CEO Succession Planning: It’s Not Only About Tomorrow
CEO succession planning is one of a board’s core responsibilities; yet it is often postponed, only to be taken up when transition (driven by retirement...
By Andrew P. Chastain and Susan M. Snyder
CEO succession planning is one of a board’s core responsibilities; yet it is often postponed, only to be taken up when transition (driven by retirement or performance) is required. We argue that CEO succession planning is a board imperative. It is a critical strategic activity that boards should prioritize not only because it avoids major disruption when transition occurs, but also because it enables strategic alignment and development now. Given the disruption in our world today, any activity that fosters current and future performance is an absolute necessity.
[This article is based on “CEO Succession Planning: A Strategic Journey”, published The Governance Institute’s BoardRoom Press. Read the full article in PDF format here.]
To assist in launching or refining your organization’s CEO succession planning efforts, we offer the following recommendations:
- Start now. Don’t wait until your CEO’s tenure is nearing its end to get the succession planning process underway or to update a current plan. In fact, the hiring of a new CEO can be an ideal time to begin preparations for the next one. CEO succession involves multiple components – including clarifying the important competencies and experiences required for the future, identifying the individuals who may one day ascend to the top job, devising development plans for these leaders, and monitoring their progress – which take time and attention over the course of years.
- Leverage organizational strategy to inform CEO succession planning. Talent – especially in the CEO role – enables strategy; strategy defines critical roles and talent requirements. As you review and align on strategic context and imperatives, extend the work to define what you need from your current CEO and what you’ll likely need in your next one. Your next chief executive will rarely be “in the same mold” as the previous one simply because your strategic landscape will have changed. Our research and experience confirms the role of the healthcare CEO has changed in recent years to match the market and evolved strategic priorities. You can’t just dust off the previous requirements. They are no longer relevant.
- Proactively identify – and prepare – potential successors. The sooner you are clear on the characteristics and experiences needed in the next CEO, the better able you are to develop internal talent. If you begin the process early, you can thoughtfully evaluate your C-suite and their successors, and identify strengths and gaps you may not realize. Most importantly, you can implement development (through formal programs or coaching, career moves to expand breadth, and/or collaborative action learning) that not only prepares executive talent for larger roles but improves performance today.
- Anticipate the unpredictable. In an ideal situation, CEO succession planning provides a blueprint for a smooth baton exchange from one leader to the next. We know all too well, however, that such a scenario is far from given and that a CEO may abruptly exit due to illness, sudden dismissal, or the pursuit of another opportunity. A sound CEO succession plan accounts for emergencies and contingencies, minimizing the potential disruption to the organization and providing guidance for selecting a replacement CEO.
- Orchestrate the transition. Good succession planning goes beyond identifying and developing a successor to stipulating how the next CEO will be onboarded and supported in their critical first months on the job. Many new CEOs fail – or fail to meet expectations – for a lack of comprehensive transition support. Provide the new leader with a proper and thorough orientation. Ensure your board members and key executives make themselves available to the CEO for advice, questioning, or relationship-building. Provide resources such as coaching and development to shore up the CEO’s areas of need. The hiring of a CEO is not the time to relax but rather to ramp up activities to ensure a productive early tenure and set the stage for long-term success.
- Review, revise, repeat. Revisiting the CEO succession plan should be at least an annual undertaking for your board. Before looking at the strategic road ahead, look back at how successful past CEO succession efforts have been. What worked in developing your internal CEO candidates? How supportive were you during your current CEO’s window of transition? What missteps did you make that you can learn from?
We can’t overstate the importance of CEO succession planning to good governance. Keep it on your agenda and keep the succession plan updated, including tracking the development of potential successors over time. Your institution will benefit not only when the inevitable transition comes but also in the here and now.