Conversations with Kellogg January 27, 2010, 11:57AM EST

Lessons from Leno and Conan on Managing Succession

Kellogg's Adam Galinsky on why you shouldn't keep an ex-CEO around, the importance of hierarchy, and the "three R's" of smoothing ruffled feathers

By Kellogg School of Management Faculty Members

Adam Galinsky

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While Conan O'Brien enjoys/endures seven months of forced retirement from late-night television, and former/future Tonight Show host Jay Leno prepares to resume his former job (while David Letterman presumably cleans up in the ratings), senior management and boards of directors can draw some useful lessons from the Late Night Wars circa 2010, says Adam Galinsky, the Morris and Alice Kaplan Professor of Ethics & Decision in Management at the Kellogg School of Management. He has done extensive research in how individuals make sense of and participate in their social and organizational worlds and the consequences for motivation, team performance, and conflict.

Galinsky recently spoke with BusinessWeek.com Management Editor Patricia O'Connell on how the Tonight Show fracas illustrates how a good succession plan should involve more than just picking a successor, and the dangers of keeping a deposed CEO around. Edited excerpts of their conversation follow.

We all know what happened at NBC with The Tonight Show—Conan O'Brien decided to leave after being made an offer with terms he found unacceptable, and is being replaced by Jay Leno, whom O'Brien replaced. If we want to look at this from a corporate perspective, with O'Brien and Leno being CEOs and NBC the board of directors, what's the lesson here for boards and other corporate decision-makers?

Don't keep an outgoing CEO around, which in a sense is what Jay Leno was. It's very hard for the outgoing CEO to give up the status and the power that he once had. When Leno [was moved to 10 p.m.], he basically got demoted.

When that happens, you have to deal with someone who is still part of the organization whose stature has been deflated but not their ego. That creates all kinds of backbiting, and sniping—the kind of behavior that we saw in the O'Brien/Leno situation.

But companies constantly do this—keep an outgoing CEO around as chairman, for example.

The data are clear: If you're going to replace that CEO with an insider, to keep the ex-CEO around makes for a very complicated situation. Whose authority matters? Will they constantly be trying to legitimize their own standing? This is a critical issue in management/leadership succession that we see all the time.

Look, there are lots of good reasons [on the surface] to keep a CEO around. They have great insights and wisdom. But the problem is it creates a dysfunction at the hierarchy level. My research has shown that hierarchy is the most efficient form of social organization because it solves three issues: It reduces conflict, it increases cooperation, and it creates incentive for performance.

To keep the former CEO around is a negative; it disrupts the hierarchy. It's too hard to discern whose voice matters. When you replace the top dog, you can't keep the old top dog around.

NBC has made the case that O'Brien couldn't deliver the ratings that Leno did and that was the reason to move things around. Doesn't management have to deal with issues of performance?

It's a complicated question. You have to ask yourself how much time are you going to give someone in their new job. You have to give someone the opportunity to establish the culture they want, get the people in place that they need to be successful. You have to decide in advance how you are going to play this out.

So it needs to be established what the benchmarks against which performance will be measured are, and the timetable for when you are going to look at those benchmarks?

Of course, part of the problem is you can never make perfect measurements, or evaluations strictly on metrics, because you can't control all of the variables. In a lab, you can have the same conditions with only one variable changed. The real world—the business world—is too fast-moving.