At Berkshire Hathaway’s 60th AGM, Warren Buffett, 94, announced he will be stepping down as CEO and handing over day-to-day operations and investment decisions to Greg Abel at the end of 2025.
Abel has been with the business for 25 years, so he has intimate knowledge of how things are done at Berkshire. This is one of the year’s most significant business leadership transitions, so I reviewed some others that might initially have given investors cause for concern but ultimately were a boon for shareholders.
First, who would have thought Apple would survive and thrive under Tim Cook’s leadership once Steve Jobs, the iconoclastic founder, died? Remember that Jobs was ousted as Apple CEO in the mid-1980s before returning in the mid-1990s. He rescued the business and led Apple through an incredible rebirth and growth over the next 14 years.
With the loss of his charisma and product design talent, many thought Apple would lose its mojo and even become the next Nokia. But under Cook’s leadership, Apple has gone from strength to strength, and many might now wonder who will take over when he decides to retire and what that will mean for Apple’s future.
Another leadership transition that has gone much better than initially expected is that of Pieter Engelbrecht, who had big shoes to fill as CEO of Shoprite after Whitey Basson retired. Engelbrecht has done a masterful job driving the business to new heights. He has capitalised on the weakness of competitors such as Spar and Pick n Pay, stealing market share and cementing Shoprite’s position as the market-leading retailer in South Africa, not to mention the largest private employer in the country. Who would have predicted the position Shoprite would find itself in today at the point of this leadership transition?
Lego, at the time Knudstorp took the top job, was losing money and fast approaching a death spiral due to mounting debts
Jørgen Vig Knudstorp, the former Lego CEO, probably had the most challenging leadership transition — he was the first non-family member to lead the business, and it was underperforming when he took the reins. At least the other CEOs were taking over companies that were in rude health. Lego, at the time Knudstorp took the top job, was losing money and fast approaching a death spiral due to mounting debts.
With previous experience at consultancy giant McKinsey, Knudstorp was made CEO after only three years at Lego. He implemented a radical turnaround and during his tenure Lego regained its former glory as one of the world’s best-loved and most profitable toy companies.
A common theme in these three leadership transitions is that the new boss was a company insider who had worked elsewhere first. They all would have been familiar with the firm’s operations and culture when they took the reins as CEO.
However, none of them was afraid to put his own stamp on things and none tried to be a carbon copy of his predecessor. Cook is no Jobs, but that hasn’t been bad for Apple; he brought a more corporate feel to the company, and in hindsight, that’s what it needed to move to the next level in its evolution as a business.
Knudstorp had no choice but to make radical changes, as Lego was failing badly and business-as-usual was not an option.
That is not to say that bringing in an outside CEO doesn’t work; it can, and sometimes it is needed. An outsider can come in and shake things up. Someone from the outside is not beholden to any sacred cows or relationships within the company. However, this style of transition can be marked by a high degree of disruption and change to the company culture.
The appointments of Abel, Cook and Engelbrecht followed long-term strategic succession planning by the respective boards and, no doubt, their predecessors as CEO.
A smooth transition speaks to the quality of the business and, indeed, of the board, which needs to navigate what can be a challenging period. Such a transition helps to maintain and build confidence in the business.
When do these leadership transitions need to happen? Sometimes, as with Lego, circumstances compel a board to act. In other cases, like comedy, timing can be everything, and only a good comedian knows the right time to drop the punchline.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.