By Tony Samson
BEFORE THE start of a movie showing, the cinema announcements after the trailers provide a guide on the location of the fire exits. They also show the expected demeanor of patrons in case of a fire unhurriedly ascending the stairs, having time to turn their heads and smile at the camera. There is no sound of a fire alarm in the quiet procession to the exit — how’s my hair?
Even in life’s milestones, it is good to know where the exits are. An exit plan is part of the architectural design of a building to allow a safe passage out in case of an emergency.
Investors are always advised to have an exit strategy when they set up their portfolio. When buying a stock, it should be clear what the profit target is and therefore the right time to sell or exit. (It can be a long-term hold as well where the exit goes to the estate.) The plan applies too when the stock price is going down, predetermining when to stop the loss and take it on the chin.
Once a CEO is appointed to a new job, he must remember three things. First, he must listen to subordinates and colleagues to understand the situation and have a clear picture of where the current organization is. Listening can be done regularly through the now popular format of the town hall. With the connectivity available, this can be done globally and weekly as practiced in some companies like Facebook.
Second, he draws up plans to address the needs of the organization and maybe provide his vision of where it should be going. Third, he provides an exit strategy for himself. As soon as he takes over, the CEO must prepare for a succession plan and his eventual exit.
An exit strategy is built-in for projects like hosting the SEA Games. Such events have definite starts and finishes, including the flurry of criticisms and threats of investigations. A temporary organization has a very defined exit plan. This is true as well for movie productions. Although incorporated to establish shareholdings and how to distribute profits or losses, once the movie is wrapped up and shown in theaters with the video rights secure, the project is done. And the CEO or producer exits and starts another project.
Corporate appointments, on the other hand, are often open-ended without an exit date, except perhaps for consultants.
With all the management talk of succession planning and preparing the organization for the next generation, exit plans are often taboo topics with CEOs. (Are you talking to me?) Exits are implemented instead at the lower levels as redundancy programs. A manager may be out on a vacation only to come back to a redecorated office with a new photo on the table and a box of his stuff at the anteroom.
CEO exits are seldom planned. A CEO is replaced when the company is acquired or minority shareholders revolt and elect a successor. Seldom does the CEO leave according to a timetable of his own making. The appellation of “lame duck” seems to justify not making succession plans.
Even when the CEO reaches mandatory retirement age set in the by-laws, he tends to stay on “for continuity” as Chair or Mentor. A new person is designated with the title, but where does real power reside?
In family corporations, the patriarch may exit the “day-to-day” operations, leaving these in the hands of the next generation. This type of exit seems to work well as the moral authority of the “patriarch” cannot just be passed down. The stature that belongs to the founder is given up only in a horizontal exit. Thus, the patriarch can stay in his penthouse and maybe travel if he is still up to it. Even when he’s physically in the boardroom, his mind may be elsewhere in the cloud (not the one for digital storage).
An exit plan needs to be in place even before it is required. While it is easy to find the entrance into a parking basement, it is the painted arrows heading for the exit that matter. The system avoids circling back where one came from or inviting a collision.
While entrances are clearly marked and even architecturally enhanced, exits are less glitzy but even more important for someone needing to get out… in a hurry.
Tony Samson is Chairman and CEO, TOUCH xda.
