Of all the significant times in a company's history, the change from one Chief Executive Officer to another is one of them. Ensuring that there is a peaceful change in leadership is vital to maintaining the confidence of the company's stakeholders (i.e. investors, business partners, employees and customers). This stability provides a solid foundation for the new CEO, so he/she settles in quickly and can get to work moving the company forward.
For this very reason, it is paramount to have a strategically designed succession plan in place. Also, because CEO vacancies can sometimes be unplanned or unexpected, it is vital for the Board of Directors (BOD) to have this document crafted well in advance so that the company isn't caught unawares.
Asides from mitigating the risk associated with the element of surprise, the goal of a comprehensive succession plan is as follows:
- It offers a clear outline that ensures senior management development and the alignment of C-suite executives on the overall needs and objectives of the firm
- It fortifies the relationship and flow of information between the board of directors and other C-suite level executives (as they review potential candidates for the CEO job role).
With that said, let's explore some tips that would help companies maximise the effectiveness of a CEO succession plan:
1. Active participation of the Board of Directors
In addition to green-lighting the strategy of an organisation and providing thoughtful and strategic oversight, selecting a CEO is another crucial role of the BOD.
It is important that they take full responsibility and own the succession planning process. Such involvement should be proactive in nature and occur at least once a year. This way they can evaluate the current CEO's performance, and if the need be, plan for replacement sooner rather than later.
2. Have a succession time-frame in mind
They who fail to plan, plan to fail. Following this truism, it is expedient that the BOD have an idea of when a succession should go into effect; they don't always have to wait till a CEO suddenly resigns.
To do this, they need to engage the current CEO actively, to understand what his/her long term goals are: when do they expect to retire? Two years? Four years? Six years down the line? Such information would allow the BOD to plan efficiently.
3. Always have an emergency/temporary plan
As alluded to earlier, CEO changes sometimes happen unexpectedly and it is important for the BOD to have a list of potential internal candidates ready at a moment's notice.
They should ensure that this list has been vetted by the current CEO - who can give perspective on things like their cultural fit, emotional intelligence, experiences, etc. This way when the unexpected happens, the BOD have someone they can call on to temporarily lead the company.
4. Invest in management development initiatives
Companies need to ensure that there is a plan/programme put in place that invests in the development of managerial talent within in the organisation. Again, this is a future proofing strategy to gives the BOD a line of sight into spotting new talent for key positions.
5. Clearly articulate what key CEO attributes they need
The BOD need to ensure that they understand the needs of their business thoroughly, in so doing, they would be able to identify the key CEO attributes that are in-sync with the company's long-term goals.
Written by Sandra McLeod @Locomote