Avnet Inc. only recently named William Amelio interim CEO but the board of directors must move quickly to appoint a substantive leader for the global electronics components distributor. As one of the industry’s biggest players, Avnet cannot afford to be perceived as a rudderless enterprise or one without a proven leader with a clear vision for its role in a rapidly changing market.
Customers, suppliers and shareholder don’t like uncertainty. Avnet, a famously buttoned down company well respected for its solid management ranks and executive transitions, tumbled from its lofty perch when it unexpectedly dismissed Rick Hamada as CEO on July 11. The appointment of Amelio, a high-tech industry veteran, may have calmed investors initially but the company needs to make a more reassuring gesture that can confirm it is on top of this management transition. One such action could be to name Amelio as the substantive CEO or indicate a CEO-search committee has been constituted with the mandate to complete the task within a set timeframe.
A lot is at stake for Avnet. Due to disruptive forces swirling through its industry segment, the company cannot take its leadership role for granted. Like many other segments of the global economy, the high-tech industry is in the wrenching throes of transitioning operations to digital platforms from the old analog system. This shift is affecting operational and management strategies, products, product innovations and development practices, services and how enterprises relate to and interact with customers and suppliers.
Most of what companies do and make as well as services provided are being impacted by this shift and it is apparent that some executives are either too slow to realize the significance of this evolutionary development or are not responding swiftly enough with strategic initiatives that would position their companies to benefit from the emerging digital economy. The realization that new tools – and fresh executives – might be necessary is forcing directors at public and private companies to dump lagging CEOs and commence an intense search for more competent leaders.
The upheavals in some markets, including the components distribution sector, are so monumental that new players uninhibited by existing practices are threatening to topple established leaders. Amazon, for example, has stormed into the components distribution business, shredding the rigid traditions companies in the sector have followed for decades. This has created new opportunities for suppliers, OEMs and contract manufacturers while broadening the reach of smaller distributors whose ability to maneuver in the market had been threatened by Avnet, rival Arrow Electronics and other bigger players.
Hamada, a 32-year veteran of Avnet, lost his job as CEO because the board didn’t think he was responding quickly enough to the changing environment. He is not alone. LM Ericsson this week dumped CEO Hans Vestberg, “effective immediately” and announced a search for his replacement. Just like Avnet, the Swedish telecommunications equipment company also appointed an interim leader.
“Hans Vestberg has led the company for seven years through significant industry and company transformation [and] has been instrumental in building strong relationships with key customers around the world,” said Leif Johansson, chairman of Ericsson’s board of directors. “However, in the current environment and as the company accelerates its strategy execution, the Board of Directors has decided that the time is right for a new leader to drive the next phase in Ericsson's development.”
Outsider vs. Planned Successor
Neither Avnet nor Ericsson indicated whether or not they will be going outside for a new CEO. In the case of Avnet, though, the appointment of Amelio – a member of the board of directors – rather than a current executive might indicate the company intends to cast its net as widely as possible. Analysts will be sure to grill Amelio on this when Avnet reports its quarterly and fiscal year results on August 10. Amelio probably won’t provide any more information than the bland statement issued by William Schumann, chairman, board of directors at Avnet, when he announced Hamada’s layoff.
In addition to queries about the motive for the CEO-replacement, other questions on investors’ minds include: Will Amelio succeed where Hamada has failed; What changes should the industry expect; How long will he remain as interim-CEO; Has Avnet started searching for a replacement; Will it consider an internal candidate or is it looking for an outsider; How are customers, suppliers and shareholders reacting to this move and; How will this action structurally change Avnet and the entire market?
Avnet, one of the world’s biggest electronics component distributors, went in one day from having a respected CEO to dredging for a leader from its board of directors. Does this mean a CEO-transition program wasn’t in place? That’s quite unlikely. A company of Avnet’s size, prominence in the electronics supply chain and the high-tech sector in particular must have had a serious succession plan in place.
The conclusion is that the company chose to ignore its existing succession plan, rejecting whoever had been penciled down as Hamada’s likely replacement. Amelio’s appointment probably means Avnet may be considering an exhaustive external search for a permanent CEO. This would mean there are significant concerns about the entire direction of the company and hence the need for a leader with a completely different vision.
Presumably, therefore, leaders within the current executive board may be out of the running. This would include Gerry Fay (president, Avnet Electronics Marketing, Global); Patrick Zammit (president, Avnet Technology Solutions Group); Mike Buseman (chief global logistics and operations officer) and; Kevin Moriarty (CFO).
What about the other managers in Avnet’s global executive council? In picking Amelio, the board ignored experienced hands like Jeff Bawol (president, Avnet Technology Solutions, Americas); William Chu (president, Avnet Technology Solutions, Asia Pacific); Miguel Fernandez (president, Avnet Electronics Marketing, EMEA); Mike Hurst (senior VP, Avnet Services & Avnet Technology Solutions); Ed Smith (president, Avnet Electronics Marketing, Americas); Graeme Watt (president, Avnet Technology Solutions, EMEA) and Stephen Wong (president, Avnet Electronics Marketing, Asia and Japan).
This view might be wrong, of course. It could simply be that Avnet’s board of directors was forced to take this critical decision because it did not have enough time to consider a proper replacement for the departing CEO. Whatever the reason, the outcome was a messy bowl of porridge for a company that still accounts for as much as a quarter or more of distribution’s total available market.
The board of directors must move quickly to restore Avnet’s image as a well-run company with a smooth succession engine. The company has several options. It could tap one of its seasoned executives or even appoint Amelio as the substantive CEO. At only 58, Amelio can still deliver many years of useful service to the company and over time help groom a new corps of executives that may better understand the changing market conditions and replace him.
Although Amelio lacks direct distribution management experience, he has held senior positions at companies like Lenovo, Dell and IBM. Also, since his appointment to the board in 2014 Amelio must have taken enough crash courses on the distribution market to develop the required level of expertise to lead the company. The only strike against Amelio comes from his 5-year stint at president and CEO of CHC Group Ltd., an oil services company that filed for bankruptcy one year after he left the company in 2015.
If Avnet opts for someone other than Amelio the board shouldn’t limit itself to traditional distribution executives. Though Avnet needs a safe and steady pair of hands at the helms simply sticking with orthodoxy in the search for an executive will not work in today’s market. All segments of the manufacturing economy are becoming interlocked. Enterprises are ignoring traditional product and service boundaries and are diving into adjacent or even completely unrelated markets.
This means Avnet can expect the group of companies it competes against to broaden and expand beyond the traditional group of rivals. They now include Amazon and possibly even current partners in the OEM, contract manufacturing, logistics and supply chain services sectors. What Avnet needs now is a leader who similarly recognizes no business boundaries, comprehends the challenges of the digital economy and can chart a clear vision for the company in the emerging world.
Bolaji Ojo is editor-in-chief and publisher of EPSNews. The views expressed in this blog are those of the author alone who promises to base his sometimes biased, possibly ignorant, occasionally irrelevant but absolutely stimulating thoughts on the subjective interpretation of verifiable facts alone. Any comments should be sent to the author at email@example.com.