Managing the successful transition of a Chief Executive Officer is one of the most important responsibilities of a Board of Directors. Our clients engage us to ensure the transition is done with best practices tailored to match the culture of the organization, the particular succession situation, and the needs of the CEO.
We strongly recommend that a transition plan be developed proactively so that shareholders experience an orderly change in leadership. However, we have had many clients who needed to make a CEO change under less than favorable conditions. Some refer to this as an emergency CEO transition. We are equally prepared and experienced to help a Board through such a challenging transition and have developed an approach that can be approved in advance and deployed immediately.
Of course a CEO transition is not complete until the new CEO is identified, secured and in place. Clients use us to help them define the characteristics and competencies for their new CEO in partnership with HR and an external search firm. Our role also includes interviewing internal and external candidates, narrowing down to a short list, and helping to choose the new CEO. Clients appreciate our comprehensive, customized executive assessment work to help determine which candidates possess the leadership and professional experience required for success and who will best fit the culture. We’ve also serve as an advisor/coach to the Board and the new CEO to ensure that the onboarding process and the first 18 months meet desired expectations.
Each CEO transition is unique. We welcome the opportunity to discuss the best plan for your organization so that when the time comes, you are prepared.
In the past 10 years we’ve seen boards become less honorific, more engaged – and held more accountable. CEO succession was historically driven by the CEO and “rubber stamped” by the board. There has been recent investor backlash on succession issues directed at the board – not at CEO. There has also been a dramatic shift in the last 10 years towards a preference for internal vs. external CEO candidates which requires boards to:
Start 3-5 years before an anticipated CEO transition event (retirement for example) to allow time for meaningful development of top candidates
• Get full board alignment on the selection criteria for the future CEO
• Gather data on internal candidates through multiple lenses, including formal executive assessments. This data will provide insights to the board and be a compliment to the board’s ultimate judgment
Investors are increasingly concerned about succession risks.
Because of the impact succession risks can have on a company—and its share value—this is an area of growing concern for investors who are increasingly:
• Considering succession risk factors when analyzing the overall risk inherent in any investment in an organization
• Including succession risk factors in analyst opinions and raising succession issues in analyst meetings, such as having a 62 year-old CEO
• Requesting information relative to succession planning processes in their dialogues with company management, particularly where this is an obvious risk area for the company, such as: Founder or other “iconic leader”, weak bench strength and no emergency plan for replacing the CEO
Major components of the CEO succession plan include: