Disney stunned us all by announcing that its chief operating officer and heir apparent, Tom Staggs, will be leaving next month. The No. 2 executive at the entertainment giant was expected to take over the chief executive officer position once the current chief, Bob Iger, steps down in 2018.

The sudden turn of events has stirred up plenty of buzzes, with people asking, what’s the story behind the departure? What does this mean for Disney? And of course, what’s this mean for Disney’s succession plan over the next 27 months?

Who’s Taking Over?

Following Disney’s announcement on Monday night, I’ve been reading the news and wondering the same thing. Who’s an alternate for Staggs? Some are suggesting Facebook’s current chief operation officer, Sheryl Sandberg, would be a popular replacement for Disney’s lead position. However, my thoughts are that appointing Sandberg, a Silicon Valley transplant (a very different culture), would mean a shift from Disney’s pattern of grooming its past appointments from within. Sure, Disney is now multimedia, is the plenty techie and social media focused, but are they really ready for Sandberg?

How similar is Facebook to Disney and will it be enough time to get her (or any other candidate) up to speed? And, how much will this cost for Disney? For this reason, some analysts have suggested that Bob Iger may be tempted to extend his tenure, once again, and for the third time during his tenure as the CEO, past the 2018 contractual deadline.

Disney’s Checkered Past in Matters Succession

Disney has time and again struggled with a smooth transition of power and has experienced various cases of succession turmoil already. Perhaps the most memorable are the one that ended with Bob Iger becoming the chief in 2005. The changeover was widely controversial and even attracted criticism from Roy E. Disney, the nephew of Walt Disney himself. In that instance, Disney was forced to clarify that Staggs’ promotion from his role as theme park chairman to the chief operating officer position in 2015 was not a coronation as it was widely suggested by the media.

How Staggs’ Imminent Departure Impacts Disney, Stock Holders And MillennialsTeam Disney

The biggest challenge facing Disney right now is on how to fill the CEO’s position once Bob Iger retires in 2018. Iger has been considered wildly successful during the past decade he’s been at the helm and many call him “irreplaceable” as he orchestrates monumental deals and steered the company to record profits. And now with his heir apparent imminent departure, it means that Disney will have to go back to square one in their search for another worthy successor.

The timing is interesting. It comes at a time when Disney is looking to expand its global operations with a key focus being on the $5.5 billion Shanghai Disney Resort set to be unveiled this coming summer. This historical project is one in which Staggs played a significant role in bringing to fruition as Disney’s theme park chairman. This probably won’t have an immediate impact on the project, however, his stepping down will certainly leave a disruptive effect later and on the future projects that he was a part of. Without a doubt, it will be an expensive process to groom another successor to Bob Iger especially if Disney decides to look outside as many are expecting.

Shareholders

Under the stewardship of Bob Iger, Disney’s profits have increased several folds and so has the Disney stock share price. The company made $8.4 billion in profits in 2015 alone. This represented a 12 percent increase from the previous year. Recently, Disney’s stock traded for about $98 a share which is a meaningful growth from a paltry $24 when Iger took over slightly over a decade ago.

Following the announcement that the company COO was stepping down last Monday, the stock fell about 2 percent. However, I expect this to be temporary.

Millennials

In a study conducted recently, Walt Disney came in second as one of the dream employers/companies for Millennials job applicants. Disney is also ranked high as one of the favorite companies for Millennials to invest in. They feel like they understand the business model, and in turn, they have a positive outlook on its long-term future. There’s no surprise that many Millennials have a higher degree of familiarity with Disney. And as Millennials represent the largest consumer population and as they start having their own families, this yet becomes another market for Disney.

As such, any instability in the company’s leadership could impact their trust and confidence in the company long-term. Although I highly doubt this is a problem Disney will withstand long-term. Millennials are smart, and for many, it will be a tale of “wait and see”.

Show Me The Money

Like any other company, leadership challenges often put off potential investors and stock buyers which tend to limit its resources and subsequently reduce its overall competitiveness. I don’t think this is the case for Disney. Sure, Disney is facing the news that theoretically is bad for business, but they have time. And, they have a business and services that people all over the world, in multiple markets and industries that people love. No doubt, it’s to the best interest of the company to make another heir apparent, but once they do, investors and partners will be back in favor.

The imminent departure of Disney’s Tom Staggs is an interesting one. Will it prove to be a major blow to the company’s long-term leadership plans? I don’t think so. Disney’s leadership runs deeps and the executive board understands that proper management of the vacancy is paramount. They have no interest in seeing investors, partners, and consumers lose faith in the beloved company. For me, I’m looking forward to seeing who they name next. So, are you leaning in?

Source: Forbes

Comments

comments