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The power of planned succession

13 March 2015

The power of planned succession - read more

New leaders must be fully immersed in the organisation’s culture before their appointment

On 22 April 2014, just less than 11 months after trumpeting David Moyes as its new manager, Manchester United Football Club abruptly announced it was firing him. The club made the usual bland statements thanking him for his services, but all that did was draw attention to what was really going on.

Firing Moyes was a severe case of damage limitation. Manchester United could not even wait until the end of the season and instead hastily installed the untried Ryan Giggs as interim manager while it found a replacement.

In the revolving door that is top-flight English football, this kind of behaviour might not seem such a big deal. Managers seem to come and go so frequently these days it is hardly worth learning their names. Manchester United however, is not just any old football club. It has dominated the English Premiership since its inception.

In 2012 market research company Cantor estimated that the club had 659 million fans worldwide, over half of them in Asia. To give that number some context, it would mean 1 in 7 of the earth’s population support United. It is not just a football club; it is a global phenomenon and a massive business.

Most of the news stories focus on United’s football team; the drama on the pitch, angry fans and trophies lost. Yet the real drama was the impact that the Moyes period had on the business.

A multinational business

When Moyes was appointed, Forbes Magazine calculated that the club had a value of around $3.3 billion – over a billion dollars more than any other sporting franchise on the planet. Less than a year later the same magazine estimated that its value had dropped by 11% ($340 million) leaving United well behind Spanish clubs Real Madrid and Barcelona. Revenues were affected too: in a call to the clubs investors, United’s Executive Vice-Chairman, Ed Woodward, estimated that Moyes’ reign had cost the club over £50 million in lost prize money and marketing income.

United is a high profile sports brand but it is also a multinational business. Moyes’ appointment and failure cost the club a fortune. Moyes’ successor, the charismatic and combative, Louis van Gaal, has gone some way to stabilising the club, but it is a long way short of reclaiming its former glory – and value. United’s story shows the strategic importance of leadership succession and what can happen when it is managed badly.

Governance lessons

Other industries can take important lessons in risk management and governance from the United debacle. At first glance, the tactical error United’s board made was taking the advice of outgoing manager Alex Ferguson about who should replace him. Ferguson was manager at United for 27 years and brought unprecedented success to the club. Asking him to choose his successor might not seem a bad idea to a fan. United’s board, however, should have known better.

Common to many leaders, Ferguson was not without an ego. In choosing Moyes it is now clear he was trying to find someone who would maintain his legacy rather than bring in new ideas. Probably without realising it, Ferguson did not want someone to come in and eclipse his own work. He chose someone cut from a very similar cloth but who did not have the same track record for success.

The position United achieved under Moyes was very similar to the level of success his previous club Everton had reached under his management. That he did not perform better should have been of no surprise to anyone. What it shows is United’s board did not conduct appropriate due diligence. What they got was entirely predicable. If they had assessed risk more effectively they would have seen this coming.

Leveraging culture

Looking more deeply, it becomes apparent that the real strategic error the board made was failing to appreciate the value, power and importance of the culture at Manchester United. It was crucial to bring in a leader who fit in with it and was able to leverage this asset.

Popular western belief, echoed in many management and leadership schools, places far too much emphasis on the value of charismatic and strong-minded leaders and their ability to stamp a new vision on the organisations they join. Steve Jobs is often cited for his great turnaround of Apple – but he was not an outsider to the business. Jobs did not bring a radical new vision to Apple, he returned to Apple to help it rediscover the vision he and his peers had built the company on. Jobs instinctively understood the Apple culture and therefore was able to both rehabilitate and rejuvenate it.

David Moyes might have been been perceived as a pugnacious Scot like the man he replaced, but that is where the similarities end. Ferguson’s fire, arrogance and natural chip-on-his-shoulder persona fitted perfectly with United’s working class boy-made-good swagger. Yet Moyes carried an air of puritanism that just did not sit well with a club famous for creating glamorous larger-than-life working class heroes – George Best, Eric Cantona, David Beckham and Christiano Ronaldo to name a few.

Planned succession

Great leaders know the value and resilience of culture and work with it rather than against it. Apple has announced the biggest profits in corporate history with CEO Tim Cook in charge, which illustrates the power of a planned succession. Cook was Chief Operating Officer under Jobs and was steeped in the Apple culture. When Jobs had to leave, Cook did not try to be a second rate version of him and he also did not make any big strategic changes to show he was in charge. He added rather than swapped in new talent. Working at Apple for such a long time, he understood that continuing Jobs’ legacy was not as important as maintaining Apple’s unique and strong culture.

When Moyes came in, like many football managers, he swept out some key senior people and brought in his own to stamp his authority. This was a disastrous move. Senior long-serving management and staff both understand the culture and the relationships with the talent. Just like the citizens of a country, they know the intricacies and subtleties of what makes the place tick – the overt and covert ways things work.

What has made Manchester United, like Apple, so successful for so long is the strength, depth and resilience of its culture. Cultures this strong do not just resist change, they actually react against it. Moyes was, as Jim Collins put it in his book Build to Last, ‘ejected like a virus’.

It is worth noting that the word succession has ‘success’ within it – approaching it as a strategic planned issue is critical to a company’s success. Companies need to relate to and evaluate their culture as a crucial strategic asset rather than something that is an HR or ‘soft issue’. Only then can they really understand the qualities of leadership they need. If Manchester United had done this, the board would have understood how important that ‘swagger’ was to its culture and brand. It would have recognised that, despite appearances, Moyes was the antitheses of what the club needed. It looks that with the installation of Louis Van Gaal that they have woken up to this fact.

Succession needs to be planned as a transition not a handover. It could have cost United about £2 million to install Moyes as heir apparent a year before Ferguson left. Although this is a lot of money, it is a drop in the ocean compared to the financial damage caused by simply handing him the keys. He would have been immersed in the organisation, been able to build relationships; the culture would have changed him rather than him trying to change it.

Neil Gibb is Director and Consulting Partner at SLP Global

Join Neil Gibb on 26 May in Dublin for the annual ICSA Ireland Conference 2015.

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