The Cripple Effect

ITV's senior leadership hiring strategy has become increasingly public since Q2 2009 when Michael Grade announced he would step down as Chairman and Chief Executive once the search for a chief executive was completed. Russell Reynolds, the US headhunter, was instructed by the board to produce a shortlist of candidates.

This is a perfect illustration of how a search process can go wrong. As reported in the Guardian, three years ago, Michael Grade was appointed chairman and chief executive, defying corporate governance guidelines which hold that the two roles should be held by separate individuals. Normally, the chairman plays a key role in finding a chief executive, but at ITV Grade was planning to leave and his departure date, and the identity of his successor, became a “bone of contention during interviews with potential CEOs”.

Those familiar with the discussions have commented that, Tony Ball, the former chief executive of British Sky Broadcasting, was an early favourite to take on the role. He has since failed to reach terms with a board that was “not united in its desire to appoint him”.

According to reports in The Times, for Sir Crispin Davis, the ex-Reed Elsevier boss to reject the opportunity to chair Britain’s biggest commercial broadcaster, “looks like misfortune”, to lose a second, in a matter of days in the form of Sir Michael Bishop, former owner of airline bmi, “looks like carelessness”.

Sir Michael, who pocketed £223m in June after selling bmi to Lufthansa, hired investment bank Gleacher Shacklock to analyse the job. He concluded that the job “was not for him”, according to close sources.

Sir Michael, unlike Sir Crispin Davis before him, seemed cut out for the job. His decision to walk away reflects poorly on ITV’s board and on Russell Reynolds, its headhunter.

Russell Reynolds has since been described by Dan Sabbagh media editor of The Times as “failing to produce candidate lists with sufficient depth — and failed to examine whether those on the list really wanted all the trouble that goes with a top job in British television”.

He further adds that the shortlist was created with the wrong purpose in mind. ITV wanted a “strong chairman” to act as a counterweight to the strong-willed Tony Ball as chief executive. That, of course, was not Mr Ball’s idea and, as a result, his candidacy exploded at the end of last month in sufficient acrimony that the list of shortlisted names for the chairman’s job leaked.

Behind every succession plan are the headhunters called on to execute the search process and draw up a shortlist of candidates for the nomination committees of company boards. Clearly reputations are on the line and disastrous leadership changes can cripple companies. Whitehead Mann has previously faced a series of setbacks including the botched appointment of Sir Ian Prosser as chairman-elect of J Sainsbury in 2004. His candidature was eventually withdrawn after an investor revolt where it is alleged that he had destroyed shareholder value when he led Six Continents, the hotel and leisure group.

David Pierce Hallahan, International Director at executive search firm Team Capital, told reporters this week that for any publicly-listed company, the appointment of a new Chairman and Chief Executive Officer is the most important decision a board will make: “Change is dislocating for all stakeholders involved in the process. A purposeful and clearly defined strategy is essential as part of a smooth transition at the top of the business. When key top management changes are taking place, an upside down process of securing the services of the new chief executive prior to the appointment of a new chairman may surprise many”.

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