Business Insight Zone

One of the hardest things a CEO can do — and one of the markers of a really great CEO — is to groom well-qualified, well-experienced replacements. Given Stan O’Neal’s stated desire to shake up Merrill Lynch, and all the hackles he raised among long-timers at “Mother Merrill,” it’s no surprise that O’Neal hasn’t cultivated any suitable replacements.

The upshot of this is twofold:

1. O’Neal’s own blunders have hurt the firm, which may need years to be turned around.
2. There is no obvious candidate from within the company’s senior ranks who is clearly capable of tackling that turnaround.

One of the beliefs that I’ve formed in my years of covering the business world is that many CEOs are grossly overrated. Being a CEO of a big firm requires an unusual combination of skills, including financial acumen, operational toughness, and a deft p.r. touch. By no means would I suggest that you can find this combination at a dime a dozen. But too often, company boards anoint someone with this basic profile, or some fascimile of it, and then let them run the company poorly or tepidly for years. It’s much harder — but totally necessary, for companies that want to succeed in the long haul — to make CEOs accountable for their firms’ short-term and long-term performance, and to ensure that CEOs help to cultivate the bench of leadership talent among them.

So, besides the giant writedown through which Merrill is now suffering, it must also confront the failure of O’Neal and the Merrill board to make sure that ready successors were already in place in the event of O’Neal’s unplanned departure — whether that departure came from failure to perform, a heart attack, or what-have you.

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More context:

• David Gaffen of the Wall Street Journal: Will Replacing O’Neal Matter?
• Landon Thomas of the New York Times: A Search for a Chief Who Can Unite Merrill Lynch

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