Gradually, then suddenly—that’s how the Canadian Imperial Bank of Commerce (CIBC) has gone about installing a successor to retiring CEO Gerald McCaughey. Victor Dodig will take over September 15, a transition time of just six weeks, after a search process that played out for three months following McCaughey’s April retirement announcement.
That’s an unusually short time period for any succession process, says James Wong, an expert in business succession planning who currently works at RBC Wealth Management. It’s all the more puzzling because Dodig comes from the wealth management side of the bank, which makes up a small fraction of CIBC’s operations. “One can assume that he has the management skills,” says Wong. “But the broader issue is, can he assimilate the culture of what happens in wealth management over to commercial and retail banking? Six weeks assimilation is a very short time to do that.”
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But the quick switch will be easier to manage because Dodig is an insider, says Wayne Vanwyck, CEO of the Achievement Centre International. “Because he’s already familiar with the politics, people and products [of CIBC] he doesn’t need a long time to get up to speed on those things,” he says. “Somebody coming in from the outside would bring fresh ideas but would also have to take some time to get up to speed on a number of those issues.”
CIBC is just the latest major financial institution to see a changing of the guard—the CEOs of Royal Bank of Canada (RBC), Toronto-Dominion Bank (TD) and the Bank of Nova Scotia (Scotiabank) have all revealed retirement plans in the recent past. But nine-year veteran McCaughey was the only one not to have a designated successor in place at the time of his announcement, and most banks have given their new leaders plenty of time to transition. New RBC head Peter McKay was chosen last December and takes over in August, while at TD Bharat Masrani will have had over a year to prepare to succeed Ed Clark.
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Dodig’s selection follows a long policy of hiring from within, and his inside knowledge will be a significant asset as he readies to take over on such short notice. But CIBC’s internal succession choices have proved divisive in the past, with factions developing within the company and snubbed veterans departing. John Hunkin’s selection as CEO over Holger Kluge in 1999 led to the loss of several top executives and McCaughey was among those who benefited, taking over as the bank’s top investment banker before eventually succeeding Hunkin. McCaughey in turn brought his replacement in, with Dodig joining in 2005.
It’s normal for a new leader to shake up the bank’s management team says Wong, and six weeks doesn’t leave Dodig much time to implement his changes. “When a new CEO takes over, he builds his own team, cherry-picks the people he trusts and is familiar with,” he explains. “There has to be a certain chemistry in the inner circle, and for him to choose those people in six weeks is a short time frame.”
The April announcement suggested McCaughey would retire in 2016, and his departure two years ahead of schedule may be hasty according to Vanwyck. But it could also be a way for CIBC to make a clean break. “There are often situtations where it does make sense for the current CEO or President to step aside completely so they aren’t interfering or seen to be interfering in the new person’s mandate,” Vanwyck says.
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CIBC was ranked one of the world’s safest banks by Bloomberg earlier this year, and McCaughey has re-built the financial heavyweight following a spate of embarrassing setbacks. With just six weeks to adjust to his new role, Dodig will have to move especially quickly to continue his predecessor’s good work.