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Lessons from the Change of Guard at HSBC September 25, 2010

Posted by Alan Yu in Leadership, Leadership and management, Management.

According to the New York Times, HSBC has settled management succession at the top after its current Chairman Stephen Green departs to become UK Trade Minister.  It has been a week of tumultuous week of public relations damage control.

HSBC is not known to be flamboyant or attention seeking.  The amount of speculation surrounding succession in the last week has been somewhat unusual, especially when at times the company appeared to have been caught off guard.

Speculation started when the Financial Times reported that current Chief Executive Michael Geoghegan had threatened to resign if he was passed over for the top job.

The New York Times quotes Glen P. Suarez of Knight Vinke, an HSBC shareholder and a critic of the bank’s strategy in the United States, as saying: “It is not the most glorious episode in HSBC’s history, but…it will all come down to execution.”

This “episode” in the history of HSBC highlights some fairly universal issues concerning management, succession planning and leadership:

Nobody can be indispensable

An organisation functions because of all its people working together, not because of any individual.  For an organisation, the old adage that “nobody is indispensable” is not enough.  It should be: nobody can be indispensable.  All organisations have some reporting structures, with some positions senior to others making decisions with greater impact, but they need to exist above and beyond the individuals.

Management cannot be seen to succumb to threats

Only insiders will know whether Geoghegan really threatened to resign.  If he did, that threat alone would have justified HSBC not appointing him Chairman.  As a long-suffering executive who has risen through the ranks to Chief Executive, Geoghegan is entitled to think he has the credentials to take the top job.  He is certainly entitled to put that view to, and argue the case with, the board.  Threatening resignation to achieve an objective is always bad tactics.  It forces the organisation to take a stand for which it may not be ready, and is fraught with the danger of setting unpalatable precedents.

Succession planning needs to be more comprehensive

All organisations do some succession planning, formally or otherwise.  Many managers have a rough idea what to do when selected members of staff leave.  Unfortunately, we often scramble because of inadequate scenario and contingency planning.  Identifying individuals to take over certain positions is one thing, implementing succession when resignations happen is another.  Many unforeseen factors get in the way.  Anointed successors usually show high potential, making them the target of rival firms.  They may not want to wait until a higher position is available.  The timing of a change may not coincide with personal plans, for example the need for frequent travel with young children in tow.  Their skills may not be fully developed when the vacancy occurs.   It will do us well to have a few scenarios in mind in the planning process.

“Alpha” leaders need to keep their egos in check

 Some personality traits and styles render executives particularly suited to be effective leaders: decisiveness, larger-than-life presence, self-confidence and a razor-sharp intellect.  In turning around companies or when faced with an adverse operating environment, leaders with these qualities help the team move swiftly to overcome obstacles.  At other times, these same qualities could prevent leaders from being inclusive and collaborative, being good listeners and showing empathy.  Self-confident leaders with a big ego need to remind themselves constantly to keep it in check, in case on the odd occasion they are wrong.  Doing so will also help them avoid falling into the I-am-too-important-not-to-be-taken-seriously trap.  Geoghegan is not quite Chainsaw Al Dunlap, but he certainly seems to have over-estimated his importance, or under-estimated HSBC’s need for organisational integrity.

Corporate Values vs. the individual

In his books Built to Last and Good to Great, Jim Collins shows how celebrity executives fail to turn good companies great.  According to him, leaders who turn good companies into great ones tend to be comfortable being humble and with exerting a strong professional will at the same time, the so called “Level 5” leaders.  Great and enduring companies also tend to have a robust set of core values.  Talented people promote these values consistently and pervasively in the organisation.  In its most recent succession decision, HSBC has clearly asserted its corporate values over the importance of individuals.  Although it was unfortunate that some of the dirty linen was washed in public, I’m sure it will emerge to be even stronger in time.



1. World Wide News Flash - September 26, 2010

Lessons from the Change of Guard at HSBC « Random Thoughts of a ……

I found your entry interesting do I’ve added a Trackback to it on my weblog :)…

Alan Yu - September 26, 2010

Thank you for your interest.

2. Ross Tse - September 28, 2010

I am pretty certain your sound view will be same sentiment HSBC Board takes.

Alan Yu - September 29, 2010

Thanks for your comment, and for stopping by.

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