February 4, 2019
February 4, 2019
Founded in 1872, Kimberly-Clark Corp., the venerable packaged goods company that sells brands like Kleenex and Huggies, has grown to more than $18 billion in revenue, with 43,000 employees worldwide and a coveted spot at number 163 on the Fortune 500 list. The company could not have made it there without strong leadership, and part of its secret to growth is sound succession planning for their board.
Thomas Falk, chair and chief executive officer of Kimberly-Clark, recently spoke at an NACD North Texas Chapter program, sharing details of the company’s long-term succession planning process. This process culminated in the announcement of Falk’s imminent move into the executive chair role, with an internal successor taking the CEO position on January 1, 2019.
“The process of succession planning,” said Falk, “is like creating a sculpture out of clay.” It requires dedication and discipline. Falk suggests that other companies consider the quantitative and qualitative process that he and his board have followed over the years, which has five basic principles:
1. Start early. Falk was only the eighth CEO since Kimberly-Clark went public in 1929. So, with a sense of that history, he knew that starting the identification process for a successor would be at the top of his list. “I started planning for my successor when I started as CEO 16 years ago,” said Falk. He deliberately involved the board in that work. “Hiring the CEO is the most important decision a board can make,” he stressed. “Succession planning is not an individual sport.” As a new CEO, he also had to be secure enough that he could match or exceed any expectations developed as a framework for identifying his successor.
2. Go deep. The first step was to come up with a set of criteria, including attributes such as integrity, operating and international experience, innovation experience, financial acumen, and others. A sizable set of internal candidates was identified to be included in the process, recognizing that a candidate’s experience and growth would be measured over time before any decision would be made.
External scans (versus searches) were routinely completed to ensure that internal candidates were being benchmarked against skills found in the marketplace. Of course, Falk noted that the board had an inherent preference for internal candidates, because a transition to such a candidate would mean less risk for the company.
3. Keep at it. Each year throughout Falk’s tenure, the process continued in an iterative fashion. “I met with board leadership a couple of times a year,” he added. As the company evolved, the criteria might change or be adjusted to reflect what the company needed in coming years; however, the process remained constant. Succession planning was regularly included on executive session agendas. Falk also noted that he made a point to keep tabs on the status of his senior team, checking routinely in recent years on any departure plans to ensure that, if possible, key personnel would never depart at the same time. As it turned out, senior leadership departures ultimately were staggered, with new leaders slotted in over the last several years, ready to support the new CEO in 2019.
4. Keep score. Potential candidates were measured each year, with 360 degree reviews completed along the way. Both qualitative and quantitative measures were documented. The full reviews were shared with the candidates and also with two to three key board members such as the head of the nominating and governance committee. Candidates’ progress was tracked over time. An emphasis was placed on keeping accurate records of performance over time.
5. Separate emergency planning. Falk also ensured that crisis succession planning discussions happened at different times than discussions on the natural succession plan. “Emergency planning is not just a name in an envelope,” said Falk. “We looked at what each senior leader would have to do in an emergency. For example, the CFO would have to talk to investors. The human resources leader might have to start a new search.” This planning was updated every year, with an eye toward ensuring uninterrupted company operations. This work could also point out weak spots, which would benefit non-emergency operations.
Of course, activists can precipitate a management change, or, according to Falk, “If the CEO ever stagnates, then that person has to get out of the way.” In the case of Kimberly-Clark, after more than 24 years in the Fortune 500, smart succession planning did its job. In January, Michael D. Hsu took over the reigns as Chief Executive Officer of Kimberly-Clark Corporation. Before becoming CEO in January 2019, Hsu was chief operating officer, leading day-to-day operations of Kimberly-Clark’s business units, along with the global innovation, marketing and supply chain functions. He joined Kimberly-Clark in 2012 as group president of the company’s nearly $8 billion North American Consumer Products business.
NACD North Texas wishes to thank Mr. Falk for sharing his insights and experience. Offering programming in the areas of Dallas and Ft. Worth, NACD North Texas welcomes NACD members and visitors. More information can be found here.
Kimberly Simpson is an NACD regional director, providing strategic support to NACD chapters. Simpson, a former general counsel, was a U.S. Marshall Memorial Fellow to Europe in 2005.