The one with the hospital pass

So it’s conference season again (actually when isn’t it conference season?) but in the coming weeks I’m off to ‘do a turn’ at the CIPD conference in Manchester (very excited to be asked). I was thinking about some form of presentation (I must finish that) a few weeks ago when I got distracted by the BBC News app and read that Kate Swann is stepping down as CEO of W.H.Smith next year. The share price dropped by 7% after the announcementĀ  which I’m sure was a great bolt of confidence for her successor Steve Clarke.

In reading the press coverage that followed it was this comment from retail consultant Matt Piner (reported here on the BBC) that really got me thinking: “The worry is that Swann’s departure signals that the retailer’s strategy of cutting costs is beginning to run out of steam, making it a good time for her to exit on a high,”

Last year at the CIPD conference the opening keynote was Sir Terry Leahy and having watched his presentation I wrote about the fact that no one took the opportunity to ask about how Tesco’s performance was reflecting on his legacy. Since writing about it Tesco have continued to have a less successful time of it than under Leahy issuing profit warnings, losing senior managers and having to really fight for their market share in a way they haven’t for some time. From an uninformed perspective (i.e. mine) it would appear that Leahy has consigned himself to the ranks of Level 4 leaders in that his successor, Philip Clarke is not continuing his success (although hasn’t failed yet!)

So that’s the context but I imagine some of you are asking what the hell a hospital pass is? It’s a term I know from rugby (but is used in several other sports) which describes a player passing the ball to avoid being tackled but in offloading it they put their fellow player in a position to be crunched (or as Wikipedia puts it ‘unavoidable heavy contact’) by a member of the opposition [Please see video below for further clarity]

Are Swann and Leahy both guilty of throwing a hospital pass? Are we seeing a trend of CEO’s cutting as much as they can out of business and then getting out when the going is good? Whilst I understand that human nature (and incentive) says do what you can until the going stops being good but given how good the going gets (i.e. how large executive remuneration is) and the obligations of a company director to act in the interests of the share holders can this really be a successful strategic outcome?

Obviously we don’t know what the closed door conversations are in these two cases but I keep on coming back to the fact that HR need to get in the game, evolve exec reward (specifically LTIP) or we will continue to see these situations arise as the personal incentive is near term enough to not truly focus on anything past 3 years of the individual’s tenure

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4 Comments

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4 responses to “The one with the hospital pass

  1. Isn’t the “hospital pass” in business just a symptom? An indication that there isn’t adequate social / team bonding to encourage the leader to tackle the issue head on, take & roll with the hit, position it for someone else to run with and start running with them in support… it takes skill and a long term view of the game but isn’t that we want from leaders anyway?

    Perhaps organisations (& their boards) need to take greater care when continuously front running the leader. Perhaps reward them for making the “good pass”, though in my experience a great pass and score is plenty reward when you have the social / team bond in place.

  2. Karen Bosher

    Those who operate at this level are like moths to a flame. They will have a finite existence – those in the camp of Leahy and Swann are exceptional in that they have doubled the average lifespan of a CEO and maintained momentum for their investors.
    The rest either stay and become institutional relics (certain sectors are really guilty of this) or the others who are far too whimsical (or egotistical) about their organisations and inevitably exit in a cloud – investors hostile and forgetting previous glory and financial return.
    Organisational success is largely cyclical.The quality of leadership will dictate how fast you hit the top of the curve.

  3. @David
    I think the self interest and insecurity at the top of organisations is in direct opposition to the type of social bonding you describe but I come back to my belief that it’s only a change in incentive that will change this form of behaviour. With boards as vested in the organisational performance to a degree I don’t see the driver for anyone to make the tough decision for the longer term if it is at the expense of the short term

    @Karen
    After reading your comment I found this:
    http://www.conference-board.org/press/pressdetail.cfm?pressid=445 which cites average CEO tenure as 8.4 years so Leahy (97-2011) did stretch that but Swann only just.

    I find myself nodding to your comment but actually thinking that the acceptance of the cycle is one of the biggest problems, is it the truly great organisations and their leaders who beat the cycle and evolve their strategy to sustain success?

  4. Pingback: The one with the second bite | Masters or Bust

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