One more bit of anecdotal evidence that habit gets hardwired in our corporate psyches.

The head office at my old company has several conference rooms. The primary venue for meetings is The Blue Room, just outside the president’s office. It was called The Blue Room because, back in the ‘80s, the chairs around the conference table were blue. Over time, these were replaced by burgundy chairs and then black ones. Even the black chairs are, at this point, long overdue for replacement.

Down the hall, beyond the accounting offices, through a locked security door, beyond a small lobby, down a corridor lined with motivational posters and union message boards, past the nurse’s station, the lunchroom, the washrooms and the morgue for useless files of failed projects, is a second meeting place, The Red Room. It was called the Red Room because, back in the ‘80s, the curtains covering the grubby wood windows were red. Over time, the red curtains were replaced by blue ones and these, eventually, by white vertical blinds. (Last time I looked, though, the windows were still pretty grubby.)

The point is, two decades and three generations of management later, The Blue Room is still referred to as The Blue Room and The Red Room as The Red Room though absolutely no one – with the exception, perhaps, of a certain superannuated gentleman – has the slightest idea why.

I guess I shouldn’t be smug. In our kitchen is a counter where the microwave used to be. We had long-ago graduated to an over-the-range unit. But when we look for important papers, my wife says, “look on the counter where the microwave used to be”.

Our old places and things and friends are comfortable because we cling to the terms of reference that defined them in the first place…long after they have changed and most especially long after they have gone.

Parking was always an issue at my old company. Finding a space, especially in winter, was like dividing by zero; you got a null answer. It didn’t help that shift workers filled up the spaces by the time the office staff was collectively just rolling out of bed. Nor did it help that parking in the street was reserved for trucks lining up to be loaded with product.

There was, however, one primo space (near the entrance to the building housing our sales, marketing and customer service teams) that was never used. The problem was a large yellow X that signaled the space as off-limits. There was nothing particularly important about that space. It faced the window of a small office in which toiled no one in particular…or at least someone not especially particular because the office was poorly insulated and required a space heater in the winter months.

I did some investigating and found out that, years ago, there was an entrance to the building at that spot. The X kept the entrance clear of vehicles. But the door was eventually sealed up, the building re-sided and a window installed. Only the extra insulation was left out. The X was left behind. And, to this day, some 20 years later, it remains there…in all its yellow-splendored glory. And, to this day, the denizens of a 400-man operation – ever respectful of painted authority – leave the space empty.

My story, told to colleagues at a management committee meeting, was met with bemused smiles. People are funny, I was told. Indeed they are, I thought, as we moved on to other, more important topics. That was a year ago. 12 months later, winter approaching, the X still stands guard. The space remains empty. The world continues to spin on its crazy tilt axis.

You have to wonder. How many inefficient processes hinder operations simply because companies do things the way they always have? How many products does your company keep in its offering despite poor sales simply because they’ve always been there or simply because your competitors have them? How many HR or marketing programs are kept in place, despite their lack of results, simply because they were a good idea at one point in time… a long time ago? Why do so many companies cling to a corporate culture that has been rendered obsolete by a global marketplace?

Is your company a victim of the X Factor? If so, it’s time to park the past and jump at opportunities when they become available. Especially with winter approaching.

In November, 2007, the online business journal of the University of Pennsylvania’s prestigious Wharton School looked into the subject of succession planning (CEO Succession: Has Grooming Talent on the Inside Gone by the Wayside?) This is a delicate subject that pops into the corporate consciousness and onto business mag covers whenever a corporate giant goes outside for its CEO.

In the Knowledge@Wharton case, the stimuli for discussion were executive hires at financial megalosaurs Merrill Lynch and Citigroup. Stanley O’Neal (Merrill) and Charles Prince (Citi) were asked to leave their respective companies subsequent to the mortgage securities fiasco. In December, John Thain, CEO of NYSE Euronext and a former president of Goldman Sachs became Merrill’s chairman and CEO. Citi, however, went inside, tapping Vikram Pandit. Then again, Pandit was hired by Prince just a few months earlier so he barely qualifies as an insider; he was Citigroup’s investment banking head before his new appointment.

(Subsequently, Merrill was acquired by Bank of America. Pandit, meanwhile, faces major restructuring challenges at Citi; check out Gary Weiss’ article in the September issue of Portfolio magazine.)

The Wharton discussion takes place at two levels: the issue of going inside or outside in key executive searches and the importance of succession planning in general.

CEO Selection

The selection of CEOs is as much a politically-motivated, risk-mitigating, investor-sensitive decision as anything. Boards, like those at Merril and Citigroup, go outside to let the investment community know that they recognize there are internal problems and that a change in direction – and a changing of the guard – is merited. It would be impossible to advance anyone associated with the old regime.

It is risky (Wharton’s words) to bring in someone at the height of a crisis. There’s a huge learning curve to understanding a company’s strategy and culture. A CEO who comes in from the outside is very dependent for information from and vulnerable to the perspective of those left …an irony in itself.

But what about lower level executive positions? The consensus seems to be that this is the most appropriate level for leadership training and succession planning because this is where the likelihood of selecting internal candidates is highest.

Indeed, Peter Cappelli, management professor and director of Wharton’s Center for Human Resources feels it is better to focus on skills improvement in general than to groom people for specific positions. “I don’t think the idea ought to be to develop people for a particular job,” Cappelli says, “because the odds of using them in that way are pretty small. Both the person and the job have to be lined up too exactly for that to happen.”

Unfortunately, despite the supposed emergence of workforce planning, most firms seem to have abandoned the systematic management of talent, not only as a priority but as a core human resources activity.

Planning Pros and Cons

They argue that businesses operate in fast-paced, highly-competitive, increasingly-global environments; it, therefore, only makes sense to access the broadest base of talent available when seeking specialized skills and technical knowledge. The internet makes tapping into this base easier and faster than ever. To boot, the needed skills and knowledge can be acquired on a contractual basis, reducing long-term overhead cost commitments. Finally, bringing in new talent at all levels on an ongoing basis maintains freshness and brings to the organization new perspectives needed in an ever-changing world.

On the other hand, I would argue that a company should be diligent in maintaining and leveraging the intellectual capital of its organization. I have always been a big believer in the value of experience, codified process knowledge, and intellectual property (brands, trademarks, patents and licences). These are all best home-grown.

I also believe that self-fulfilment, not self-gratification, is the prime motivator of success. There is no better motivator of people – especially in the upper levels of a company – than the opportunity for advancement. It is, of course, an opportunity that must be earned, not given. But developing talent coincident with the strategic mid- and long-term needs of the company, enhancing leadership and management skills, and substantively encouraging upgrades in education to ensure employees are fully-conversant with the latest technologies are all cost-beneficial.

Finally, rather importantly, stuff happens. People resign, retire, become ill. Some fail to adapt to changing circumstances, management, or technology. Assuming their responsibilities cannot be reassigned – a big assumption – they must be replaced. Without diminishing the value of and need for new blood, there is also value in and need for continuity, connectivity (relationships with stakeholders) and chemistry.

Whatever their approach, companies should take as much of the drama out of the succession process as possible. Employees – especially senior ones – should understand their respective company’s policies going in and their own potential for growth on an ongoing basis. That their company goes inside or outside to fill the CEO position – or any management position, for that matter – should never come as a surprise.