Ted Bililies, PhD, Chief Talent Officer and Managing Director, AlixPartners, will be speaking at The Boardroom Summit, April 23-25, 2018 in New York City. The event will provide corporate board members with an unparalleled opportunity to share ideas and exchange solutions to today’s greatest board leadership and governance challenges. Click here to register.
Q: Leadership transitions are one of the most significant events in a company’s life. What are the key points for the board to get CEO succession planning right?
A: By definition, a change in CEO leadership is a potentially destabilizing event for an organization. To mitigate the impact of these events, companies are increasingly taking much needed steps toward formalizing succession planning processes, although some are realizing they have a long way to go.
It is critical that the CEO succession planning process be (1) structured, (2) clear about the future strategic direction of the business, and (3) explicit regarding the specific leadership traits and competencies needed for future leaders.
Q: Can you break that down into some best practices?
A: AlixPartners has a distinct and specific perspective on succession planning:
Succession planning is a direct result of an organization’s commitment to ongoing, effective leadership development. If your organization is not developing its leaders at multiple levels on an ongoing basis, especially its senior leaders, then the quality and quantity of the candidates available–and their cultural assimilation and potential as culture carriers–will be diminished;
Succession planning ensures that top leaders possess both business and people skills. Besides technical proficiency, the next CEO must understand, carry and, where necessary, reshape the unique culture of your organization;
Succession planning is strengthened when integrated with scenario-based strategic planning. While circumstances change, organizations can identify and prepare for various opportunity and risk scenarios, and these have different implications for the succession planning process. Boards should therefore specify, in advance, the leadership skills and selection criteria required to lead across these unique scenarios;
Succession planning requires rigorous assessment against objective criteria. To determine the skills and competencies required for future CEO success, boards must specify the measurable outcomes the CEO will be expected to deliver. Candidates for the top role should be evaluated rigorously against these criteria. Objective candidate evaluation takes into account multiple perspectives on the candidates, including past accomplishments and formative experiences, as well as performance on business reasoning tests, personality and culture measures; feedback from key people inside and outside of the organization; and a close read of each candidate’s motivation to take on the job. Evaluating candidates against clear criteria to determine how they will fare in the envisioned future of the business helps remove personal biases and manage key risks in the succession planning process;
Succession planning utilizes a highly tailored approach to develop the future leader, which is regularly reviewed. Even the most seasoned candidates, including those with previous experience as a CEO, will face new challenges. There will be gaps in capability, even in the most ideal candidates. Objective leadership assessment will help identify those gaps and inform a structured development plan;
Succession planning involves a strong assimilation and integration plan, even if the candidate is an organization veteran. In addition to the unknown future challenges they will confront, new CEOs all face some predictable challenges, and many tend to make similar, and predictable, mistakes. The new CEO should participate in ample coaching and support to avoid these predictable mistakes and reduce time on the learning curve. A data-informed plan to support the new leader is good common sense.
Q: How can an outside investor gain comfort that the board has a strong CEO succession plan?
A: Look for the above six elements in an organization’s approach to talent management. This is an evergreen process that is dynamic and is always being refreshed. Succession planning is not one person’s name in an envelope. It is an active and deliberate process that focuses on the very best present and future talent in an organization—continually.