Merrill Lynch – Buy or Sell? Depends on the Successor’s Cognitive Capacity
By Michelle Malay Carter on November 1, 2007
The fundamental determinant of a company?s growth, stability, or contraction is the cognitive capacity level of its CEO.? It’s what I refer to in this blog as problem-solving capability and what Elliott Jaques called complexity of information processing.
–If a?CEO’s cognitive?capability level?matches the level of work of the CEO role in a particular organization, you can expect stability.?
–If the CEO’s capability is lower than that called for by the role, it’s time to sell your stock.?
–If the CEO has excess capacity, fasten your seatbelt for growth.
Not all CEO roles are created equal, the level of the role will depend upon the size and complexity of the organization.? Generally, a single business unit organization will top out at level 5.? Multi-business unit organizations have 6 or 7 levels, and only the largest mega-corporations have 8.
What would I do if Alberto Cribiore, the Merrill Lynch board member leading the search committee to replace Stanley O’Neal, called me in a panic because the board dropped the ball on succession planning?
CEO Succession Process
- I would do an analysis of the organization and its strategy to determine the highest level of work within the organization, which would specify the level of work of the CEO’s role.?
- I would talk with the board about their future strategy to determine if they want to hire for stability (CEO capacity matching the role)?or growth (+1 CEO capacity).?
- Then, we would screen the CEO candidates to determine the current level of problem solving capability and hire accordingly.? Of course, knowledge, skills, experience and values would be factors as well, but cognitive capacity calibrated to strategy level would be the imperative.
Most of us view ourselves as “out of the box” thinkers, but despite over 50 years of research on the subject, most management consultants and business executives simply remain blind to the idea of levels of work and corresponding cognitive capacity.?
Accurately matching cognitive capacity to roles at all levels of?the organization?is the key to bringing about?all that is lacking these days – employee engagement and retention of high potentials.
Curious?? Let’s chat.
Filed Under Executive Leadership, High Potential, Organization Design, Requisite Organization, Succession Planning, Talent Management
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3 Responses to “Merrill Lynch – Buy or Sell? Depends on the Successor’s Cognitive Capacity”
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Would it not be advisable to replace the board of directors entirely since they most likely have, by now, been enjoined by a re-trenchment mentality?
Daniel,
Thanks for the comment. Yes, the board failed on many fronts here and should be accountable for this mess. From a succession and talent standpoint, the board is accountable for keeping an eye on the talent pool two levels down, i.e. the CEO’s direct reports, and this usually doesn’t happen. Here’s a post on this: http://www.missionmindedmanagement.com/why-is-succession-so-badly-managed-a-globally-thought-provoking-subject
Regards,
Michelle
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