Choosing a new CEO is the most important job of a company's board of directors. No other decision has such a profound impact on a firm's strategy and performance. Yet the topic of succession often gets shoved aside by concerns that seem more pressing. No one pays attention until the CEO's departure is imminent-and by then it's too late to adequately vet and train a replacement. A.G. Lafley, in contrast, began pushing the directors at P&G to begin the search for his successor as soon as he took office as CEO. From then on, the first board meeting of the year was devoted to that issue. In this article, Lafley describes the rigorous processes P&G established to ensure that it would always have a slate of strong internal CEO candidates. Among other things, P&G set up many opportunities for direct, in-depth interaction between the board and candidates; established clear leadership criteria and continually measured people against them; and developed various scenarios the company might face and identified who could best steer the firm in each situation. Lafley himself took responsibility for seeing that the company developed as many potential CEOs as it could. He became P&G's head leadership coach, responsible for training its top 500 executives. P&G's disciplined approach paid off by producing not only a first-rate successor but a contingent of senior executives who've led the company to tremendous growth.

According to the traditional view, judgment is an event: You make a decision and then move on. Yet Tichy, of the University of Michigan's Ross School of Business, and Bennis, of the University of Southern California's Marshall School of Business, found that good leadership judgment occurs not in a single moment but throughout a process. From their research into the complex phenomenon of leadership judgment, the authors also found that most important judgment calls reside in one of three domains: people, strategy, and crisis. Understanding the essence of leadership judgment is crucial. A leader's calls determine an organization's success or failure and deliver the verdict on his or her career. The first phase of the judgment process is preparation--identifying and framing the issue that demands a decision and aligning and mobilizing key stakeholders. Second is the call itself. And third is acting on the call, learning and adjusting along the way. Good leaders use a "story line"--an articulation of a company's identity, direction, and values--to inform their actions throughout the judgment process. Boeing CEO Jim McNerney, for instance, focused on a story line of Boeing as a world-class competitor and ethical leader to make a judgment call that launched the company's recovery from a string of ethical crises. Good leaders also take advantage of "redo loops" throughout the process, reconsidering the parameters of the decision, relabeling the problem, and redefining the goal in a way that more and more people can accept. Procter & Gamble's A.G. Lafley and Best Buy's Brad Anderson have both used redo loops--in preparation and execution, respectively--to strengthen not only support for their calls but also the outcomes.

Karen Barton, Zendal Pharmaceuticals' senior vice-president of human resources, was livid when COO Dave Palmer slashed her executive education budget by 75%. Without funding, there could be no in-house leadership development program, which was to be the first step toward a full-blown Zendal University. Palmer was not against bold initiatives, but sales were down 26%, and there was that $300 million debt Zendal took on when it acquired Premier Pharmaceuticals. As a result, Barton's budget wasn't the only one being cut. Palmer added that it wasn't clear what the return on investment of her proposed program--or any of her current ones for that matter--would be. Barton's analysis had been woefully short on quantitative benefits. Figuring ROI for people isn't the same as calculating the payback from a machine, Barton complained to friend and ally Carlos Freitas, head of the medical devices division. But Freitas disagreed: "If you want dollars, you have to show how you fit in with [management's] plans. You must be willing to fight for resources with the rest of us." She knew Freitas was right. She needed to make the case that doubling her budget was a smart move even in tough times. The question was, How? In R0305A and R0305Z, four commentators--Susan Burnett, an HR executive at Hewlett-Packard; Mike Morrison, dean of the University of Toyota; Noel M. Tichy, professor at the University of Michigan Business School; and David Owens, vice-president of Bausch & Lomb's corporate university--offer advice in this fictional case study.

Karen Barton, Zendal Pharmaceuticals' senior vice-president of human resources, was livid when COO Dave Palmer slashed her executive education budget by 75%. Without funding, there could be no in-house leadership development program, which was to be the first step toward a full-blown Zendal University. Palmer was not against bold initiatives, but sales were down 26%, and there was that $300 million debt Zendal took on when it acquired Premier Pharmaceuticals. As a result, Barton's budget wasn't the only one being cut. Palmer added that it wasn't clear what the return on investment of her proposed program--or any of her current ones for that matter--would be. Barton's analysis had been woefully short on quantitative benefits. Figuring ROI for people isn't the same as calculating the payback from a machine, Barton complained to friend and ally Carlos Freitas, head of the medical devices division. But Freitas disagreed: "If you want dollars, you have to show how you fit in with [management's] plans. You must be willing to fight for resources with the rest of us." She knew Freitas was right. She needed to make the case that doubling her budget was a smart move even in tough times. The question was, How? In R0305A and R0305Z, four commentators--Susan Burnett, an HR executive at Hewlett-Packard; Mike Morrison, dean of the University of Toyota; Noel M. Tichy, professor at the University of Michigan Business School; and David Owens, vice-president of Bausch & Lomb's corporate university--offer advice on this fictional case study.

Many companies now run boot camps--comprehensive orientation programs designed to help new hires hit the ground running. They're intense and intimidating, and new employees emerge from them with strong bonds to other recruits and to the organization. But at Trilogy, organizational consultant Noel Tichy discovered one program that's a breed apart. In this article, Tichy gives us a detailed tour of Trilogy's boot camp, Trilogy University, to demonstrate why it's so different--and so effective. Like the best boot camps, it serves as an immersion in both the technical skills new recruits will need for their jobs and Trilogy's corporate culture, which emphasizes risk-taking, teamwork, humility, and a strong customer focus. But this is a new-employee orientation session that's so fundamental to the company as a whole that it's presided over by the CEO and top corporate executives for fully six months of the year. Why? In two three-month sessions, these top executives hone their own strategic thinking about the company as they decide what to teach the new recruits each session. They also find the company's next generation of new products as they judge the innovative ideas the recruits are tasked with developing--making the program Trilogy's main R&D engine. And they pull the company's rising technical stars into mentoring roles for the new recruits, helping to build the next generation of top leadership. After spending months on-site studying Trilogy University, Tichy came away highly impressed by the power of the virtuous teaching cycle the program has set in motion. Leaders of the organization are learning from recruits at the same time that the recruits are learning from the leaders. It's a model, he argues, that other companies would do well to emulate.

In July 1991, Lawrence A. Bossidy became chairman and CEO of AlliedSignal, the $13 billion industrial supplier of aerospace systems, automotive parts, and chemical products. The company's story since then appears to be the typical slash-and-burn turnaround, but the view from the inside is far more interesting for anyone grappling with what it takes to lead a competitive organization and sustain its performance over the long term. Bossidy is a straight-shooting, tough-minded, results-oriented business leader. But he is also a charismatic and persistent coach, determined to help people learn and thereby to provide his company with the best-prepared employees. In this interview, Bossidy explains his views on the leader's role in changing a large organization. He discusses how he uses values and goals to "coach people to win." And he explains his efforts to focus AlliedSignal's management on three core processes--strategy, operations, and human resources.

This is an enhanced edition of HBR article 98301, originally published in May/June 1998. John F. Welch, Jr. believes that GE must operate with the flexibility and agility of a small company. In this interview he explains how he is building a revitalized "human engine" to match GE's "business engine." Welch champions a companywide drive to eliminate unproductive work and energize employees and leads a transformation of attitudes at all levels. The centerpiece of this process is "Work-Out"--an intense multiyear program through which representatives of GE's 14 businesses meet regularly to identify sources of frustration and inefficiency and to overhaul evaluation and reward systems.