Losing a leader: How to bounce back
By Shelley DuBois, writer-reporter
FORTUNE — Since Steve Jobs was reported to have pancreatic cancer back in 2004, media outlets have carried a debate over whether or not Apple could maintain its breakneck growth path without him. Jobs resigned in August, and his recent death saddened Apple (AAPL) employees and tech appreciators everywhere.
Companies shift power at the top all the time, but research suggests that the sudden loss of a leader affects a company differently than a smooth transition, such as a successfully orchestrated succession plan. Given that companies often experience fast, dramatic shifts in power, there are ways to ease the blow to employees, who often feel traumatized by the change.
Actually, Apple has been preparing for this transition for some time. Jobs had been grooming Apple’s former COO Tim Cook to take over. “Cook was hand-selected by Steve Jobs and socialized into the role,” says Gilad Chen, a professor of management and organization at the University of Maryland. “That will hopefully allow Apple to experience a smoother transition than companies that didn’t really expect a change.”
But even companies that aren’t expecting a major leadership shift should prepare for one, says David Ballard, director of the American Psychological Association’s healthy workplace program. CEOs fall ill or switch jobs, or, in the case of Mark Hurd at HP (HPQ), become embroiled in a scandal that ultimately leads to their departure. Most companies don’t have an emergency succession plan in place, Ballard adds.
A sudden shift such as the firing of a disgraced CEO can be especially difficult. Employees tend to mistrust surviving leadership after this kind of scandal, especially if those members of management supported the CEO or hinged the company’s image on him or her.
But managers can actually turn the loss of a rule-breaking leader into a positive, says Lisa Penney, a professor of industrial organizational psychology at the University of Houston. Remaining leaders can use the CEO’s departure to reinforce the company’s values. Firing powerful people who fail to uphold standards sends a message that no one is immune, that codes of conduct are set in stone.
Experts agree that as much as possible, companies should guide the conversation about a CEO’s departure and provide clear, valid explanations to employees why the change is good. Especially in this economy, any sort of shift in leadership causes employees to start hearing footsteps.
“We’re sort of wired for consistency,” says Bill Becker, a management professor at Texas Christian University’s Neeley business school. “When there’s significant change, that triggers a danger signal. In general, that’s going to generate negative emotions.”
One of the best buffers to a perceived sea change is to distribute leadership early on. This happens in the military and with most government positions: “Those are systems where there’s a regular shift on tap,” Chen says, and therefore those organizations cannot depend too much on any one person.
The same is true for the International Monetary Fund, which made a fairly smooth leadership transition under managing director Christine Lagarde after Dominique Strauss-Kahn resigned from the position amid accusations that he sexually assaulted a hotel housekeeper. Again, that’s an organization where leaders only serve for a set term, and it may be tough for companies to build a management structure where leaders are as interchangeable.
Still, it’s a good sign when a top executive can distribute leadership opportunities across upper management. “It takes a strong, confident leader to share power,” Chen says. “Leaders who are more likely to share power believe in the power of many versus the power of one.”
Companies with this kind of power distribution are much more resilient to changes that appear dramatic. Even though a primary leader may be disgraced, or the loss of a leader to sickness or death may come as an upsetting blow to the organization, the true leadership network stays intact.
It remains to be seen whether or not Apple built this kind of sustainable leadership structure. While the company had a succession plan in place, it was very much a one-man show for decades. It may not have been the most sustainable leadership strategy, but of course, Steve Jobs bucked much of management conventional wisdom. Apple’s performance, going forward, will illustrate whether it really is a one-in-a-million company, or if Steve Jobs was just a one-in-a-million executive.