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The selection of a CEO is one of the most important--and risky--events in the life of any company. Yet the way CEOs are chosen remains little discussed and little understood. The succession process has traditionally unfolded behind closed doors--some observers have even likened it to the election of a pope. To shed light on what works and what doesn't in CEO succession, the authors lead a roundtable discussion with five distinguished corporate directors: Philip Caldwell, George D. Kennedy, G.G. Michelson, Henry Wendt, and Alfred M. Zeien. Collectively, the five directors have participated in dozens of successions, either as board members or as CEOs. In a lively and frank exchange of views and experiences, the roundtable participants explore a broad range of questions: What can a company do to ensure a successful succession? How should management-development and succession processes be managed? How should the board work with the sitting chief executive during the process? What makes for a strong CEO candidate? When should outside candidates be considered? How much competition should be encouraged among potential CEO candidates? What role should executive search firms play? What role should former CEOs play after they are succeeded? Their conversation illuminates a corporate challenge that is as difficult as it is important.

In today's business world, there's no shortage of know-how. When companies get into trouble, their executives have vast resources at their disposal: their own experiences, colleagues' ideas, reams of computer-generated data, thousands of publications, and consultants armed with the latest managerial concepts and tools. But all too often, even with all that knowledge floating around, companies are plagued with an inertia that comes from knowing too much and doing too little--a phenomenon the authors call the knowing-doing gap. The gap often can be traced to a basic human propensity: the willingness to let talk substitute for action. When confronted with a problem, people act as though discussing it, formulating decisions, and hashing out plans for action are the same as actually fixing it. And after researching organizations of all shapes and sizes, the authors concluded that a particular kind of talk is an especially insidious inhibitor of action: "smart talk." People who can engage in such talk generally sound confident and articulate; they can spout facts and may even have interesting ideas. But such people often exhibit the less benign aspects of smart talk as well: They focus on the negative, and they favor unnecessarily complex or abstract language. The former lapses into criticism for criticism's sake; the latter confuses people. Both tendencies can stop action in its tracks. How can you shut the smart-talk trap and close the knowing-doing gap? The authors lay out five methods that successful companies employ in order to translate the right kind of talk into intelligent action.

In boom times, it is easy for managers to forget about risk. And not just financial risk, but organizational and operational risk as well. Now there's the risk exposure calculator, a new tool that will help managers determine exactly where and how much internal risk is mounting in their companies. The risk calculator is divided into three parts: The first set of "keys" alerts managers to the pressures that come from growth. Now that the company has taken off, are employees feeling increased pressure to perform? Is the company's infrastructure becoming overloaded? And are more new employees coming on board as the company rushes to fill positions? If the answer is yes to any one of those questions, then risk may be rising to dangerous levels. The second set of keys on the calculator highlights pressures that arise from corporate culture. Are too many rewards being given for entrepreneurial risk taking? Are executives becoming so resistant to bad news that no one feels comfortable alerting them to problems? And is the company's level of internal competition so high that employees see promotion as a zero-sum game? The final set of pressures, the author says, revolves around information management. When calculating these pressures, managers should ask themselves, what was the company's complexity, volume, and velocity of information a year ago? Have they risen? By how much? How much of the time am I doing the work that a computer system should be doing? High pressure on many or all of these points should set off alarm bells for managers. To control risk, managers have four levers of control at their disposal that will show them where they need to make organizational adjustments.

Northern Oil is moving offices, and CEO Fritz Schumacher wants to make the most of the move in this fictional case study. He believes that adopting an open-plan work space will reinvent how the company works, not to mention cut costs. Facilities manager Sasha Pasternak also supports the open plan. Her job would be easier, and her budget would stretch further, if Northern had standardized workstations and used partitions, not walls. And she likes the way the new design flattens the organization: everyone has the same amount of space and the same ergonomically sound furniture. The new building would have more conference rooms and just-in-time work spaces for employees who worked mostly off-site. And although she knew that initial meetings between the architects and Northern employees hadn't yielded much support for open space--people were attached to their private offices--she expected that people would warm to the idea. But when the new design was unveiled, employees were less than enthusiastic. They hurled questions like, How will workers concentrate if they can't shut their office doors? How will people have confidential meetings with their boss? And why would people stay at Northern when the competition offers them private offices? There was even talk of circulating a petition refusing to move to the new space. A week later, the architect presented revised plans to the project group. The new options would add costs and reduce the amount of space savings, but offering a choice to employees might make them feel less threatened. What should the project team do? In 99312 and 99312Z, commentators Nick MacPhee, Donald J. Chiofaro, Paul O'Neill, Vivian Loftness, and David Lathrop offer advice.

Northern Oil is moving offices, and CEO Fritz Schumacher wants to make the most of the move in this fictional case study. He believes that adopting an open-plan work space will reinvent how the company works, not to mention cut costs. Facilities manager Sasha Pasternak also supports the open plan. Her job would be easier, and her budget would stretch further, if Northern had standardized workstations and used partitions, not walls. And she likes the way the new design flattens the organization: everyone has the same amount of space and the same ergonomically sound furniture. The new building would have more conference rooms and just-in-time work spaces for employees who worked mostly off-site. And although she knew that initial meetings between the architects and Northern employees hadn't yielded much support for open space--people were attached to their private offices--she expected that people would warm to the idea. But when the new design was unveiled, employees were less than enthusiastic. They hurled questions like, How will workers concentrate if they can't shut their office doors? How will people have confidential meetings with their boss? And why would people stay at Northern when the competition offers them private offices? There was even talk of circulating a petition refusing to move to the new space. A week later, the architect presented revised plans to the project group. The new options would add costs and reduce the amount of space savings, but offering a choice to employees might make them feel less threatened. What should the project team do? In 99312 and 99312Z, commentators Nick MacPhee, Donald J. Chiofaro, Paul O'Neill, Vivian Loftness, and David Lathrop offer advice.

Northern Oil is moving offices, and CEO Fritz Schumacher wants to make the most of the move in this fictional case study. He believes that adopting an open-plan work space will reinvent how the company works, not to mention cut costs. Facilities manager Sasha Pasternak also supports the open plan. Her job would be easier, and her budget would stretch further, if Northern had standardized workstations and used partitions, not walls. And she likes the way the new design flattens the organization: everyone has the same amount of space and the same ergonomically sound furniture. The new building would have more conference rooms and just-in-time work spaces for employees who worked mostly off-site. And although she knew that initial meetings between the architects and Northern employees hadn't yielded much support for open space--people were attached to their private offices--she expected that people would warm to the idea. But when the new design was unveiled, employees were less than enthusiastic. They hurled questions like, How will workers concentrate if they can't shut their office doors? How will people have confidential meetings with their boss? And why would people stay at Northern when the competition offers them private offices? There was even talk of circulating a petition refusing to move to the new space. A week later, the architect presented revised plans to the project group. The new options would add costs and reduce the amount of space savings, but offering a choice to employees might make them feel less threatened. What should the project team do? In 99312 and 99312Z, five commentators Nick MacPhee, Donald J. Chiofaro, Paul O'Neill, Vivian Loftness, and David Lathrop offer advice.

When a reform-minded economist joins Romania's Ministry of Agriculture, she expects to help move her nation toward market-based changes that will increase the production of food by reducing subsidies and tariffs. Instead, General Secretary Cristina Esanu, formerly with the World Bank, quickly confronts a dilemma. The terms of the release of a new round of World Bank assistance to Romania make new aid contingent on Romania's "progress" toward lower tariffs, generally considered to be protecting inefficient producers from outside competition. Esanu quickly learns that powerful political interests make further tariff reductions, in particular, very difficult to achieve. When the World Bank makes clear that it will ask that at least a symbolic five percent tariff reduction be implemented in order for Romania to receive new assistance, Esanu is asked by her superior--the Agriculture Minister--to take on a task about which she is deeply ambivalent: writing a memo to convince the World Bank that tariffs should not be reduced. The case raises questions about how a public official can, and whether she should, compromise principles and pragmatic political considerations. HKS Case Number 1507.0

Offers an overview of Veritas Software's history, beginning with the initial company, Tolerant Systems. Discusses the troubles Tolerant ran into and introduces the changes the company went through when it became a restart led by Mark Leslie. It touches on hiring and training a new sales force, striking new OEM partnerships, revisiting key partnerships and contracts, including a large one with AT&T, and accomplishing its goals on a shoestring budget.

The CEO of Northern Napa Valley Winery must forecast aggregate sales of red table wine for the product year, as well as month-by-month sales for the same period. This case provides the student with the opportunity to try to forecast a time series characterized by distinct trend and seasonality with almost nine years of monthly data available. (A Microsoft Excel data file is available for use with this case, product 7A98E046.)

In August 1998, the partners of Columbia Capital in Arlington, Va. made a decision about whether or not to raise an outside fund for venture capital investing. Columbia had begun in 1988 as a boutique investment bank focused on the telecommunications industry, but had over its history become progressively more involved in making direct private equity investments; from 1994-98, the firm made over $100 million in such investments. Unlike traditional venture capital firms, however, Columbia made these investments entirely with its partners' own personal money.

Describes an interesting plastics technology and an entrepreneur's attempts to build a business around it. Highlights issues around managing technical and market risk. Teaching purpose: Highlights difficult decisions around building a business off of an unproven platform technology.

Examines the relationship between management at Alpha Shanghai and San Yu Mopeds, a large Chinese moped producer, and a customer which Alpha Shanghai had hoped would become one of their largest. Specifically, the case focuses on the general manager's influence on the organization's communications strategy and the extent to which it was a departure from "typical" supplier relationships in China. The case poses the issue of to what extent the failure in the relationship was a function of the general manager's lack of exposure to doing business in China, and/or an insensitivity to local customs and business practices. By examining these issues, the students will learn to appreciate how culturally specific communication patterns are, as well as what societal and cultural assumptions affect the behavior, attitudes, and communication patterns within the organization, and between the organization and its local partners, suppliers, and strategic alliances.

R&B Falcon is the world's leading offshore drilling contractor. Amid surging exploration budgets and increasing deepwater drilling activity, the company makes huge investments in several new state-of-the art $300 million ultra-deep-water drilling rigs. As day rates and utilization fall for shallow-water rigs, the company must decide whether to idle capacity to defend pricing. It must also decide whether to scale back its commitment to deep-water rig construction projects. Finally, the firm wrestles with whether to pursue "turnkey" drilling contracts, in which it would provide a complete bundle of drilling services.

After booming in 1997 and early 1998, the offshore drilling industry slumps in late 1998 and early 1999. Lower oil prices lead oil companies to reduce drilling budgets, and rig utilization falls from essentially 100% to 70% in some markets. Day rates--the prices paid for a rig's services--fall by as much as 75%. The case illustrates how supply and demand work together to determine prices and utilization in the short run, as well as how long-run supply is determined in an industry where capacity additions take several years. Also describes the industry's move toward "turnkey" contracts, in which drilling contractors provide a complete bundle of drilling services, and how advances in deep-water drilling technology are changing industry structure.

After reaching all-time highs in excess of $2,500 per ton in 1988 and 1989, aluminum prices fall dramatically in the early 1990s as the former Soviet Union begins exporting far larger quantities of metal. By the beginning of 1994, the price has hit all-time lows (in real terms) and stands at $1,110. The case contains data on world consumption by sector; an accompanying spreadsheet contains detailed cost data for the world's 157 smelters. Together, these allow a thorough supply and demand analysis that illuminates price fluctuations in this industry. A rewritten version of an earlier note.

With prices at all-time lows at the beginning of 1994, South Africa's sole primary aluminum producer--Alusaf--is considering building the world's largest greenfield smelter. Using cost estimates in this case, students can evaluate the relative cost position of this plant in the context of the cost data on other smelters provided in the spreadsheet accompanying "The Aluminum Industry in 1994." By building on the supply and demand analysis supported by that case, students can evaluate the profitability of this massive capital investment.

GE is faced with Jack Welch's impending retirement and whether anyone can sustain the blistering pace of change and growth characteristic of the Welch era. After briefly describing GE's heritage and Welch's transformation of the company's business portfolio of the 1980s, the case chronicles Welch's revitalization initiatives through the late 1980s and 1990s. It focuses on six of Welch's major change programs: The "Software" Initiatives, Globalization, Redefining Leadership, Stretch Objectives, Service Business Development, and Six Sigma Quality.

Spreadsheet supplement for case 399-150.

Provides students with an opportunity to use simple real options analysis to value a startup. Penelope Phillips is deciding whether to start a company to make wireless phones. Students get experience using traditional discounted cash flow valuation and a real options approach.

Describes a methodology for identifying markets for new technologies and for defining the highest value attributes of new products or services. It helps innovators escape the trap of incremental improvements to established product concepts by asking a straightforward question: What job did my customer expect this product to do for him or her?