As a seasoned executive search professional, I can’t count the times I’ve been called on to urgently replace a departing CEO, but the board had no contingency for filling the gap. You can imagine the mess.
It’s sometimes easy to forget CEOs are employees— and human. They can be tempted away by competitors. They get burned out. Their priorities change. They may become ill. And when they resign, the board must scramble for a successor.
Having a solid succession plan for your top executives is a key responsibility for the board of directors of an organization. But many companies have no blueprint for replacing their current leader.
That’s a major risk for any company—and they know it. Succession challenges and the inability to attract and retain the talent needed to achieve operational targets—not just now, but a decade from now—is the No. 1 worry of business leaders around the globe, according to research from global consulting firm Protiviti (a Robert Half subsidiary) and NC State University’s ERM Initiative.
Why the resistance? From the CEOs’ perspective, it’s hard to imagine giving up power or being forced out by circumstances. On the board side, it’s a difficult proposition to tell a leader you’re planning for their end. And while most executives and board members understand the value of succession planning, it often takes a back seat to more immediate issues.
Still, it’s the board’s responsibility to put a leadership succession plan in place. In managing our personal lives, we buy insurance. We make a plan for “what if,” and it should be no different for company boards.
To ensure your organization can survive a CEO departure, here are some tips as you prepare your leadership bench.
Don’t put it off
If your current CEO departs unexpectedly without a clear succession plan, the board will be left to handle a leadership crisis that could bring down the company’s reputation, performance and shareholder value.
Develop your talent pipeline starting today! It takes time to identify potential successors and work with them so they will be mostly ready to step up before they need to.
Once potential internal or external candidates have been identified, the board should work with the HR department—engaging the CHRO and the learning and leadership development team—to build a plan for getting them ready for leadership when the time comes.
Succession should be a regular topic of boardroom conversations, and the plan should be reviewed by the board and CEO at least once a year. This includes monitoring the progress of potential candidates and making necessary adjustments to the talent pipeline.
Select a CEO fit for the future
Anticipate economic and industry changes: Someone with a finance background can manage budget tightening; an entrepreneurial choice can leverage times of growth; an innovator may be right when your industry is threatened with existential disruption. The succession strategy will be strongly influenced by the organization’s understanding of its own future.
In any event, be prepared to support your candidate with executive coaching to identify and address any shortfalls. I tell clients it’s not a weakness to coach your executives; it’s another tool, like a speechwriter, that enhances your leader’s status and performance.
Don’t go it alone
When seeking candidates for the top job—or to fill an empty seat on the board, using your personal and professional networks may only deliver people you know and not the talent you may need.
An independent search firm or a management consulting team can provide the objectivity you need, pinpointing your requirements, working through issues of compensation and contracts and introducing you to candidates who may be a closer fit to your business conditions.
One surprising benefit of succession planning— it’s a positive contributor to company culture. When employees see there is a clear path for advancement within the company—all the way to the C-Suite—many will be inspired to stay and contribute to the company’s growth.