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For tech firms, the risk of not preparing for leadership changes is huge
Every week over the past three and a half years, an average of three CEOs have exited tech companies in the U.S. That tally is higher — in good times and bad — than in any of the other 26 for-profit sectors tracked by executive search firm Challenger, Gray & Christmas. You’d think tech companies should be the paradigm of how to prep for leadership transitions, since they operate in such a constant state of flux.
They’re far from it.
A change of command is one of the most delicate moments in the life cycle of any organization. If mishandled, the transition from one CEO to the next can result in a loss of market valuation, momentum and focus, as well as key personnel, customers and partners. It may even become that turning point when an organization begins to slide toward irrelevance.
With so much at stake, 84% of tech execs agree that succession planning is more important than ever because of today’s fast-changing business environment, according to our new survey of corporate America’s leaders. Seven out of 10 survey respondents agreed that tech companies face more scrutiny than other multinationals during a transition.
84% of tech execs agree that succession planning is more important than ever because of today’s fast-changing business environment.
Yet we found that tech execs appear just as unprepared for C-suite transitions as their peers in other sectors. Three out of five respondents said their companies don’t have a documented plan to handle a leadership change, even though, by that same ratio, they acknowledge that a documented plan is the biggest determinant in seamless transitions.
The findings may not be troubling if these respondents were millennial startup founders, years from leaving their companies. The executives we polled, however, hail from 160 companies that have been in business for a minimum of 15 years — 35 are tech companies, the largest industry cohort in the survey.
The smallest companies have at least 1,500 employees and $500 million in annual revenue, while the largest have head counts of over 500,000 and revenue upward of $100 billion. They have been around long enough to understand — and put into place — risk management and crisis planning, including what happens should their leaders fall victim to the proverbial milk truck.
Tech execs should be more rigorous about succession planning for one important reason: institutional memory. Tech firms generally are younger than other companies of a similar size, which partly explains why the median age of S&P 500 companies plunged to 33 years in 2018 from 85 years in 2000, according to McKinsey & Co.
These enterprises clearly have accomplished a lot in their short lives, but in their haste, most have not captured their history, unlike their longer-lived peers in other sectors. Less than half of these tech firms, in fact, have formally recorded their leader’s story for posterity. That puts them at a disadvantage when, inevitably, they will be required to onboard newcomers to their C-suites.
It’s best to record this history well before the intense swirl of a leadership transition begins. Crucially, it will help the incoming and future generations of leadership understand critical aspects of its track record, the lessons learned, culture and identity. It also explains why the organization has evolved as it has, what binds people together and what may trigger resistance based on previous experience. It’s as much about moving forward as looking back.
Most execs in our poll get it, with 85% saying a company’s history can be a playbook for new executives to learn and prepare for upcoming challenges and opportunities. “History is the mother of innovation for any type of company,” one respondent said. “History,” writes another, “includes the roadmap to failures as well as successes.”
But this documented history cannot be a hagiography of the departing CEO. Too often, outgoing execs spend their last years in office constructing their own trophy cases. Even as they conceded their own flat-footedness on transition planning, the majority of execs said they have already taken steps to create and reinforce their personal legacies — two-thirds said they have already completed their own formal legacy planning, many with the blessing of their boards.
It’s ironic, then, that three out of five also said that the legacy of a CEO or founder often overshadows the skill set and experience a successor brings. Two-thirds of tech execs believed that the longer a leader has been in office, the more it complicates a transition.
Tech leaders can do this right and have done so. Asked which five big-name CEO transitions was most successful, respondents’ No. 1 was Apple’s handoff from Steve Jobs to Tim Cook (38%), followed by Microsoft’s page-turn from Steve Ballmer to Satya Nadella (28%). The others, at General Electric, General Motors and Goldman Sachs, each netted no more than 13% of votes.
Apple’s apparent predominance in this survey might contradict the advice to play down the aggrandizement of an exiting CEO and highlight the compilation and transfer of an organization’s history to the next chief executive. Jobs, after all, painstakingly managed his legacy until the end. But even as he continued to take center-stage, he also made sure to pass along Apple’s institutional knowledge and ethos to Cook over the 13 years they shared space on Apple’s executive floor.
Sooner or later, everyone in the C-suite today — including startup founders — will depart. For the sake of everyone they’ll leave behind, they should begin prepping for that day now.
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Now approved in LA, Abodu’s backyard homes can now go from contract to completion in as little as 30 days
Abodu, one of a slew of startup companies pitching backyard homes and office spaces to Californians in an effort to help address the state’s housing shortage, has instituted a new “Quickship” program that can take an order from contract to construction and installation in about 30 days.
Behind the quick turnaround time is a pre-approval process that was first rolled out in Santa Fe and came to Los Angeles in recent weeks.
Abodu began installing homes through a pre-approval process back in 2019, when the city of San Jose created a program that allowed developers of alternative dwelling units to submit plans for pre-approval to cut the time for homeowners.
That approval process means that ADU developers like Abodu can be permitted in one hour. Other ADU developers pre-approved in San Jose, California include Acton ADU, the venture-backed Connect Homes, J. Kretschmer Architect, Mayberry Workshop, Open Remodel and prefabADU. In Los Angeles, La Mas, IT House, Design, Bitches, Connect Homes, Welcome Projects and First Office have all had homes pre-approved for construction.
Beyond the cities where Adobu’s ADUs have received pre-approval, the company has built across California in cities ranging from, Palo Alto, Millbrae, Orange County, LA and Oakland. Units in the Bay Area cost roughly $189,000 as a starting price, compared to the $650,000 to $850,000 it takes to build units in a mid-rise apartment building, or $1 million per unit in a steel-reinforced highrise, according to the company.
“Our Quickship program is the fastest way to add housing,” said John Geary, CEO at Abodu. “Homeowners with immediate needs, be it family situations or those looking for investment income, can now complete an ADU project in as little as four weeks. A key mission for Abodu is to make a serious dent in our state’s housing deficit while providing people and municipalities the necessary blueprint to enact real change.”
For Initialized partner (and former TechCrunch writer) Kim-Mai Cutler, who serves on the Abodu board of directors, the achievement of a 30-day construction milestone is almost a dream come true. Cutler wrote the book (or the equivalent of a book) on the housing crisis and its impact on the Bay Area and California broadly.
That piece led Cutler to work in public service “on boards and commissions overseeing the spending of federal dollars on homelessness and the proceeds of municipal bonds directed at financing affordable housing (because yes, for some segments of residents, you do have to explicitly subsidize housing at the local level),” as she noted in a blog post about her investment in Abodu.
The interior of an Abodu home. Photo via Abodu.
Cutler backed the company because of her deep knowledge of the issues associated with housing.
“The reason this is a big deal is because Northern California has been the most expensive and unpredictable place to build new housing in the world. Projects typically take several years because of uncertainty with entitlements and materials,” Cutler wrote. “Over the past year, Abodu co-founders John Geary and Eric McInerney have put homes in the backyards of parents bringing kids home from college, a mother-and-son pair that each bought one for their homes in Millbrae, a couple looking to eventually house a grandmother in San Jose and on and on.”
The key inspiration that Abodu’s founders hit on was their concentration on granny flats, casitas and backyard dwellings. “While deliberations over mid-rise density were stalling in Sacramento, the state legislature (and legislatures up north in the Pacific Northwest) were passing bill after bill, including Phil Ting’s AB 68 and Bob Wieckowski’s SB 1069, to make it really easy to add backyard units,” Cutler wrote. “This is the kind of change that suburban America wants, is comfortable with and can politically pass and implement easily.”
To Cutler’s thinking, Adobu’s 30-day construction schedule will change consumer behavior, thanks to the fact that the home can be craned in and installed in less than a day on a foundation constructed in less than two weeks. Its incredibly low cost will enable a lot of opportunities to develop new inventory and the simple fact is that inventory remains a scarce commodity. As Cutler noted, only half as many homes are trading across the United States as were available a year ago, which is happening at the same time as when millennials are entering prime family formation years.
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