PNB Chairman: Eight Thoughts on Leadership and Succession
Following news reports of Tan Sri Abdul Wahid Omar's statement on suggesting CEOs to limit their time in office to ten years, the Permodalan Nasional Berhad (PNB) Chairman has written a follow-up piece to elucidate further his thoughts and opinions on the matter.
This article is extracted from Tan Sri Wahid Omar's keynote Address at the Malaysian Leadership Summit organised by The Institute of Leadership Development, UiTM on 6 February 2018.
There are many aspects of leadership and succession that I can touch on. But perhaps I can confine it to eight. First is on the need to select the right leader. Many people have been asking, what does it take to be a good and sustainable leader? To my mind, beyond working hard and working smart, there are three prerequisites to becoming a good and sustainable leader; Unquestionable Integrity; Competency; and Humility. Integrity is about “doing the right thing even when no one is watching”. A competent leader with unquestionable integrity and who works very hard will enjoy a reputation that will precede him. Competency is about having the necessary knowledge and skills to do the job. Humility is about treating people with mutual respect, about staying grounded to our roots and about being cognisant that we all serve a greater purpose. Humility is also about knowing that you don’t know everything and that you can't succeed without teamwork.
Second is the need to put into place a proper succession planning and talent review process to cover key positions. Not just for the CEO and CEO-1 positions but also for CEO-2 and even CEO-3 positions for large organisations. For each position, identify 3 potential candidates, their state of readiness (whether Ready Now, within 2 years or 3 years or 5 years) and what is the intervention required to prepare them to succeed the incumbent. For such succession planning efforts to be successful, it needs to be driven from the top i.e. by the Board and Management alike. Best practice is for Management to conduct a talent review session twice a year.
My rule of thumb is that all things being equal, one in every four or five senior positions should be filled externally. That means 75%-80% of positions to be filled by internal promotions.
Third is the need to strike a right balance between internal and external talent. I personally believe in nurturing our internal talent or 'grow your own timber'. This is important to provide the employees with good career progression opportunities. However it is also important to bring in external talent from time to time to refresh the organisation and bring in external perspectives. My rule of thumb is that all things being equal, one in every four or five senior positions should be filled externally. That means 75%-80% of positions to be filled by internal promotions.
Fourth is the need for rejuvenation. Whilst long serving CEOs provide stability to the organisation, there is also the risk of the leader and his organisation slipping into complacency. I believe there is enough empirical evidence to suggest the performance of many companies whose CEOs have been at the helm for more than 10 years would not be as good as the CEO's performance in the first 10 years. Therefore I subscribe to the belief that as a rule of thumb, no one should be in the same position for more than ten years, whether as a head of department or a CEO. If he or she is good, then give him or her a bigger role or give him or her the opportunity to lead a bigger organisation. I am pleased to note that PNB had already introduced a time limit of nine years for directors serving on the Board of its Group companies. I am therefore in favour of imposing time limits on the tenure of CEOs and Board members. This will instil greater discipline on the CEOs to identify and prepare his successor. Of course there are exceptions to the rule but they need to be appropriately justified.
Fifth is about Diversity as a source of strength. I always believe in diversity as a source of strength for any organisation. Diversity in terms of skills, gender, ethnicity, age and even nationality for multinational organisations. Organisations that embrace diversity tend to perform better and more sustainably. I am encouraged that most public listed companies have heeded the Prime Minister's call for greater gender diversity at the Board level. The time has come for such diversity to be broadened further to cover ethnic and age diversity not just at the Board level but also at Management level too.
I am in favour of imposing time limits on the tenure of CEOs and Board members. This will instil greater discipline on the CEOs to identify and prepare his successor.
Speaking of diversity, some organisations get very defensive when we highlighted the lack of diversity in their organisations. They would immediately claim everything is based on merit. Which brings me to the Sixth point on the need for us to be conscious about the "Affinity-Favouritism- Cronyism-Prejudice Continuum". Well, we are all human beings and it is only natural for us to have affinity towards people from the same school, same university, same profession, same State, same clan, same ethnicity, same religion, and same nationality. For example, I studied at MRSM Seremban and I have great affinity towards former MRSM students. Similarly I am a Johorean and therefore I naturally have affinity towards my fellow Bangsa Johor. But if we do not contain our affinity, it can easily become favouritism. And if you don't control it, it will become cronyism. Eventually, it may even result in prejudice. I have worked in an organisation where a large number of the CEOs in the Group were from the same school. I have also come across a company where more than half of the senior management were from the same secondary school. In such a situation, you may be depriving your organisation of quality talent to propel your organisation. At the same time you may be depriving deserving candidates the opportunity to excel in their career. So it is useful for us to be conscious of the diversity in our organisation (or department) and ensure we do not practice favouritism nor cronyism.
Seventh is about giving the young people the opportunity to lead. I was fortunate to be given the opportunity to be the CEO of UEM-Renong Group when I was 37 years old. Datuk Abdul Rahman Ahmad was 32 when he was appointed as CEO of MRCB. Likewise Tan Sri Mohd Bakke Mohd Salleh (35), Datuk Seri Che Khalib Mohamad Noh (33), Datuk Shahril Ridza Ridzuan (32), Tan Sri Azman Yahya (30), Datuk Mohammed Azlan Hashim (32) and many others were given the opportunity to be CEOs in their 30s and early 40s. Yet many of us now regard executives in their 30s and 40s as being too young to be CEOs. I have even come across some Board members opposing the appointment of someone as CEO for being too young. That CEO was 50 years old! The time has come for us to renew our commitment to nurture future leaders and have the courage to give some talented young managers, with the prerequisites of being a good leader of course, the opportunity to lead an organisation as CEO.
The Eighth point is about the need to develop quality leaders in sufficient quantity. Many organisations complain about how their managers and executives are being poached by competitors and other organisations. I tend to take a more liberal view on this. Surely it is quite flattering when other organisations regard the people you have trained as being good and talented. So, instead of complaining, what if you were to hire and train more people so that you will still have enough people even after half of the people you have trained left you after say ten years? These people whom you have trained will be your ambassadors and reference points in the future.
Tan Sri Abdul Wahid Omar
Tan Sri Abdul Wahid Omar is Chairman of Pemodalan Nasional Berhad. He was formerly a Senator & Minister in charge of Economic Planning. He was also formerly the President & CEO of Maybank Group.
** The views and opinions expressed in this article are those of the author and do not necessarily reflect the position of AWANI Review