CEO succession planning is no different from any other type of role. In my recent blog post on business continuity and succession planning, we discussed the criticality of succession planning and management at all leadership levels. Few organizations are doing succession management right, even at the executive level. More than one-third (35%) of organizations surveyed in our ongoing research indicated that their organizations do not have a CEO succession plan in place. In interviews conducted last quarter with senior leaders, global executives told us that, on average, it takes more than three months to find a suitable replacement for an exiting CEO and at a mind-boggling cost – from several million dollars for small firms to tens of millions for large firms.
And the impact is more than sheer cost. Unplanned or less-than-well-planned CEO transitions put many organizations on the edge of collapse, if not out of business. When your CEO decides it’s time to move on, or in some cases asked to leave, it’s risky business at best to not have his successor ready to assume the reins.
When selecting a replacement, CEO succession planning is among the most important responsibilities of any organization’s Board of Directors. A Board that has been intentional about considering CEO succession in a regular and ongoing fashion will be best positioned to identify and select the best-suited candidates when the need arises. Leading practice CEO succession planning gives shareholders, leadership, and employees confidence in the organization’s long-term performance.
4 Tips for Improving CEO Succession Planning
- Embed a transparent culture. Those organizations best at CEO succession planning encourage the organization’s board and its senior leadership to have open and honest discussions about executive performance, executive succession selection criteria, and who’s in (and out) of the CEO succession pool. These activities might seem “business as usual” for more junior leader levels, yet most organizations fail to act transparently with executives on these items.
- Link CEO succession planning with executive coaching. High-performance organizations often rely on external coaching to correct senior leaders’ performance deficiencies. Third-party coaches offer objectivity and thoughtful insight, allowing executives to grow talents and work-around weaknesses in ways never before explored. Further, external executive coaches provide the board with unbiased perspective about executives’ progress on closing performance gaps and the implications on current and future organizational performance.
- Treat CEO succession as a continuous practice. Succession planning and management at any level, but particularly at the executive level, carries considerably more cost, risk, and resource requirements when conducted after a CEO’s departure. CEO succession is most effective when practiced proactively and in a planned, continuous manner through which the board is preparing for the CEO’s departure at any time, and in advance of the vacancy.
- Define and communicate roles and responsibilities. Though the board typically owns and has accountability for CEO succession, there are several other stakeholders who have responsibility in the process and should also be held accountable for results. These stakeholders include the board chairman, the outgoing CEO, other senior executives, and Talent/HR leaders. Involving these constituents reduces CEO succession risk.
High-performance CEO succession planning enables organizational agility and business continuity. It results in greater employee engagement and senior leadership retention. It allows for seamless CEO transitions under both planned and unforeseen senior leadership departures.
How prepared is your organization to effectively transition out your CEO when the time comes? How ready is your board to make quick and well-informed decisions if your CEO leaves in a hurry? What leading practices has your organization adopted to ensure your CEO succession planning process is more similar to walking the flatlands than climbing a steep and slippery slope?
Until next time …