Magazine article Ivey Business Journal Online

Leadership Succession: What Can We Learn from National Hockey League?

Magazine article Ivey Business Journal Online

Leadership Succession: What Can We Learn from National Hockey League?

Article excerpt

In a business that lives by the rule of "What have you done for me lately?" standing by while a new coach - or a CEO - piles up losses in the short term may be necessary to produce winning ways in the long run. However, as these authors point out, it's not so much if you should make a change as when you should make it.

Whether individual leaders are directly responsible for organizational performance is a question that dominates strategy research. Franco Bernabe, the CEO of ENI, a large, Italian energy company, once said that "...I realized that leaders could make a difference. They could transform situations that seemed impossible." (Linda Hill & Suzy Wetlaufer, "Leadership When There Is No One To Ask: An Interview with ENI's Franco Bernabe," Harvard Business Review, July-August, 1998). Bernabe, for one, believes that leaders can affect organizational outcomes. Strategy researchers such as Sayan Chatterjee, Michael Lubatkin and William Schulze support Bernabe. They argue that: "Our field's [strategic management] theory, research and pedagogy are based on the intuition that management matters: Firms, through calculated actions, can protect their earnings from market forces in ways that are valuable to investors." ("Toward a strategic theory of risk premium: Moving beyond CAPM," Academy of Management Review, Pp. 556-568, 24(3), 1999). On the other hand, research on leadership succession suggests the opposite. Studies from Major League Baseball, the National Basketball Association and the National Football League suggest that organizational leaders (the field manager in baseball, the head coaches in football and basketball) have little, if any, impact on a team's performance. These conclusions are drawn from studies that found that a change in leaders between seasons had no impact on team performance. However, they are inconsistent with the widely held belief that individual leaders do, in fact, affect organizational performance.

Interestingly, studies from English professional soccer have found that, on average, teams that went through a mid-season management change did not perform as well as teams that did not change managers during the season. It would seem that a new manager has little time to have an impact on a poorly performing, demoralized team in the middle of a season. Betweenseason changes, on the other hand, give new managers (such as coaches in hockey) an opportunity to use training camp, pre-season conditioning, player selection and repositioning to influence the team's structure and level of play. Yet, as already mentioned, the average performance of teams with between-season changes is no different than the average performance of teams without them.

So, why don't teams realize the expected benefits of between-season succession? One explanation, we suggest, is that between-season appointees have neither the opportunity to observe and assess the team's strengths and weaknesses under competitive conditions, nor the information for building on the resources at hand. On the other hand, coaches appointed the previous season have had the opportunity to assess the talent of each player, and can then work more effectively with the general manager between seasons to make the appropriate draft choices and trades, and to improve the integration of the new players. As a result, teams that changed coaches during the previous season should perform better, on average, in subsequent seasons than teams that did not make changes. It is a theory, we

believe, that can be applied to the world of business and organizational performance. To test this theory, we used a model in which we predicted the positive, neutral and negative effects on National Hockey League (NHL) teams with previous-season, between-season and withinseason successions of general managers and coaches.

The data

There are several reasons that we chose to use a professional sports organization, the NHL, to study the effect of leaders on organizational performance. …

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