the succession histories of 34 department heads in various Dutch organizations, that poor departmental performance was an incentive to select outsiders as successors. D. R. Dalton and Kesner (1985) observed that outside successors were most often chosen by companies that were middle-range in performance. However, for a sample of 166 large firms, Lubatkin and Chung (1985) noted that in a crisis of falling profits, fewer outsiders were chosen as successors. Chung, Lubatkin, Rogers, et al. (1987) obtained results indicating that in 99 firms, outsiders were chosen in the highly performing firms but in only 14% of the poorly performing ones. These results were explained partly by the nature of the organizations involved and the measures of financial success or failure (Puffer & Weintrop, 1995). Perhaps there was more willingness by outsiders to accept a senior appointment in a prosperous firm than a failing one. Nonetheless, when corporate performance has been good, Brady and Helmich (1984) reported, insiders were more likely to be chosen as they represented stability, continuity, and experience with policies and practices. As mentioned earlier, outsiders are more likely to be chosen when there is no heir apparent and the incumbent is unable to influence the selection (Cannella & Lubatkin, 1993).
In some firms of sufficient age, long-standing policies, management development, and manpower planning, inside heirs are identified early and groomed for the succession. Larger and older firms develop their own chief executives who rise from the ranks and are familiar with the firms’ people, markets, and products (Pfeffer & Moore, 1980; Tsurumi, 1983b). Appointment of insiders signals continuity and stability. Appointment of outsiders signals change (Pfeffer & Salancik, 1978).
In the political arena, outsiders are chosen to exemplify the “new broom sweeping clean.” Best (1981) contrasted the original appointments of cabinet members and their replacements for the U.S. presidential administrations between 1952 and 1976 in terms of whether they came from inside or outside the government. Only 35% were original appointments at the beginning of a presidential term of office; 65% were replacements during a term of office. The original appointees were chosen to generate legitimacy and to form a cabinet that the president could trust. They were mainly outsiders to the Washington bureaucracy. However, their replacements later in the same presidents’ administrations were more often insiders with Washington experience and managerial ability.
Can the benefits of change in executive leadership outweigh the disruptions caused by the change? The answer depends on a variety of considerations. Just as poor organizational performance may be an antecedent of succession, so succession is often associated with greater organizational mortality.
On Organizational Performance. Turnover of key executives can disrupt work routines, interrupt command, diffuse authority, and increase employees’ feelings of insecurity (Haveman, 1993). Gordon and Rosen (1981) proposed a model for the dynamics of succession that takes into account variables antedating the arrival and entry of the new leader into the organization, postarrival variables of consequence, and the interaction between the two sets of variables. Included in the prearrival variables are: (1) the successor’s background, competence, motivation, and orientation; (2) whether the successor came from inside or outside the organization; (3) how well the successor was known in advance by the organization; (4) the organization’s previous general experience with the succession process; and (5) how much the organization was specifically involved in selecting the new leader. The new leader’s mandate is also important. Post-arrival variables include much of what was identified in preceding chapters about the factors that influence leader-follower relationships and how they, in turn, affect productivity and satisfaction. Ziller (1965b) obtained results suggesting that the rapid replacement of small-group leaders provides a means of creating new ideas that lead to the continued success of the group. But changing leaders can result in a group’s decreased performance and high personnel turnover costs (Rogers, Ford, & Tassone, 1961). However, the change in leaders need not be disruptive, especially when it is planned and expected. It may actually result in the improved performance of a group or organization in some instances and no change or reduced performance in others. Boal and Hooijberg (2000) suggested that succession might result in a number of different possibilities: (1) a honeymoon early on due to novelty and temporarily looser reins; (2) an early decline in organizational performance due to the successor’s need for time to learn; (3) a reinforcement of the same positive or negative effects over time; (4) effects on organizational performance depending mainly on the personalities and situations involved; (5) eventual declines in performance due to the inability of the successor to adapt to changing environments; and (6) no real effects of the successor on organizational performance, only a fictional “romance of leadership.” Different dynamics may be involved in the short-term and long-term consequences of a succession (Zaheer, Albert, & Zaheer, 1999). Jeffrey and Lee (1996) analyzed the consequences of succession and CEOs’ tenure in 2,780 community hospitals between 1984 and 1991. They found that failure declined initially with the tenure of the successor, but after six years in office, failure increased steadily with tenure. A meta-analysis of succession outcomes explained the effects as due to differences in measurement, operationalization, and organizations (Tzabbar, 2003).
On Board Members. Ward, Bishop, and Sonnefeld (1999) looked at the consequences to members of the boards of directors in 144 companies between 1988 and 1992 when the CEO was dismissed, retired, or remained in office. With successions, peripheral directors left the board. The board became more involved in the succession when the dismissal was due to strategic disagreement, but directors who were CEOs elsewhere became more involved regardless of the reasons for the dismissal. Ward, Sonnenfeld, and Kimberly (1995) followed up dismissed CEOs and noted that older ones were likely to take advisory roles rather than new executive positions, but this did not affect their various board memberships.
On Personnel. Friedman and Saul (1988) surveyed respondents from 235 Fortune 500 firms. They showed that the morale of a firm’s personnel decreased with the succession of a new chief executive officer. Taking into account the successor’s age, origin, and position, morale was lower particularly if the predecessor had been in office for many years. But shareholder reactions were usually positive when successions were announced (Davidson, Worrell, & Cheng, 1990). However, Lieberson and O’Connor (1972) found that changes in the corporate sales, profit, and profit margins of 167 corporations in 13 industries over a 20-year period (1946 to 1965) were not closely related to changes in their corporate presidents or chairmen of the boards.
On Managerial and Organizational Performance. The results were different when the effects of changes elsewhere in management were analyzed. Lieberson and O’Connor concluded that the succession of new presidents or board chairmen accounted for less variance in sales, earnings, and profits than differences in either industry or company. But Day and Lord (1986) pointed out that the effects of the change of these top executives increased with time, accounting for 15.2% to 31.7% of the profit margins when the time lag between the change of management and its subsequent effects was increased to three years. Changes in top business management did have important, practical effects on the firms’ performance. Thomas (1988) reported in a study of large retail firms in Britain. Changes in the alignment of executives and organizational strategies were seen to have positive effects on organizational performance (Thomas, Litschert, & Ramaswamy, 1991). Friedman and Saul (1991) surveyed the consequences of changes at the top of the Fortune 500 firms from about 170 replies. If the board initiated the succession, morale was enhanced (r = .24) although greater also were disruption (r = .38) and executive turnover (r = .26). However, if the succession was initiated by the incumbent CEO, there was little effect on disruption, turnover, or morale. When other variables were taken into account, disruption was particularly greater when the successor was an outsider and the incumbent was disabled. Eitzen and Yetman (1972) and Trow (1961) thought that there was an optimal rate of turnover of leaders. Nevertheless, Schendel, Patton, and Riggs (1976) found that 80% of turnaround strategies were associated with the replacement of top managers. Similar results were reported by Graham and Richards (1979) for the railroad industry.
On Sports Teams. Gamson and Scotch (1964) concluded that the impact of the change in managers of a baseball team was minimal; the firing of a baseball manager was only a ritual for, as noted before, Grusky (1963) had found that baseball teams with the highest rates of change in managers had the poorest performance records. Allen, Panian, and Lotz (1979) confirmed that the higher rates of change subsequently resulted in poorer performance by the teams. Additionally, their path-analytic examination of managerial succession for 54 seasons showed that baseball teams that replaced a manager during the season subsequently performed worse. According to Smart and Wolfe (2003) winning baseball games was accounted for primarily by individual players’ pitching and batting records, not team leadership. Nevertheless, particularly in a circumstance of high rivalry, a baseball team manager with a record of competence and experience could increase a team’s successful performance (Cannella & Rowe, 1995).
While Eitzen and Yetman (1972) found no relation between the turnover of coaches of basketball teams and the teams’ performance records over 40 years, Giambatista (2004) reported that with National Basketball Association teams from 1980 to 1989, the disruption of in-season replacement of coaches compared to out-of-season successions did result in poorer performance. Brown (1982) concluded that in the case of 26 National Football League teams from 1970 to 1978, there was no difference in the recovery of teams that had steep declines in performance to better winning records when coaches were replaced in midseason because of the teams’ poor performance than when the same coaches were retained. Brown inferred that the changing of coaches in midseason was a scapegoating mechanism that had little subsequent effect on the teams’ performance.
On Other Entities. Salancik and Pfeffer (1977) studied the influence of 172 successive mayors on the revenues, debt, and expenditures of 30 U.S. cities from 1951 to 1968. As Day and Lord (1986) noted, an adjustment had to be made for the size of the cities to reveal the effect of the succeeding mayors on expenditures and indebtedness. Changes in mayors accounted for about 19% of the variance in financial outcomes. The succession of a new pope, such as John XXIII, brought much change and liberalization worldwide in the Roman Catholic Church. John Paul II returned to a more conservative stance in the Church’s teachings on sex, became a bridge for political democracy into Eastern Europe, and brought an increase in the recognition of the importance of Catholicism in Latin America, Africa, and elsewhere in the developing world. Benedict XVI is so far maintaining the changes instituted by his predecessors.
As already noted, whether replacing the leader will contribute to a team’s or organization’s subsequent performance is affected by a variety of moderating variables (Gephart, 1978). The reasons for the succession make a difference in its effects on future performance, as does the mode of analysis, whether the succession is voluntary or forced, and whether the departing chief executive is the firm’s founder (Reinganum, 1985). The effects of succession are moderated by whether the successor brings more specialized competence to the position and what changes occur in the style and power of the leadership. The suddenness of the succession, whether the successor is an insider or outsider, and whether there is a consensus in the group or organization will affect whether the change of leadership is beneficial to the group, team, or organization. The industry in which the succession occurs also moderates its effects.
In Business. In an analysis of 136 successions, Friedman and Singh (1986) compared the stock market value of shares of firms from 300 days before the announcement of each succession to 100 days after it. The market value declined when the announced reason for the departure of the chief executive was an unexpected disability. The market value was unaffected if the retirement was expected. It increased if the departure was voluntary or forced because of poor performance. The market value of shares of subsidiary firms that performed poorly for 300 days before the succession increased during the next 100 days with announcement of a new chief executive. But the succession had no effect on the parent firm’s shares if they had already been doing well. Ndofor and Rathburn (2003) reported that the effectiveness of the succession in making changes depended on the executive’s timing and experience in formulating and implementing change. Shetty and Perry (1976) found that executives had more of a postsuccession effect on their organizations in a new industry if they possessed the necessary knowledge and relevant influence. The succession of executives with prior experience with different products and strategies made for greater success in the entry of these products into the market by their new employers (Boeker, 1997). Day and Lord (1986) noted that it was necessary to take monetary inflation and the size of the organization into account, in addition to allowing sufficient lag-time for the effects of the new management on the firm’s performance to be seen. But the effects of changes in management have been most understated by analyses such as those of Lieberson and O’Connor (1972), because the best predictor of future performance is past performance. When the effect of the company’s past performance on its future performance is added first in the multiple regression analysis, it takes with it much of the effect of the changes in management on future performance. However, as Weiner and Mahoney (1981) demonstrated for a comparable sample of firms, when the management succession variable is entered into the equation first, it accounts for 75% to 95% of the explained variance. The same is true for studies of the performance of baseball teams.
In Sports Teams. Pfeffer and Davis-Blake (1986) showed, for 22 teams in the National Basketball Association, that when prior performance is controlled, replacing the coach, in general, had no effect on a team’s subsequent performance. However, the new coach’s greater competence did make a positive contribution to improving the team’s performance. A team that replaced its coach with one who had a good prior record and relevant experience or who had brought about improved performance in other teams performed better than did a team whose new coach lacked experience or had performed less adequately in his previous assignments. The succession of coaches of National Hockey League teams from 1942 to 2002 was found by Rowe and Rankin (2003) to be consistent with findings from other professional sports: midseason changes of leaders worsened team performance in that season. However, successions that had occurred in the previous season had a positive consequence on current season performance.
In Religious and Educational Institutions. Smith, Carson, and Alexander (1984) found comparable results with their sample of Methodist ministers. Incoming ministers with a previous record of competence had more positive effects on their new church’s performance than did those without such a record. In the same vein, controversial new professional programs were likely to be adopted by liberal arts colleges when incoming college presidents had had previous experience in professional schools (Kraatz & Moore, 2002). In examining the performance of newly appointed deans in 36 colleges, Welsh and Dehler (1988) found that if a lot of preselection politicking occurred among college faculty, in a college with abundant resources, as would be expected, the new successor expended much less effort to acquire resources than did a successor in a college with scarce resources. But unexpectedly, if political activity was low, there were no differences in the activities of the successor. If there was a lot of political activity among the faculty, the successor was expected to engage in more administrative activity if resources were scarce than if they were abundant. However, if resources were abundant, nonadministrative activity was required of the successor if there was little politicking among the faculty.
How the transition is handled by organizations and successors is also important. For instance, an organization may resort to an acting appointee before selecting a permanent successor (Gordon & Rosen, 1981). The transition process itself has become an important subject of study to determine whether it foreshadows things to come. From the November election through the first day following the inauguration of the new president on January 20, the transition is carefully watched by journalists for signs of what lies ahead during the new administration. Gilmore (1988) pointed out that the successor, whether in government or in industry, needs to consider the past leader’s performance, entrenched interests, and the resistence to change in the agency or firm. A new team has to be assembled, agendas changed, a new vision of the organization created, and a reorganization accomplished that is consistent with the new vision. Change must be realistic and balanced. Productive working alliances need to be negotiated to provide for the organization’s effective management.
Abruptness of the Succession. In this regard, Friedman and Singh’s (1986) demonstration of the negative impact of an unexpected succession on stock prices was already mentioned. Jackson (1953b) reported finding a work group emotionally disturbed by the unexpected replacement of its valued supervisor. Top management was excoriated, and the new supervisor was overly devalued. Gordon and Rosen (1981) also noted that changes in leadership that come with little advance notice are especially detrimental to the effectiveness of factory work groups.
The sudden death of an executive—particularly one who is highly visible to the public—that forces an unexpected succession, results in a decline in the market value of the firm (Worrell, Davidson, Chandy, & Garrison, 1986). Trow (1961) concluded that the effects of executive succession on organizational performance will be more positive if the succession is orderly and planned than if the succession is unexpected and the selection of the new chief executive has to be made under time pressure. Sorcher (1985) agreed that careful succession planning is needed at each organizational level and must be encouraged by boards of directors (Carey, 1997). Betts and Huntington (1986) noted that long-term instability follows the death of an authoritarian leader if a country is already unstable, if the authoritarian ruler was in office for a long period, and if there is strong social organization to facilitate antigovernment actions following the death of the ruler. The continuing instability and insurgency in Iraq in 2007 following the termination in 2003 of the 24 years of dictatorship of Saddam Hussein was thus to be expected.
Differences among Industries. Durbrow (1971) analyzed the biographical sketches of some 5,300 executives in 429 organizations in 10 major industries. Mobility rates were highest in the aerospace, electronics, and office equipment industries and lowest in the gas utility, electric utility, and chemical industries. Durbrow found that firms with low rates of executive turnover made the highest profits in high-mobility industries and those with high rates of executive turnover made the highest profits in low-mobility industries. Thus, for instance, utility firms were more profitable if they had high rates of succession, but aerospace firms did best if there was a low turnover among their executives.
Given its consistency and personal antecedents, it is not surprising that leadership is persistent to some degree among children and more so among adolescents and adults. Both logic and empirical results attest to the persistence of leadership behavior and its effects from childhood onward. However, such persistence depends, to some extent, on the occurrence of leadership in past, present, and future situations that are similar in leadership requirements. It transfers from one situation to another if the new situation is similar in relations and task requirements to the old one. But transfer can be negative if the responses to the old situation are contraindicated. The nature of the demands of the task determines whether the effects of the transfer will be positive or negative. But, in all, there is a tendency for the leader of one group to emerge as the leader when placed in other groups.
Leadership in high school and college tends to be predictive of leadership in adult life. When members of experimental groups are successively reassigned to new groups, the same individuals tend to emerge as leaders. This effect is enhanced when the task is similar from group to group.
When effective and ineffective leaders change places, the performance and morale of formerly ineffective groups tend to improve under effective leaders, but the formerly effective groups suffer from such a change in leaders. The productivity of groups that change leaders frequently or experience high rates of succession of new leaders tend to decline. But such reductions may be the cause rather than the effect of the rapid turnover of leaders. Antecedents affecting the succession of senior executives and CEOs include the composition of the succession committee, the board of directors, the size of the organization, and family ownership. Moderators of the effect include preselection politics, whether successors are insiders or outsiders, how abruptly the changes are made, and the chosen successor’s agenda. Another moderator is whether the successor is of the same or opposite sex.