Hester is to be replaced as chief executive of RBS, a role he has held since November 2008. The move has reportedly left many in the City reeling and with conflicting reports as to the reason for his departure, many have been left questioning the decision.
In stark contrast, in the last few weeks Sir Alex Ferguson left Manchester United after 26 years in charge. He joins an elite few leaders who have succeeded in staying at the top of their game within the same organisation for decades.
Sir Alex proves that with the right person in place, leadership longevity can bring many benefits for an organisation. So, as a board how can you have a great leader that lasts?
The pros of the long-term leader
There are significant gains that can be made from having a successful leader remain in post for the long-term - not least of all it provides stability and consistency, which are two very important yet often undervalued attributes.
But longevity is far from the norm. Take retailer Marks & Spencer, one of many examples; it's had six different chairmen in the last 10 years alone. Now I'm not suggesting regular changes in leadership can't work, but there are definitely, and often ill-considered, risks. Now RBS faces these risks with its own turnaround.
The dangers of a new leader
For an organisation to maximise its results it needs a clear vision, a good strategy, a united and effective leadership team, effective governance and systems. All employees need to be clear, motivated and aligned, working together to achieve the organisation's goals. When a new leader joins all of these aspects are thrown into question. This can create disabling instability and confusion. At its worst, it generates significant fear and with fear comes politics, gossip, self-preservation, and an increased internal focus. The impact is often lost productivity, unwanted staff turnover, reduced customer focus to name a few.
The new leader will bring his or her new ideas, new plans, new intent, that may well nullify everything that was previously being worked upon.
Replacing the CEO might be the right strategy in certain situations, it sometimes isn't. Often boards don't effectively evaluate and proactively support the development of their in-post CEO in the first place and they can act too quickly in removing the old and bringing in the new. I'm not saying stick with your CEO if he/she isn't working but hire better, evaluate more regularly, and develop better first.
Why don't they stay?
Of course there will be times when a successful CEO doesn't want to stay. They've made a success of the role, they have earned sufficient money and may have lost the drive to carry on, and so they look for a new challenge.
How to create long-term leaders
So, there's significant risk in bringing in a new leader from outside and there's significant benefit if you can find and retain a successful leader for the long-term. How do you achieve it?
If you're a board member or a key decision-maker, then here are some tips:
- Get someone very good and have the clear intention to stick with them through thick and thin
- Ensure their role is more than a job. Explore how it can be something way more meaningful, a deep-rooted mission for them for the long-term
- Continually evaluate their performance and invest in their development, to help them become a great success and maintain it
- Enable them to do their job sustainably. If they don't have the life balance they need, at some point they're likely to punch out
- Encourage them to continually adapt and reinvent themselves and the company direction
- Pay them very well and provide them opportunity
- Develop a strong succession pipeline. If a CEO does leave at least you have the option to promote from within and keep some continuity of approach
Martin Palethorpe (pictured) is executive coach at The Pragma Group