McCormick's Successful Succession Plan

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Was the board in the driver's seat in managing the succession or were you?

I initiated it. Five years ago, I said I would like to have a discretionary part of my compensation to be based on succession planning. The ultimate responsibility to provide them a list of candidates for the senior executive team and eventually the CEO was mine. Together, we made the decision.

How did the board link your compensation with succession planning?

It was a piece of the annual bonus program. In June of every year, we reviewed the progress we were making on succession. And we had midyear updates on how we were doing and how the players were developing. They had one-on-one sessions with five or six of the candidates during lunch periods prior to a board meeting, without me in attendance. We tried to put a structure and a discipline in place to give the board every opportunity to talk to the individuals.

Why was Alan Wilson chosen?

In the end, it came down to somebody who fits the culture. That was an important part of the process for us because we have such a unique culture. Somebody had to have good experience both on the business front and the international front. It had to be somebody who could implement the strategies we had set. We all felt the time was right for me to retire and him to come in. It wasn't an "a-ha" moment in the final six months.

What's so special about the McCormick culture?

We have a people-oriented culture. It requires a CEO to lead from the front but also to be part of the people. You have to demonstrate to the people that you're part of the people. You can get out and lead and make tough decisions, as we did, with restructuring and the divestment of businesses. That's part of what I sold the board on. I said there was no need to change the culture by bringing a CEO in from outside.

Come back to the question of why more boards don't get succession right.

In a recent edition of BusinessWeek, Jack Welch talked about succession planning (BusinessWeek.com, 11/15/07) and why it doesn't happen in other companies. You can say, well, CEOs don't want it to happen. People just don't want to go. When I'm asked about that, I say I'm not ready to retire to watch Oprah and drink tea. I'll do something else. But I was ready after 11 years to say, "I've done what I can do at McCormick"

As in the case at General Electric (GE), did you lose top executives who didn't get the CEO's job?

We did not lose anybody. We're not a $50 billion or $100 billion company, but they all saw there were lots of good jobs here.

Why do you think so many CEOs try to hang on indefinitely if these jobs are so difficult and consume so much of your life?

These are life-consuming assignments, and if you don't have anything else to go to, why leave? It also gets involved with, "I'm better than anybody else. Nobody else can do this. Nobody else is ready." That is the tension that's created.

I see all these giant companies with 50,000 or 100,000 people and they haven't got anybody in training for CEO? I shake my head and ask, "Where's the CEO and where's the board?"

Were any outside parties involved in helping you manage your succession?

Yes, RHR International has worked with us for 25 years. They do full assessments of the individuals over a period of time. They were an integral part of the whole process.

Why did you need an outside corporate psychology firm?

Why do we need third-party people to handle the auditing and why do we need third-party people to help us with compensation systems? It's to give the board comfort that I'm not biased. I'm not making a huge mistake on an individual because I happen to be a friend. There is a whole development plan for this individual—it has five or six elements and we tick them off each year. If we in Corporate America would spend more time on robust succession planning where you have skin in the game, meaning compensation, and where you have third-party involvement, I think our businesses would transition from leadership to leadership much more seamlessly. That's important in an environment like the one we have today.

In addition to writing Armchair MBA for BusinessWeek.com, William J. Holstein writes for The New York Times, Fortune, Corporate Board Member, Dealmaker, and Strategy + Business.