Chapter 12: Strategic Leadership 391
involvement because effective strategic control generally leads to higher performance.^55
Intriguingly, it may be that “the liabilities of short tenure ... appear to exceed the advan-
tages, while the advantages of long tenure—firm-specific human and social capital,
knowledge, and power—seem to outweigh the disadvantages of rigidity and maintain-
ing the status quo.”^56 Overall then, the relationship between CEO tenure and firm per-
formance is complex and nuanced,^57 indicating that a board of directors should develop
an effective working relationship with the top management team as part of its efforts to
enhance firm performance.
Another nuance or situational condition to consider is the case in which a CEO acts
as a steward of the firm’s assets. In this instance, holding the dual roles of CEO and board
chair facilitates the making of decisions and the taking of actions that benefit stakehold-
ers. The logic here is that the CEO, desiring to be the best possible steward of the firm’s
assets, gains efficiency through CEO duality.^58 Additionally, because of this person’s pos-
itive orientation and actions, extra governance and the coordination costs resulting from
an independent board leadership structure become unnecessary.^59
In summary, the relative degrees of power held by the board and top management
team members should be examined in light of an individual firm’s situation. For exam-
ple, the abundance of resources in a firm’s external environment and the volatility of
that environment may affect the ideal balance of power between the board and the top
management team. Moreover, a volatile and uncertain environment may create a situa-
tion where a powerful CEO is needed to move quickly. In such an instance, a diverse top
management team may create less cohesion among team members, perhaps stalling or
even preventing appropriate decisions from being made in a timely manner. In the final
analysis, an effective working relationship between the board and the CEO and other top
management team members is the foundation through which decisions are made that
have the highest probability of best serving stakeholders’ interests.^60
12-3 Managerial Succession
The choice of top-level managers—particularly CEOs—is a critical decision with import-
ant implications for the firm’s performance.^61 As discussed in Chapter 10, selecting the
CEO is one of the boards of directors’ most important responsibilities as it seeks to repre-
sent the best interests of a firm’s stakeholders. Many companies use leadership screening
systems to identify individuals with strategic
leadership potential as well as to determine
the criteria individuals should satisfy to be a
candidate for the CEO position.
The most effective of these screening sys-
tems assesses people within the firm and gains
valuable information about the capabilities of
other companies’ strategic leaders.^62 Based on
the results of these assessments, training and
development programs are provided to vari-
ous individuals in an attempt to preselect and
shape the skills of people with strategic lead-
ership potential.
A number of firms have high-quality
leadership programs in place, including
Procter & Gamble (P&G), GE, IBM, and
Dow Chemical. For example, P&G is thought
to have talent throughout the organization
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Managers participating in a leadership training program.
