Corporate Boards are now being held increasingly responsible for their succession plans and there is a growing expectation that succession plans will be transparent. Shareholders are asking for greater clarity on the process, communication plan, potential candidates and selection methods, not to mention effectiveness. If you are a Board member with the responsibility of building a sound succession plan, here are five major issues for you to consider. Establish a succession planning committee
The first step is to identify a committee that is responsible for succession planning. This typically includes one or two board members and an outside consultant to design and manage the process. A common activity at this stage is a readiness diagnosis or a risk assessment to understand the potential issues that could negatively impact implementation and the business risks associated with director turnover.
Identify multiple candidates
Sophisticated boards will not be satisfied with the identification of just one candidate, and risk sensitive boards should not be either. Ideally, there are three qualified candidates to chose from and these are identified through personal networks and executive search practices which involve proactively identifying potential candidates in the market place and approaching them to gauge their interest.
Clarify Hiring Criteria
An often missed step, the Board needs to clarify the hiring criteria and identify the skill sets that are needed for future successors. This includes considering the cultural and relationship dynamics on the Board, and the mix of skills required to optimize board functioning. An ideal Board typically includes someone with finance, business, and legal experience, and more and more, we are seeing seasoned human resources professionals on boards given the pending labour challenges and how critical human capital is to executing on the business strategy.
One of the tricky parts of implementing a succession plan is establishing an internal communications message. What makes the messaging challenging is that the Board needs to communicate a fair and credible decision making process, not a final decision. In addition, protocol must be established for how to have confidential conversations with candidates. These conversations have the potential to backfire, if the perception of “winners” and “losers” is created or if candidates are not selected and feel that that the process was subjective and more about “who you know” than “what you know.”