EDITORIAL: Good planning paved way for graceful handoff at Eli Lilly

July 30, 2016

John Lechleiter is only the 10th CEO in Eli Lilly and Co.’s 140-year history. So the handoff at the end of this year to longtime executive Dave Ricks will be a big deal for the city’s most influential corporate citizen and for the broader community.

Lilly tends to pull off these transitions with a minimum of drama, which is to its credit, thanks to its meticulous CEO succession planning and the board’s preference in recent decades for internal candidates who already know the Lilly way.

Lechleiter and the board started succession planning as soon as he took the helm in 2008, and Ricks will be doing the same when he slides into the CEO’s seat in January.

That Lechleiter is turning over the reins in a graceful fashion is no surprise to anyone who has watched him guide the company over the last eight years. He exuded calm during his tenure even though it was a period of unprecedented tumult as a result of a barrage of patent expirations and what looked at times to be a sputtering R&D pipeline.

In a statement, Lilly’s lead independent director, Ellen Marram, summed up Lechleiter’s legacy nicely: “John demonstrated the courage to make important and necessary changes in the company, and, despite near-term financial pressures, he invested robustly in R&D and maintained constant focus on leadership development. As a result, Lilly today is in a position of strength, with excellent prospects for the future based on recent and anticipated new product launches.”

Before that strategy bore fruit, there were plenty of worriers who thought Lilly would have to do something drastic—perhaps even sell itself. “It’s a very strange position they’re taking, considering what they’re facing,” Standard & Poor’s analyst Herman Saftlas said of the company’s go-it-alone strategy in 2010. “They have to do something, or the patent cliff will kill them.”

Lechleiter grasped the sense of urgency. He sharply cut non-core expenses as he doubled down on R&D, among a range of other initiatives. But all the while, he maintained an optimistic, confident demeanor.

That’s what good leaders do, former Lilly CEO Richard D. Wood told IBJ in 2003. Wood should know: Before retiring in 1991, he guided the company for 19 years, a period when profit increased sevenfold.

Wood’s successor, Vaughn Bryson, lasted only 20 months. He was ousted in part because “he talked down the company,” Wood said in the 2003 interview.

Bryson and his executive team said, “We have all these problems, and what are we going to do about them?” recalled Wood, who had remained at the company as nonexecutive chairman. “The management has to be the cheerleader for the troops.”

Lechleiter did that masterfully. Now it will be up to Ricks, who also exudes an upbeat, confident manner, to carry on the legacy.•


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