The idea of this hack is simple but a bit revolutionary—institute systematic rotations for managers in a particular role, which would in effect position-specific set term limits for upper and middle management (say two to three years at a time). Term limits would increase diversity and regularly add fresh perspectives to decisions, which in turn would improve the ability of an organizaton to adapt.
Most companies recognize the importance of changing as fast as change itself in order to remain competitive. An adaptable enterprise strives to make change a routine part of its organizational life to essentially reduce or eliminate the organizational trauma that hampers many businesses attempting to adapt to new markets and environments. Because change is perpetual, an adaptable enterprise is able to promptly adjust to and take advantage of emerging opportunities. Adaptability itself arises from many angles, technological adaptability being one of them (e.g., the ability to quickly adjust core business systems and lighter internet components).
Technology is often seen as a source of adaptability—for instance, it allows critical information (e.g., around products, customers, competitors) to be gathered and processed far more quickly than in the past. However, an organization’s ability to adapt technologically—and to reap the benefits that that technological change can have on business model, product offerings, etc.—depends in large part on the human element—that is, on the mindsets and behaviors of people who need to make decisions on where, when, and how to adapt.
People have an inclination to set up structures that create stable and predictable environments around them. This tendency may not always lead to the best possible results on a company level, at least on a long-term. Simply put, having managers entrenched in their position for a long period of time is likely to impair an organization’s ability to adapt because their own perspective—and biases—would dominate decision-making for the unit the person is managing.The possible negative results increase larger the higher in the rank we climb (given the person’s ability to have more authority, and to appoint a greater number of people who may share his or her worldview).
The hack I’m proposing would create role-specific term limits for middle and senior managers—that is, there’d be a rule preventing a manager from staying in the same position for longer period than two to three years at a time. To ensure continuity and to counter short-termism, the person would be still responsible for the results of his own old decisions and the assistance of his replacement for a year forward.
While this hack provides a radical departure from standard practice, there are a few companies that have implemented versions of “forced” leadership rotations, including:
- Huawei: Huawei is the world's second-largest provider of telecom equipment by market share after Sweden's Ericsson. Instead of establishing an Executive Management Team, Huawei began a rotating chairman system, with eight leaders taking turns in the office, a half year for each person. After two cycles it evolved into this year's rotating CEO system. Huawei’s current CEO describes the system this way: “The rotating and acting CEOs take turns leading the company for six months. After the rotational period is over, the non-acting rotating CEOs are still part of the company's decision-making nucleus. They have considerable authority in making business decisions and in deploying managers and experts. The rotating CEO system is an organizational arrangement of positional rights and obligations, not a rotation of the mission and responsibilities of the rotating CEOs in the company.“
- TeliaSonera: the fifth-largest European Telecom operator has an explicit CEO rotation plan for its Eurasia operations. For instance, according to the current rotation plan, the current CEO of Azercell in Azerbaijan, will move to Uzbekistan to head TeliaSonera’s subsidiary Ucell in that country. He will be replaced by the CEO of Moldova-based Moldcell, The CEO of Geocell in Georgia and the CEO of Ncell in Nepal will exchange their duties. The president of TeliaSonera’s Eurasia Operations sums up the rationale for the rotation program as follows: “We have initiated the CEO rotation to ensure that the business area will benefit from new perspectives and different ways of working. At the same time it gives our CEOs the opportunity of broadening their view, gaining valuable experience and taking up new challenges in their careers. This is what makes us truly international, pioneering, agile and unique.”
Some of the principles guiding the design of a systematic role rotation program include:
- Rotations apply to roles that are important to the company in generating growth/innovations/profit and which have ready counterparts in other areas of the organization (e.g, functional leaders across business units; country managers).
- All the positions to be rotated could be defined in a table form with a circulation sequence and their driving forces/performance criteria (see, for instance, the model from TeliaSonera outlined above, which has a pre-determined rotation program).
- The superior and the subordinate positions of the same area should not be changed simultaneously.
- The CEO should have a determination right concerning the circulation. Ideally the CEO role should also be rotated (like Huawei), with the Board playing a key role in ensuring continuity. However, there should also be a possibility for the CEO to return into the original position for compelling reasons.
The next section discusses a few alternatives for how these principles can be put into practice.
There are rather many practical issues that you would face somehow when either experimenting with the model or put it into operation in a wider scale:
- Would role term limits apply to every leader?
- Would one need to change how leaders are selected for these positions when recruiting?
- Would the term limit change depending on the role/team?
- How should the leadership rotate?
- How would accountability for results work especially when departing from one role?
However, probably the most essential question is who chooses the leader.
There are at least five different (and not mutually exclusive) ways to create role-specific rotations in practice. The responses to the questions above will depend on the specific path taken
A. With projects: When a project organisation is planned by the project owner the suitable candidates for key positions are scanned. The circulation is implemented naturally when the roles change when populating the new project. Of course the company project management pool can also be very inflexible i.e. the members of the steering committees don’t shuffle much and the rest of the project management includes almost always the same names. However, this is not possible if many projects exist at the same time. – Within a project: As the duration of the project is usually short-term the circulation within a project cannot be easily followed, at least when using a waterfall method. -- Nevertheless, if a company has a widespread project oriented culture it facilitates the implementation of a role circulation in principle. This is clearly indicated in the recruitment process too. In upper management primarily only the topics vary but in lower management also the role could circulate naturally. Concerning the question of choosing the leader we could state it differently. Every leader should lead a project at least every second year. Which projects you select and the timing could be your personal choice as far as practically possible. The accountability for results is smoother secured when the line and project organisation come from the same resource pool. This means that the line organisation cannot outsource the project ownership.
B. Within a team: It should be rather easy to implement role rotation within a team if the team is a newly established one. The term limit could have already been taken into account during the recruitment and when determining the structure of the team. Ideally the team leader role would rotate through the whole group. Or the team could designate the leader for one or two years or for any specific time frame depending on an issue that is important to the implementation of the targets of the team within a term.
C. Within an area or between teams: If the head of the area (where the area covers the specific teams) would not rotate then the head of the area would choose the leaders for the term or there could be a pool of team leaders changing from one role to another according to a predefined model. If all roles would circulate then the role superior to the head of the area could have the steering role. Or alternatively the team members would designate the team leaders and the team leaders would designate the head of the area based on achieving targets for a specific term.
D. Between areas (or units/departments/functions/divisions): This would basically follow the same principles as the point C except perhaps with two differences. If the head of the areas would be the CEO then the board/owners/partners should make the selection. But logically this role should also rotate. The second difference would be the extension of the coverage. The selection of the leader could follow the alternatives of point C i.e. the superior nominates, a circulation pool according to a predefined model or designated by the members.
E. With specific innovation and/or strategy projects: Every leader should participate in such projects. You could participate in a project with your previous role but you should significantly introduce a new dimension. For example a head of HR would participate in the recruitment innovation project. He or she could have an HR angle too but also a strongly indicated new angle (e.g. marketing). The performance of the head of HR would be appreciated by other project participants based essentially on the new angle input. And he/she could be responsible for the development of the concept further when exiting the project. This approach was successfully adapted by Red Hat, the world’s biggest open-source software company, as they developed a new strategy. To boost the odds they would stretch toward new solutions, the company ensured that the team leaders—all members of the company’s C-suite—were far removed from their areas of responsibility. The company’s chief people officer, for example, was tasked with analyzing its financial model, while the CFO explored potential operational enhancements (for more on Red Hat’s strategy development process, consult their story on the MIX).
The proper usage of management rotations would facilitate the adaptability of the company. The company would be more prone to generate innovations and strive for profit making as an integrated company and not as a sum of parts. The knowledge and experience of management would be extended and better used which would also decrease the frustration of not to have the possibility to make a favourable impact for the big picture. --- The logical step further would be to promote the circulation of all employees on an advantageous way.
All of these leadership rotations options would generate several benefits, all of which would help drive an organization’s ability to adapt quickly and effectively:
- They would help reduce office politics, since people wouldn’t be playing the typical survival game to earn a limited number of leadership positions.
- They would enable an organization to take advantage of diversity. Capture the advantages of diversity. Organizations would be better placed to embrace and exploit a diversity of experiences, values, and capabilities and therefore far more able to generate a rich variety of ideas, options, and experiments—the essential ingredients of strategic renewal.
- They would accelerate leadership development, given continuously changing power structures and the need for reciprocal coaching - horizontally as well as vertically.
The model could be rather easily tested with a specific business area, a subsidiary or anything that forms a functioning coherent whole; however, achieving validity well enough may need longer-term testing. But impacts should already be seen on a short-term if the position shuffling timeframe can be shrunk.
It is essential to determine the targets and establish the positional performance criteria right in the beginning. The execution of the circulation may also need some readjusting after a testing period. Setting up a virtual organisation might be the first testing step but any truly valid results cannot easily be achieved so. I would prefer to set up a guinea pig business area that would include a real business case with the real business targets and the realistic performance criteria for the participants engaging in it besides their normal job. Or I would facilitate innovation/strategy projects forcing leaders to participate with different roles (see section Practical Impact point E).
I believe that with this circulating the management model you could establish better principles of rewarding for results that would profit more the company itself and the stable owners than many of the currently prevailing principles.