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The big mistake HP keeps repeating

Hewlett-Packard (HPQ), JC Penney (JCP), General Motors (GM), Royal Bank of Scotland (RBS) and Ford (F)… all companies that have been derailed by poor succession planning, according to leadership expert Noel Tichy.

One of the worst of these, by his estimation, is HP. It all started when the company named Carly Fiorina to its top position at the height of the dot-com era in 1999. “She had never run a business; she was a disaster,” said Tichy, who recently published, “Succession: Mastering the Make-or-Break Process of Leadership Transition.”

Things might have improved when they hired Mark Hurd, who “was a pretty good leader” and “a good manager,” according to Tichy. But Hurd was forced out following an inappropriate relationship with a contractor named Jodie Fisher. Tichy commends that decision. “That’s a clear ethical violation… No way would you keep him,” he said.

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But the next guy after Hurd was not such a good leader, according to Tichy. Leo Apotheker lasted less than a year at the top of the company before he was fired and replaced with current CEO Meg Whitman.

HP's stock from July 1, 199 to November 24, 2014

While HP shares have rallied during Whitman's tenure, the stock is down more than 20% since Carly Fiorina took over in July 1999, and the company announced earlier this year that it plans to split into two different companies as part of a multi-year restructuring. So far, current CEO Meg Whitman has supervised some 55,000 layoffs during.

The big picture problem, as far as Tichy sees it, is failure to create a pipeline of internal talent. The companies that Tichy has worked with as a leadership expert – GE, for example – were companies that spent a great deal of time and effort on succession. GE’s (GE) pipeline was so strong, internal candidates Jim McNerney and Bob Nardelli went on to run different Fortune 500 companies when Jeff Immelt emerged as Welch’s successor.

“In recent years, as the notion of ‘glass breaking’ transformational CEOs has gained traction…. An overwhelming preponderance of evidence supports a contrary view,” Tichy says.

Exhibit A: When JC Penney brought in former Apple (AAPL) retail chief Ron Johnson to run the shop at the behest of activist investor Bill Ackman, things went so badly that they had to revert to former CEO Mike Ullman.

“The fact that a handful of highly talented outsiders… have pulled off this remarkable feat is no reason to ignore the more salient fact, which is that in the vast majority of cases, outsider selections and recruitments are risker, costlier, and far more disruptive,” Tichy declares.

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One company that embodies all of these principles for Tichy is Ford - landing it on Tichy's top 5 list for both failed CEO strategies and successes. Tichy consulted for former Ford CEO Jacques Nasser and was laid off along with him during the Firestone tire scandal. Following that, Ford brought in outsider Alan Mulally from Boeing, whom Tichy says did an amazing job. The best part of his leadership may be that he formed a pipeline, allowing him to promote from within when he tapped Mark Fields – now Ford’s CEO – as his successor.

Ford's solid restructuring of its leadership pipeline is what landed it on Tichy’s list of the 5 companies with the best succession plans as well, along with IBM (IBM), Accenture (ACN), DuPont (DD) and Pepsi (PEP).

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