Passing the Torch at Raymond James
Leadership transitions are high-stakes affairs. In hiring his own replacement, Tom James has adopted a phased-in succession.
Watching and waiting
James believes he can step back successfully from a company that has in some ways remained a family firm even though it is publicly traded. He says he’s been planning for a successor for the past six years and had been “watching” Reilly since he joined the board in 2005. James says he didn’t consider installing his sons as CEO. The elder son, he says, simply wasn’t interested. His younger son, who is a senior manager at the firm, is “not quite ready” for the role of CEO, James says.
Reilly says he doesn’t feel like an outsider coming in. For one, he’s known Tom James since he was a child playing tennis in St. Petersburg’s Bartlett Park. Secondly, his four years on the board have provided significant insight into the company. “I think as people have also learned what I believe in, that didn’t know me, they’re more comfortable.”
Until the handover, Reilly, whose official title is president of Raymond James Financial, attends budget meetings, meets with James and with all managers who report directly to James, visits branch offices and works on “various projects.” As CEO-in-waiting, Reilly says he doesn’t feel he’s on probation and doesn’t worry whether James will have difficulty stepping away from the company he helped his father to build. “You always wonder when someone’s run something so long, and obviously it’s such a big part of him, I thought there would be a little cold feet,” says Reilly. “I’d never doubt his commitment, but it’s been unyielding.”
Asked what it will mean when there is no longer a “James” at the helm, James is pragmatic. “At some point, every company that becomes institutionalized must survive the founder, or near founder,” he says. “You never know until you try whether the person who is chosen improves on the model, extends the model very successfully, changes the model to suit their personal interest — or simply can’t do it. We’re going to find that out. It’s better to find it out while I’m still around.”
Seven Succession Slip-Ups
Chip Webster, president of Vistage Florida, a CEO think tank whose members advise each other, says transitions usually fail for the following reasons:
• Confusing good management with good leadership: “Leadership is much different than management. Managers do things right; leaders do the right thing. Managers are more concerned with form than substance. Leaders take charge with passion and urgency. Selecting the best manager to succeed the CEO usually ends up in disaster.”
• Promoting from within: “Over time large institutions self-destruct because they become inbred. The seeds of destruction for Sears, GM, et al., were sewn in the ’60s and ’70s when promoting from within was the rule. Experience outside an organization can give a CEO an objective view of the company an insider cannot see.”
• Coronating the next CEO: “ ‘I’m the son or daughter of the owner so I deserve the job’ is as equally non-productive as, ‘I’ve been with the company 25 years and it is my turn to run it.’ Genes and time in grade have little or no bearing on the ability to run a business.”
• CEOs who can’t let go: “Egos play a large role in succession failures. Once the new leader is in place, the outgoing CEO needs to get out of the way. If the outgoing CEO stays around, it invites second-guessing of the new CEO, which is counterproductive.”
• Incoming and outgoing CEOs not in alignment: “Values and vision drive all organizations. If the outgoing CEO’s values and vision are dramatically different from the incoming CEO’s, the transition will be rocky at best.”
• Lack of planning: “Stories of untimely deaths of business leaders aren’t that uncommon, and unfortunately many times the CEO didn’t have a plan in place. The results of such inaction are devastating to those left behind and usually results in the company being greatly hampered and possibly even liquidated.”
• A lack of objective advisers: “We can’t see our own backswing in golf or our blind spots in business. If you want to be successful in transitioning your company, you need a group of unbiased advisers to help you see all the moving parts objectively. Otherwise, there’s a risk that all you did to build your company will be destroyed by an incompetent successor.”