Asda Succession a Vote for Home-Grown Talent

Last Updated May 11, 2010 12:34 PM EDT

Asda has appointed a successor to its CEO from within the business, with outgoing CEO Andy Bond to be replaced by former COO Andy Clarke.

Clarke, a veteran of the retail industry and a loyal 'returner' to the Leeds-based Asda, had been tipped by many to succeed Bond, so the news will come as little surprise.

But it presents a useful contrast with retailer Marks & Spencer's recent succession process. Where M&S appointed from without, choosing former Morrisons boss Marc Bolland as Sir Stuart Rose's successor, Clarke came from within the business.

It's a reminder of how persuasive the arguments for internal succession plans can be.

  1. It's a continuous endorsement of your own abilities to develop people. Asda is giving its own talent programme a vote of confidence by giving the top jobs to store veterans. It's also creating a talent pipeline -- someone will have to fill Clarke's role as Asda COO now, and so on.
  2. It's an incentive for aspirational middle managers and entry-level employees, and can't hurt when hiring. Clarke began his career as a store manager in Edinburgh in 1992 and then collected divisional expertise within the business. OK, he did also pick up some some external work experience (at Matalan and Iceland), before returning as retail director in 2005. But it's still more encouraging than being overlooked for the top job (largely the reason, it's been argued, that M&S's financial director, Ian Dyson, left to go to Punch Taverns.)
  3. He knows the business inside out, making this a "seamless leadership change", as WalMart president Doug McMillon put it. This has downsides, too: because Clarke has spent much of his career at Asda, he might be blinded to its faults, too inured to working with Bond (who becomes chairman) or unable to cast a fresh eye on old processes. But the upside is loyalty. As the recession began to bite in the retail sector, Clarke claimed Asda had a Dunkirk spirit: "An inclusive culture flourishes. We operate on the principles of 'all colleagues, one team'...". He's alsio earned his spurs as COO during a recession that's been compared to the Depression, so shrinking margins and distribution costs won't come as a great shock.
  4. It's cheaper. While no-one's recommending you you scrimp on your new CEO search, it's an incidental bonus that if you can find strong leaders within, you'll also save on recruitment costs throughout the business.
Sometimes succession planning can go awry and sometimes the board deems it necessary to appoint an external candidate. Marshall Goldsmith can think of several ways a business environment works to eliminate internal successors -- the board might want to mark a clear departure in the company's direction, for example, or to distance the new leader from a past indiscretion.

In M&S's case, perhaps Rose -- himself an M&S returner and retail veteran -- believed the stores needed a new broom every so often to ensure against it becoming stagnant. Maybe it's a necessary tonic for any business board to ensure against becoming too inward looking. Perhaps a dominating ( or "Imperial") CEO can't be succeeded by any of his or her lieutenants.

But it's hard not to see internal succession as a sign of corporate strength and modernity -- a vote for the approachable boss-next-door.