The most critical choice the board makes is selecting the CEO. All boards have strategies that the current management team has developed. However, succession planning requires boards to look at those priorities in a new light and see around corners. How does the current CEO’s skillset align with the strategies? Where are there gaps? Which gaps will emerge as the company executes its plans? Does the board have a different view of the strategic direction? A different standpoint on strategy, in turn, may require a different kind of leader.
Succession planning offers a decisive inflection point. The current CEO’s skills to bring the business to where it is today might be different from the skills required to shape the company’s future. The succession planning process may clarify strategic priorities, timing and the cultural needs of the organization, shifting your succession candidate profile and timeline.
This succession planning process, juxtaposed with the strategy, is often where the rubber meets the road when determining where to go and how fast. The process illuminates how the company’s strategy can come to life as boards consider the candidates who could drive that strategy and how their unique leadership styles contribute to the equation.
Some boards may realize they need to move faster on their strategy. For instance, the board of an automotive company moving into the electric vehicle market recognized through its succession planning process that the company needed more urgency to accelerate the strategy and a leader willing to make bold bets on business and talent investments.
At a telecommunications company, the board found that the strategy was sound. Still, the company needed an inspirational leader who could bring energy to the organization to attract new talent and drive the culture change required to execute it. The board realized that the change needed was all about heart. The technical pieces would fall in place with the leader who could promote the vision and galvanize the people around it.
Other boards may see the opportunity to seize a moment (e.g., growth in new markets) through their normal succession planning process. For example, the board of a high-performing distribution company with a rising stock price realized they had a moment to transform the company from a competitive advantage standpoint through new technology and reconfigured operations. The succession planning process gave them a moment to think about the business differently and uncovered that this refined strategy would never happen with the current CEO. So, the board brought on a new CEO, who simplified the company’s distribution networks, focused on more profitable target areas, opened new channels and helped it take market share.
Below are steps boards can take to evaluate their business strategy through the lens of succession.
1. Review your strategy and extrapolate the skillsets and leadership qualities needed to deliver on it. Does the current leadership have the appropriate urgency to drive change? Does the organization need a higher degree of teamwork? More accountability? What balance of internal vs. external leadership will be required? Companies often overcomplicate this step and end up with a multi-factor model that’s hard to execute. Keep it simple. What three things must your company do to drive the strategy? What four to five skills, experiences and attributes do you need in a CEO to deliver on that strategy?
2. Envision and discuss potential changes—in the business environment or strategy—that would impact how to think about the strategy, its execution and the succession plan. Where will disruptions likely arise? How prepared is the organization to respond to these disruptions? Timing and sequencing matter in many situations. Transitioning from today’s leadership team to tomorrow’s may not occur in a single step. Think about key moves and the right time to make them.
3. Assess where your current CEO and internal successors stack up against that strategy. What skills already reside in current candidates? Can candidates learn critical skills they don’t already possess, and in what timeframe? Would external perspectives introduce new opportunities? How would the risk of bringing in external perspectives compare to continuing with only internal views? Succession needs to be considered at the team level and the individual. Getting the team mosaic right is as important as selecting the right CEO.
Succession planning allows boards to think more broadly about strategy and leadership qualities—surfacing opportunities to accelerate priorities, seize a moment for competitive advantage or make a wholesale strategic (e.g., transaction) and/or cultural shift. Additionally, as boards review the strengths and weaknesses of current leadership and succession candidates, they may unearth new opportunities to evolve the strategic direction, accelerate the timing for executing the current strategy and revitalize the culture.