Marriott’s Executive Chairman on Choosing the First Nonfamily CEO

The Idea:For decades Bill Marriott expected that his son would become the third generation to lead the global hotel company. But gradually he realized that he had to make a different choice. When I became the head of Marriott, in 1964, many people were surprised. I was only 32 and had worked at the company full-time for just eight years. My father, who’d started the business in 1927 with a root beer stand in Washington, DC, before moving into restaurants and then hotels, had an experienced executive vice president working for him who many thought would succeed him. He was 20 years older than I was, and when it came to finance, he was brilliant. But he was a micromanager. He spent a lot of time marking up contracts, redoing the work of the company’s lawyers. He didn’t have good people skills and didn’t understand the operation of the business. We had a senior director on our board who had been the chairman of three companies, and my father really relied on him. This director came to think that the executive VP was the wrong choice, and he urged my father to make me CEO. After all, I’d literally learned the business visiting restaurants with my father as a young boy, and I’d worked part-time in different jobs at the company since I was 14. My father was worried that I was too young, but Marriott was still small at the time—we had about $85 million in annual revenue—and I think he figured he’d be around long enough to bail me out if I got into trouble. During my decades as president and CEO, the company grew immensely: At the end of 2012 we had 3,800 properties in 73 countries and territories, and our revenue last year was $11.8 billion. While I was leading the company, I often had several experienced nonfamily executives working with me. If something had happened to me suddenly, those deputies would have been qualified to step in. Some of them were probably viewed as potential successors, but I was in no hurry to give up the job. In 1989, when I was 57, I suffered a heart attack, and I began to think a little more seriously about succession. But I bounced back really quickly—I returned to work after six weeks—and I knew that I wanted to stay in the role for many years to come. I have four children, and I had always hoped that one of them would succeed me as CEO, just as I succeeded my father. This is an 85-year-old company that until 2012 had had only two CEOs, and our family’s involvement provides a great sense of continuity. Furthermore, our name is on the door, and that signals a level of personal accountability. I worry that too many businesses today have become depersonalized. We all shop at Target, but who is Mr. Target? Especially in the personal services business, in which the brand is guaranteeing a certain kind of experience, I believe that having someone whose name is synonymous with the brand, who stands behind it and cares about you, is a real advantage. Not all my children were in the running to succeed me. My daughter, Debbie, is the mother of five, and although she worked at Marriott as a teenager, she stayed home with her kids for three decades. Today she works as Marriott’s head of government relations, but she’s been in that role only a few years. My oldest son, Stephen, has a debilitating disease—he’s blind and mostly deaf. My youngest child, David, is just 39, and a phenomenal executive. He currently oversees all our hotels in the eastern United States, from Maine to New Orleans. He has tremendous potential, but at the moment, he is still learning. That leaves my son John, who is 52. Like all family members who have joined the company (including me), John started at the bottom, as a cook in the kitchen. He went on to work in nearly every part of the business over the next 30 years. He spent most of his adult life preparing to succeed me as CEO. He devoted his heart and soul to learning the business. If I’d followed my own heart, I probably would have chosen John as my successor. My son John devoted his heart and soul to learning the business. If I’d followed my own heart, I probably would have chosen him as my successor. But as time went on, I realized that it wasn’t the right fit—not for John, and not for Marriott. As personally disappointing as that was to both of us, I had to make the right decision for the company. From Litigator to Manager I first met Arne Sorenson, who eventually succeeded me, in 1993. Marriott was involved in a big lawsuit, and Arne was one of the lawyers who represented us. He was 35. He was obviously very smart and articulate. My first real experience with him came on the day he prepared me for a deposition. The case involved a lot of incredibly complicated financial details, and Arne helped me first to understand and then to explain them so that they sounded simple. I was really impressed that he could explain something so complex in a way that anyone could understand. After the case wrapped up, Arne and I kept in touch. About three years later he came to work for us. But he wanted to try something new, not law. We brought him in to head our mergers and acquisitions team. I didn’t have much direct contact with him in that job, but I did get to know him a bit better. In 1998 our chief financial officer left, and although Arne wasn’t an obvious choice for that position, we moved him into it. In that job he presented to the board at every meeting. The directors became very supportive of him, and he performed well. Beyond his performance, the most important thing Arne did during those years was develop his people skills. At Marriott our culture is focused on people, because treating one another well is essential to creating an atmosphere in which everyone treats guests well, and that’s the most fundamental element of our business. Litigation does not have as a primary goal making people feel good. When I think of a litigator, I don’t see someone who’s putting his arm around people, coaching and counseling and loving them, supporting and promoting them. So that was a concern. But even though he’d spent years filing lawsuits and conducting cross-examinations, Arne has a broader background, as I came to learn. His father was a Lutheran missionary, and Arne was born in Japan while his parents were doing missionary work. He grew up very active in his church. I believe there were people skills in his DNA, even if they weren’t immediately apparent. During his time at Marriott, I watched him become very patient with people. He’s often thoughtful, and he’s a good listener. He combines that with a firm and commanding leadership style. I recognized that Arne had great potential, but he didn’t have any experience in the operations side of the hotel business. So in 2003, with the support of the board, we made him president of our European operations, which at the time consisted of more than 150 hotels. He remained based at our U.S. headquarters, in Bethesda, Maryland, but he spent one week every month visiting hotels in Europe, and he really began to understand the business from the bottom up. In 2009 Arne was promoted to president and chief operating officer. The job gave him broader exposure to employees away from our headquarters—to general managers and frontline workers. I checked in with some of those people from time to time, and it was obvious that Arne had quickly become well respected and well liked by everyone in the field. A “Fairly Seamless” Process Arne Sorenson became the CEO of Marriott International in March 2012. HBR asked him to reflect back on the succession process. Here are some edited excerpts: HBR: Do you remember the first time you thought about yourself as a potential CEO? Sorenson: I’d never even contemplated being chief financial officer, let alone having a job higher than that. Remember that I’m a reformed lawyer, so I came here without a deep knowledge of the lodging industry and without a clear career path. Bill Marriott admits that he worried about your people skills. Did you receive guidance on how to develop in that area? I don’t recall a conversation where anyone said “Arne, you have lousy people skills.” But I do recall a series of conversations I had with Bill and with other leaders about how important Marriott’s culture is to its success, and how this was something I needed to be aware of and supportive of. The culture here is much different from a law firm, where everyone has the same educational background and a lot in common. Here people have dramatically different backgrounds and skills, and I needed to understand that kind of culture. Did you ever think you’d face a ceiling at Marriott because it’s a family-run company? No. I don’t mean to sound immodest, but over the years I had inquiries from most of our global competitors about either their top job or a very senior job, and I never contemplated taking any of them. There are a few reasons. First is my relationship with Bill Marriott—he’s been a great boss and a mentor. Second, I had good momentum throughout my career here, so I was never dissatisfied. Third, I didn’t like the notion of taking my expertise and going to work for a competitor. That would be disloyal. That’s not the way I’m built. Tell me about your relationship with John Marriott. John had worked here for 20 years before I arrived, and by that time he had a big job. He obviously had deep insights into the hotel business, which he continues to offer as vice chairman of our board. I don’t recall thinking of us as rivals until a Wall Street Journal story appeared that described us that way. But I never felt that with John. We had a good relationship, and we still do. Do you agree with Bill Marriott, who says there’s a real benefit to having a family member in the CEO job in a family company? I do. Our associates view their connection with Marriott in a way that’s deeper than if the family weren’t involved. The family helps engender a kind of loyalty. Customers, too, appreciate companies that have a human face, and that face is easier to see if it’s the face of a family member whose name is over the door. Have you looked at how other companies have transitioned from family CEOs to nonfamily CEOs? I haven’t. I don’t necessarily believe that the experiences of other family companies are relevant here. And to be clear, I still consider Marriott to be a family-led firm. The company still has deep family involvement, and hopefully will have continuing family involvement, so this isn’t a dramatic change. The process evolved naturally and over a long time, and it has actually felt fairly seamless. During those years, Arne was an attractive executive for other companies that needed new leadership. I know that some of our lodging competitors tried to hire him for very senior roles. If you believe the conventional wisdom about family businesses—that talented nonfamily executives won’t stick around, because they feel they have little chance of being promoted to the most senior jobs, which are reserved for family members—you’d think he would have been pretty excited about those opportunities. But in my experience, fears about retention are overblown: If you treat people well, they’ll want to stay. That’s especially true at Marriott, where we fill most jobs from inside, which gives people an awareness of the potential to move up. As far as I know, Arne didn’t seriously consider leaving. He really liked working in the Marriott culture, and he wanted to stay near Washington, where he’d lived since college and where he and his wife were raising their family. It Wasn’t a Horse Race As Arne was learning the business, my son John continued to move up through the company. In all, John spent three decades at Marriott. He ran restaurants, ran the food and beverage operations of hotels, and was the general manager of the Crystal City Marriott in Virginia. He held important jobs in finance and brand management. He oversaw all our sales efforts as an executive vice president, and then he became president of North American Lodging, which gave him total responsibility for our largest business. In 2002 he joined our board. John performed very well in all those roles. He worked extremely hard, and he knew the business from A to Z. I was determined to mentor him and to give him all the tools he would need to succeed. But as he moved from running hotels to working at headquarters, he seemed less happy. He’d enjoyed being in the field; now the pressure built on him to be in the office every day, attending long back-to-back meetings and focusing on administrative work. Every company develops some level of bureaucracy as it grows, and for a senior executive, managing that bureaucracy is an important part of the job. As I watched John adapt to this role, I could see that he wasn’t having much fun. I began to think about Arne as a potential CEO. But that didn’t make it a horse race between him and John. I don’t believe in horse-race succession—it’s disruptive, and the person who loses inevitably ends up leaving the company. I didn’t want that. Arne and John didn’t act like rivals, and I’m sure that if John had succeeded me, Arne would have given him a chance and stayed on in a senior role. And although succession is ultimately the board’s decision, I believe that if I’d pushed, the directors would have been willing to give John a chance too. But the more I looked at the situation, the more I realized that John is a natural-born entrepreneur. He doesn’t have the temperament to run a company the size of Marriott today, with 3,800 properties and 18 brands. He doesn’t want to be tied to his desk. Over time we both came to the conclusion that, wonderful as it would have been for me to hand Marriott off to my son, he wasn’t the right choice. So in 2005 John became vice chairman of the board and left his executive position at the company. Since then he has founded a medical testing company, which is going to be very successful, and he also serves as the CEO of JWM Family Enterprises, a family trust that he founded, which owns and operates 16 hotels. Although I miss working with him on a daily basis, in some ways our relationship is better now that we’ve gotten the question of succession out of the way. By 2011 I was approaching 80. I don’t believe that anyone who’s 80 should be running anything. Many companies have mandatory retirement at 65, and a lot of CEOs today are retiring in their fifties. Arne had already begun to handle some of the day-to-day jobs typically done by a CEO, and I decided it was time to make the transition official. I didn’t find it difficult. Although the announcement, in December of 2011, was treated as big news because Marriotts had been in the top job for nearly 85 years, it wasn’t much of a surprise to people who knew the company. Arne was clearly the right choice, and it was time. Confident and excited as I am to have Arne as our CEO, I continue to believe in the advantages of having a Marriott family member in that job. And if a family company chooses its first nonfamily CEO, that doesn’t necessarily mean no family member will serve as its top executive in the future. I look at Ford Motor Company, which family members ran from its founding until 1979, when a series of nonfamily CEOs took over. Then, in the late 1990s, Bill Ford came on as chairman and served as CEO from 2001 to 2006, when he brought in Alan Mulally as the chief executive. So when I look to the future, I think about the possibility that my youngest son, David, will someday be the CEO. He knows the business, and people love working for him. Arne has a lot of respect for David, and David has a lot of respect for Arne. But Arne is only 54, so it’s premature to think too deeply about who might succeed him. It’s been more than a year since Arne officially took over, and I’m quite happy with how the process has turned out. I care too much about Marriott, which has been my life’s work, to make a risky choice. And John is far happier in what he’s doing now than he ever could have been running a $12 billion company. My wife and I had dinner with John and his wife recently, and I mentioned that I’d spent the day in a 10-hour management meeting. John just shook his head and laughed. That isn’t the life for him.

Marriott’s Executive Chairman on Choosing the First Nonfamily CEO

Summary.

Partner Center