These six tips will ensure that your Board of Directors and Executive Team can manage the succession process effectively, and avoid unnecessary business risk due to ineffective processes.
If your organization is proactively thinking about CEO succession here are six things you need to know.
Board Engagement - The Board is responsible for managing the CEO succession process, and their ability to do this well is one measure of their ability to effectively provide governance. Before the Board can effectively lead this process they need to be in agreement on the strategic plan of the organization and the right culture. These two things will be critical for identifying what kind of CEO is needed in the future.
Current CEO’s Attitude – For succession to work, the current CEO needs the right attitude about the process. They need to see it as a way to build a lasting legacy, not a threat. Uncovering the CEO’s attitude early on, and being aware that some of their insecure feelings may be hidden from view can be important for success, and save pain later on.
Internal Candidates – Identifying internal candidates for the CEO role can be both positive and negative. On the one hand, it gives the organization adequate time to expose people to developmental assignments, yet it can also de-motivate executives who are not being considered for the top slot, but are valuable to the company. Having a fair process for identifying internal candidates and keeping the runner’s up informed about decisions and progress can help to avoid retention problems and politics.
External Searches – Many organizations like to conduct an external search regardless of whether there are internal candidates. This can be a good way to benchmark the quality of internal candidates versus the marketplace. Yet, if an external search is being done it is important to put a timeline on it, so that internal candidates don’t feel like they are getting the run around or perceived as second best.
There Will Always Be Competing Issues - Stanford University’s Rock Center for Corporate Governance recently conducted a survey of more than 140 CEO’s and Board Directors for North American public and private companies. It revealed there are critical lapses in CEO succession planning. They found that the reason for the lapse was largely due to a lack of focus and perceived urgency. Boards and CEO’s saw the value, but they were not investing the time in succession because of competing issues on the strategic agenda. Organizations that manage succession effectively manage the process with rigor and discipline and they review progress against development plans at least every six months, and they recognize that succession is happening within an evolving context.
Manage the CEO Transition – The biggest mistake that can be made with CEO succession is not providing adequate support during the transition after a new CEO is appointed. This puts the whole company on uneven footing. It is recommended that the Board proactively identify any transition risks, and they put a risk mitigation plan in place which is followed up on quarterly post hire.
These six tips will ensure that your Board of Directors and Executive Team can manage the succession process effectively, and avoid unnecessary business risk due to ineffective processes. Overall, pay attention to the broader market conditions and business context, manage the process with rigor, and do not make assumptions about the underlying relationship and political dynamics.