Monday, January 30, 2006

Outsider CEOs -- The Nike News

Surprising news out of Nike last week. Or perhaps I should say "not" so surprising. Few outsider CEOs are as lucky as IBM's Lou Gerstner, the ultimate outsider. The Nike succession plan probably soured due to several predictable factors:

1. Phil Knight, former Nike chairman, CEO and co-founder, was obviously not ready to give up his top dog role. He undoubtedly clashed with incoming CEO William Perez's decisions. Most founders do not enjoy sharing power.
2. New CEO Perez spent nearly 10 years at S.C. Johnson, a privately-held, family-controlled company. Nike is a publically-held company with a wide range of stakeholders that may have been difficult for Perez to get his arms around -- a board of directors vs. a family that does not want to shake the boat.
3. Nike makes sporting equipment and renown running shoes while S.C. Johnson produces brands such as Glade, Drano and Pledge. The emotional resonance of the Nike brand probably takes some getting used to.
4. Nike's culture is built on creativity and Knight is not known for his by-the-book leadership skills. Perez, on the other hand, is known for his masterful organizational skills. Creatives vs. process-driven are polar opposites.
5. Most outsider CEOs deliver less long-term shareholder value than insider CEOs. Apparently outsider CEOs begin their tenures with lots of action, decisiveness and new ideas. They are known for quickly losing interest when it comes to the mundane activities of running a business. Insider CEOs create less hoopla but know the culture well, have a cadre of loyal supporters and know the blind spots.

It needs no repeating but succession rarely works if the iconic CEO does not leave the premises shortly. Think about Jack Welch's smart exit. Knowing when and how to leave is a CEO's finest hour.


Anonymous Anonymous said...

What a spectacular blog, LGR. I wound up here through a series of blogrolls, and I have bookmarked you for future reading.

BTW, I wanted to let you know that in the links section of your side bar, the bottom 4 links or so go to a Blogger help file, not the URL they claim to be pointing to. If you go into your template this should be easy to clean up; and, in fact, it looks like the help file they are currently pointing to should provide any help you need.

Warmest wishes,

Shaula Evans

9:59 AM  
Blogger lgr said...

Thanks for these nice words. And we are going to fix those problems you mention. Deeply appreciate. Best, lgr

5:20 PM  
Blogger swooshblog said...

Great story. However, 1 fact is incorrect. Perez was at SC Johnson for 34 years before Nike.

again, great...I'll return to read in the future.

12:52 AM  
Blogger lgr said...

You are so right. I meant to say that Perez had been CEO of SC Johnson since 1996 -- nearly 10 years. Thanks for correcting this. Perez had been at SC Johnson for 36 years but CEO of the company for nearly 10. Apologize for the mistake.

12:19 PM  
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