Selection of a CEO is the midpoint of a process, not the end. The CEO is unique, particularly in the current atmosphere of complexity and volatility. These uncertainties require a pragmatic and aligned view on the business and leadership requirements of the CEO. While the responsibility for CEO selection indisputably lies with the board, has the focus on the board inadvertently obscured the important role of the CEO in the overall succession planning process?
The primacy of the board in CEO succession planning is well-established, and, indeed, the days when the CEO held sway over the process and essentially anointed his or her own successor are now long gone.
CEO succession planning importance
At the most basic level, the CEO’s role is straightforward, however, many CEOs have questions about how and when to be involved in the process: What activities and when to step back from the process.
CEO succession planning becomes a powerful catalyst for business transformation and growth. At its best executive leadership planning aligns current CEO with the desired company culture. Helps you optimize business performance, prevents any unhealthy competition for the position and builds internal confidence in the process,
What is a CEO succession plan?
A CEO succession plan is a strategy to determine who can replace a current CEO once they resign or retire (and when those future leaders will be ready for the role).
Having a solid plan in place is crucial for continuity. But it’s a very nuanced process. There are a lot of factors to consider, such as how to:
Define and align the board on a detailed profile of what traits they are actually looking for in their future leader
- Find suitable candidates and narrow down the selection
- Select the best choice for the company’s future
- Prepare chosen candidates for the role
- Ensure a smooth onboarding and monitoring progress
- Sustain momentum around the program into the long term
- Maintain good relationships with the current CEO and other stakeholders
- Avoid starting a “horse race” prematurely
- Ensure unsuccessful internal candidates are retained
Importance of leadership transition plan
Proper CEO succession planning is vital for boards looking to avoid risk and maximize CEO efficacy, business profitability, and values alignment.
On the other hand, CEO succession refers to a more measured, purposeful transition of power. It includes a default to the ongoing development of a number of viable candidates, a careful selection, and ongoing support and pastoral care throughout the process. The succession process will also include a rigorous ongoing refinement of the requirements of the next CEO, rather than just a presumed continuance of the current.
CEO succession planning tips
It is not about the length of time, more about premeditation and investment into development. CEO succession helps boards avoid risk and maximize CEO efficacy, business profitability, and values alignment. Lets look at the following CEO succession strategies and when and how they should be involved.
Plan succession well in advance before leaving
Directors know that CEO succession planning is their responsibility, but that doesn’t mean that they always find it easy to broach the topic. The CEO can serve as a catalyst for encouraging the board to begin thinking about succession earlier than they otherwise might and, certainly, long before a transition is anticipated.
In addition to emphasizing their commitment to management development and providing internal options for the board to consider on a long-term basis, CEOs also should encourage the board to plan for emergency succession needs, which can arise from a variety of circumstances.
Support talent development process
Boards want to know more about the senior talent coming up through the organization. The CEO is in the best position to make sure directors have the insight they need. The foundation for CEO succession planning is the strategic direction of the business, from which the profile and selection criteria for the future CEO can be developed.
Right time for CEO to step down
The CEO is a very important player in succession planning, both in an of-counsel role to the board or the committee responsible for the process. However, as the time for a transition nears and the process turns toward the board’s selection of finalist candidates and, potentially, an external search, the CEO’s participation diminishes.
CEO succession planning can be very challenging, personally and professionally, for sitting CEOs. They have to get used to the idea that the board is driving the process, not them. Even for CEOs who have actively groomed potential successors, they ultimately have to take a back seat in the process as the board moves toward selecting a successor.
Give successor candidates room to grow
Not surprisingly, many CEOs are not fully prepared emotionally for the final stages of succession. Giving potential successors the room to grow and develop the skills is one of the most important contributions the current CEO can make to the process. The CEO can help the board gain perspectives on internal candidates by encouraging directors to periodically share their points of view on the strengths and weaknesses of individual executives.
How a CEO leave is important
In the final phases of the succession process when the organization becomes increasingly distracted by the inevitable transition and speculation about possible candidates, it is not uncommon for the CEO to begin to feel like a lame duck. In this sometimes challenging period, CEOs should focus on their contributions to the business and the succession process, and feel good that an important part of their legacy is making sure that the board has a process that is going to lead to a great conclusion for the company.
The incumbent CEO will want to consider with the board what role he or she will play after the transition. If the CEO also serves as chair, he or she may be asked to remain on the board for a period of time as non-executive chair, or the expectation may be that he or she will leave both roles.
CEOs have a critical contribution to make in an effective CEO succession planning process. By encouraging the board to start planning early, overseeing a robust executive development program, stepping back at the appropriate time, the CEO will play a vital role in developing and sustaining a strong leadership team Keeping that legacy in mind may help CEOs manage the personal and professional challenges.
Engaging an experienced partner to accompany you through the process can set you up for success and ensure you not only find the best fit for now, but that your company is ready for the future.
