On Monday, Feb. 15, Marriott Hotels CEO Arne Sorenson passed away following a battle with pancreatic cancer. Sorenson received an initial diagnosis
in May 2019, and two weeks before his death, announced he would be reducing his work
schedule. His death, according to Marriott, however, was unexpected and creates a
leadership void at the top of the organization. Upon announcing his reduced work schedule,
Marriott did note that two executives would be elevated to more senior operating roles,
signaling that the Board of Directors likely had identified internal candidates to
assume the CEO role eventually. In the Q&A below, Center for Executive Succession Executive Director Patrick Wright and Research Director DJ Schepker consider lessons executives and board members can learn as Marriott Hotels navigates
this difficult leadership transition.
What would the selection of an inside candidate likely signal for the company going forward?
Wright: First, because Marriott is the family name and family members still have significant ownership, the company tends to run with a longer-term view. In addition, it causes them to pay attention to a broader set of stakeholders than just the shareholders, especially employees. Thus, the unique culture of Marriott discourages bringing in an outsider because of the risk that such an individual will not fully comprehend or embrace the company’s family-centered culture and values. Second, choosing an insider as successor will signal stability and continuity. Marriott’s current problems stem from the pandemic’s negative impact on the hotel industry as a whole, not from bad strategy. The direction Sorenson led Marriott is the right one, and as the effects of the pandemic dissipate, the next CEO will not need to take the company in a fundamentally different direction.
Schepker: Research shows that CEOs hired from within the company engage in less strategic change,
most often following the strategy set by the prior CEO that the internal candidates
often have had a hand in developing. While Marriott’s business has been significantly
slowed by the pandemic, its existing strategy was already starting to yield great
benefits. By focusing on a broad set of customers’ needs and creating new brands tailored
toward younger customers, Marriott had been embarking on significant growth. This
strategy was reinforced with the Starwood Hotels acquisition. Either inside promotion to CEO is likely to continue growth in this area, particularly
as the hotel industry fights off challenges from industry disruptors such as Airbnb.
What can we learn from Marriott’s experience in this CEO succession event? What can companies do to be prepared for unexpected leadership transitions?
Wright: This is a unique hybrid of an emergency and planned succession, which tends to be unusual. It was planned in the sense that once Sorenson had been diagnosed with a terminal disease, the board knew a succession was forthcoming. But it was an emergency in that when he died, the succession necessity came quickly and without much warning. So, it gave the board time to go through the process of identifying, assessing and developing potential successors, but they could not work on a schedule for when the new CEO would take over. This is why they have announced they will take a few weeks before making their decision, but the reports are they are pretty clear on the two candidates they will be choosing between. Regardless of the uniqueness of the situation, it highlights the importance of boards to constantly engage in CEO succession planning, always having an idea of, if an emergency succession occurs, who will be placed in the role immediately, and if that person is only a temporary fill, who are the candidates from which they will likely choose the permanent successor.
Schepker: This particular situation is somewhat unusual in that Marriott’s board of directors
and senior leadership have had some time to prepare for the eventual transition, despite
not knowing for certain when the transition would need to occur. The elevation of
two inside executives to senior operating roles illustrated the board had thoughtfully
prepared for succession and identified key internal talent who have CEO potential.
The time period between Sorenson’s cancer diagnosis and his death also provided the
board opportunities to accelerate succession planning activities, including the identification,
evaluation and development of potential candidates. While Marriott had time to ensure
that emergency protocols could be developed, similar succession events sometimes occur
without warning. Marriott’s actions illustrate the importance of having a clearly
defined emergency CEO succession protocol to deal with appropriate responses in the
wake of such emergencies. Such protocols include communication plans to manage stakeholders
both externally and internally. Most important, however, is for the Board of Directors
to regularly conduct talent management activities designed to identify, assess or
evaluate, and develop internal candidates with CEO succession potential. If the board
fails to identify internal candidates with CEO potential, external searches can be
conducted with the opportunity to assimilate external talent into the organization
before appointment to the CEO position. In the end, it is critical for boards to constantly
conduct talent management processes designed to enhance the organization’s talent
pipeline and bench strength, so if emergencies do unfortunately occur, the organization’s
talent pipeline is ready to fill in as soon as possible.
What can Marriott’s Board of Directors do to increase the probability of success for the next CEO?
Wright: Most importantly, the Board of Directors will need to counsel the new CEO not to rush things. Normally a new CEO needs to jump right in and begin establishing herself or himself as the new leader. Because Sorenson was so well liked and respected within the company, the leaders and employees will be going through a stage of mourning and grieving his loss. Someone who comes in trying to establish themselves too quickly will send a signal of disrespect to Sorenson’s legacy and communicate a level of ego and narcissism to the organization that will not bode well for that CEO going forward.
As with any new CEO, the board needs to work with the CEO to establish a rhythm and operating model with the board. The board should be clear about what they expect from the CEO regarding frequency, transparency and depth of communication with them, and how that will work with the CEO given her or his individual personality and style.
Finally, they need to encourage the new CEO to be the new CEO. Rather than trying to be an inferior imitation of Sorenson, the new CEO needs to be the best version of herself or himself. There will be pressure, both external and internal, for the new CEO to be “just like Sorenson,” but that is impossible, and the board should do everything they can to help the new CEO be their own unique self within Marriott.
Schepker: First, the board can play a critical role in helping the new CEO manage the unexpected, untimely transition. If an internal candidate is selected, it is likely she or he will be going through her or his own grief process, as Sorenson likely served as a mentor. The board’s role can be to assist in providing stability, both through communication with employees and with external stakeholders who want to ensure external disruptions are minimized.
Second, the board can serve as an important sounding board for the new CEO. The board has a wealth of executive experience that can be leveraged to provide advice as necessary. This advice can be used to work with the new CEO to develop an appropriate strategic plan for a changing environment, including activities to continue weathering the pandemic and to emerge afterward in a stronger position. While the pandemic has wreaked havoc on the travel and tourism industry, these effects are also likely to lessen short-term expectations. The board should work with the CEO to develop a long-term strategic plan and set its own expectations accordingly.
Finally, the board should provide guidance for the new CEO in identifying the skills and capabilities needed on the executive leadership team going forward to complement the skills of the new CEO selected. The leadership team will be critical to implement the vision laid out in the organization’s strategic plan.
In the end, boards of directors need to be prepared for any event, as unlikely as
it may seem. The ability to illustrate calm and preparedness in the face of disasters
or emergencies reassures all stakeholders. To assist in this process, the Center for
Executive Succession has developed an Emergency Succession Checklist of activities
boards should focus on to ensure they are prepared in case similar situations arise
in the future.
What organization’s CEO succession transition was successful after the death of a CEO? How did they approach the CEO’s transition?
Wright: Accenture provides an example of a successful transition following the death of their CEO. In January 2019, CEO Pierre Nanterme resigned as CEO citing health reasons and died 20 days later of colon cancer. The board placed the CFO David Rowland as the interim CEO and took six months to go through a rigorous process before naming Julie Sweet as the new CEO. Her success in leading Accenture over the past few years testifies to the fact that the board took the correct course of action by taking the time necessary to choose the right person instead of rushing to have someone in place.
Schepker: McDonald’s is a classic example of a successful CEO transition following a CEO’s untimely death. When CEO Jim Cantalupo passed away unexpectedly in 2004, the company’s board was able to meet overnight and name Charlie Bell the new CEO that morning. The company had seen tremendous growth under Cantalupo. Unfortunately, Bell was diagnosed with cancer and passed away less than a year after assuming the top post; however, McDonald’s continued its upward trajectory under Jim Skinner, who served as CEO for seven years afterwards.