Is corporate Ireland about to skip a generation? Will thirty-something hotshots take over at board and chief executive level and rob Ireland’s corporate fifty-somethings of their inheritance?
Many of our business bosses – the titans of the 1980s and 1990s – are now choosing their successors, and there is evidence of a change in the inheritance culture in many of our large institutions.
(I am going to refer to bosses and the ‘anointed ones’ as ‘he’ rather than ‘she’ because, lamentably – notable exceptions apart – corporate Ireland is still very much a boys’ club.)
There was a time when the anointed one was easy to spot; he had usually been at the top table for years and was clubby, chummy and the bookies’ favourite. Not any more.
These days, the assumed ‘dauphins’ should be watching their backs, because there is evidence emerging that corporate Ireland may be about to skip a generation at the top.
Generation-skipping has been a feature of corporate America and Britain for years. In those countries, an entire generation of senior managers – typically between the age of 45 and 55 – are overlooked for the top job.
So far, Ireland has played by the ‘old’ rules, where age and experience counted for more than stamina, ambition and energy.
One of the first questions that struck me in 1993 when I was first employed in the City of London was: “Where are all the bosses?” Having worked in Ireland, where there was an entire cohort of forty and fifty-something managers, it was amazing to see that these guys had been culled from large financial organisations in the City.
Typically, there were whippersnappers like myself in our 20s, a smattering of senior thirty-somethings running enormous global businesses and a few sixty-something board members.
Where was the backbone of the organisation? It was as if some corporate grim reaper had scythed down anyone born in the 1940s and 1950s.
So the career structure in the City was inverted .Normally, you join a company, and rewards and prestige flow according to the time spent kissing ass, playing corporate games and making alliances (as well as the secondary issue of working).
So when you get to 50, you have a corner office with a view on the park, sea, lake or mountains.
You have a secretary, underlings, associates and generally a little fiefdom to call your own. You are a man of status.
Many of your friends are in the same position and there is a sense of natural progression about the whole set-up. This description sums up the traditional corporate career.
In contrast, the career in the City is the opposite. You make all your money in the first ten years and thereafter, the cash and perks dwindle until you are ignored one time too many and are asked to leave – or more likely you jump and land on the soft cushion of previous bull market bonuses.
Corporate Ireland seems to be going the same way. In many firms, thirty-somethings are being promoted over their forty and fifty-something superiors. This is evident in the professions such as lawyers and accountants, as well as in consultancy, advisory firms and the banks.
Recent developments at Anglo Irish Bank are interesting in this regard. Sean FitzPatrick, who built the bank, decided to bypass the bookies’ favourites who were institutional heavyweights and well known around town.
Instead of blessing one of the favourites, FitzPatrick picked a relatively unknown thirty-something banker, David Drumm.
The fallout has already begun with the resignation of FitzPatrick’s overlooked right-hand man, Tiarnan O’Mahoney, on Thursday.
Although Dublin’s financial market gossiped and swapped rumours about Anglo, at a recent dinner I attended, fear of this generation-swapping process was palpable and it appeared to be on the cards all over the town.
In fact, the most insecure man in the room was a well-known ‘right-hand man’, whose time may well have passed.
The exception, of course, to corporate leapfrogging is the public sector. This week, in Aer Lingus, we saw the resignations of three thirty-something bosses who had done a brilliant job.
They will no doubt be replaced by older, more biddable and less problematic men.
So why is it happening in progressive companies? Why would a chief executive overlook his close associates and pluck out a much younger candidate to thrust onto centre-stage?
Remember this final decision is probably the biggest challenge for any chief executive, not least because, for any corporation worth its salt, continuity is enormously important.
The difficulty is who to pick. Typically, there will be four or five successors, who, in many cases, will be equally qualified, equally respected and equally vulnerable.
In any business, there is nothing like succeeding, but similarly there is nothing quite like public failure. And failure is public. The overlooked right-hand man has to face his peers, his colleagues and his mates down the golf club as well as himself.
The chief executive is well aware of these issues and appreciates that the stakes are high. But why go for the younger man?
Would it not be better to reward your close colleagues who have been through the mill with you, who have toiled out of the two-bit shed that you called an office before you all hit the big time? Do you not owe them?
Although, these emotional issues will be considered, they will not be imperative. The most important thing is that the successor has to be the undisputed leader. If you give it to the slightly better candidate of the three favourites, would he be the clear leader?
Or would the losers’ favoured fiefdoms rebel?
Believe me, everyone in a corporation knows what side they are on when it comes to a succession battle. This is a huge consideration.
Second, politics must also be taken out of the equation. Picking one of the three favourites means it is likely that resentment will stew and there will be long-term ramifications.
By appointing the much younger man, the firm’s entrenched politics have to realign themselves totally. This means that close to a decade’s ass-kissing and matey-matey drinks will count for nothing and, more importantly, will not be used to exclude anyone henceforth.
Third, if it is a public company, the board and shareholders need to be considered. If the board is strong, which is not necessarily the case in many PLCs, it may see things differently to the chief executive.
Also, given that companies’ managers do not own the company, the new boss will have to get on with shareholders. Although this is not determined by age, it may be a factor biasing the choice towards a much younger man.
However, the reason younger men may be getting promoted now is that older bosses realise that by their leaving, they are signalling a new era. If the company is doing well, continuity will be guaranteed by picking a younger guy because infighting will be minimised.
Ironically, there is a much greater chance that one of the loyal older lieutenants will be picked if the company is going through a rough period, because shareholders and staff will want to see a ‘safe pair of hands’ to get through the crisis before something ‘new’ is tried.
So the bizarre fact is that, the better the loyal favourites do their job, the more the less their chance of being top dog.
Appointing a younger boss also has the advantage of giving him the time to govern. People need to be able to live with their decisions, successes and mistakes.
Sometimes an older appointee will try to do things too quickly and make an impact before he is “burnt out”. This means that such companies will lose chief executives at a rate that would make even the FAI blush.
Losing consecutive chief executives is a bad signal to shareholders, possibly even worse than holding onto a bad one for too long.
In the corporate scandals of recent years, an interesting trend has emerged which shows that it has been older chief executives who have been involved in scandals. Think of the big ones: Ken Lay at Enron, Dennis Kozlowski at Tyco or Conrad Black at Hollinger.
Probably, the main reason generation skipping is happening all over corporate Ireland is that the pressures on corporate men are enormous. They are burning out at a ferocious rate and many reach their late 40s in a shocking state of ill health.
It is ironic that the very people who built the booming Irish economy are now being devoured by it, without the glory of the top jobs. This fate is befalling individuals in every industry, from the multinationals to our own homegrown outfits.
If you don’t believe me, just watch for the drunken bitching at this year’s Christmas party.
Apart from the lecherous groping and the bawling of Abba covers by the girls from the back office, lookout for the anxious, nervous laughs of previously confident senior managers.
They are the ones most vulnerable to change.
They are the ones who broke their backs (and in some cases their marriages) to build today’s success stories. And they may be the ones who will lose out in the great generation-skipping game that is dominating corporate Ireland this Christmas.