Perhaps no single decision has a more substantial impact on the future of a company than the recruitment of a new Chief Executive or Managing Director (herein CEO). Selecting a CEO is possibly the most significant decision a board can make. While certain situations may deem the appointment of an external successor to be more appropriate, recruiting an internal known quantity can often be the most solid platform from which to move a company forward. In either instance, appointing the individual, internal or external, most likely to shine brightest must be the priority. So how can a board go about recruiting a new CEO who is ready to deal with tomorrow’s challenges? In the following article we reveal some of the core facets commonly found to be at the heart of a successful succession planning process.
Managing the CEO succession process is a board’s ultimate responsibility. The board should therefore engage in a strategic alignment process and agree on future CEO benchmark profiles. It will be important that such profiles reflect the future strategic priorities set out in the business strategy. And in turn, these objectives should link to the person specification of the next CEO to be recruited. This process supports the development of a clear evaluation mechanism to consider internal as well as external candidates.
Candidates should be measured using independent methods of assessing CEO potential and the agreed upon CEO success profiles. The objective must be to form an unbiased, multi-dimensional view that includes quantitative assessment of candidate experience, competencies, skills and personality traits to inform succession thinking.
CEO succession should be at least a bi-annual topic on the board agenda. The process may commence even as early as the second board meeting following the commencement of a new CEO. As the process matures, the succession theme should filter through all levels of the company in order to identify next-generation CEO potentials at multiple levels. The board must stay close to the development practices of the company so it is assured that the future leadership talent requirements of the organization are met.
Companies should develop next-generation CEO successors through a blend of mentoring, coaching, education, rotations, secondments, key initiatives and specific developmental assignments. Once a board has gone beyond finding not just near ready CEO contenders, but generations of successors with the potential to serve as future CEOs one day, it must help that potential to prosper. Usually this will take the form of individually customized development programs aligned to both individuals’ requirements and what the organization will require in a future leader. When potential successors become CEO contenders, the attention should shift to ascertaining areas to increase growth and to bridging development gaps.
CEO Bench Strength
The board should review the internal bench strength of the C-suite on a regular basis. This should involve meaningful exposure to board members in formal as well as informal settings. Board members can therefore form their own informed impressions of CEO potential. Once individuals are considered to be future CEO material, the board will then need to peel back the layers and commence stress testing core competencies while also looking more closely at personality derailers. At this stage, the board may decide that it must recruit external leaders to increase the caliber of its bench.
Review Talent Frameworks
It is crucial to regularly review talent management and development frameworks against the longer-term business strategy. This will enable the organization to modify talent development activities in accordance with shifts in business strategy. Since there may be several possible futures to plan for, leadership profiles reflecting such differences should also be planned for.
Once a successor CEO has been selected, it is crucial that a comprehensive transition plan is developed to ensure that the incoming CEO gets off to a good start. At this time it may also be necessary for the board to agree the post transition role of the outgoing CEO. A sound transition process can take six to twelve months depending on the circumstances. Typically, it will consist of a number of important phases tailored to the circumstances of the transition required.
Developing an ecosystem that can identify and incubate future CEO talent demands a consistent commitment. It requires patience, but more importantly, it requires belief in the process for companies and their board members to go the journey. However, this is an investment that will pay high dividends through delivering leaders who can successfully navigate the nuances of tomorrow’s business landscape.
Not only does this type of approach mitigate the risk of a board being caught off-guard, it encourages a culture of personal development aligned to career growth and extends to entice external interest. It is also noteworthy that just about nothing is more closely aligned with safeguarding shareholder value than the assurance that the right leaders will be in place to deliver tomorrow’s success. For this reason, shareholder advocates view solid succession planning as a reflection of the quality of the board itself.
Founded in 1984, Agilium Worldwide LLC is an international executive search group of independent, owner-managed retained executive search firms, with members who are active in virtually every market. Agilium Worldwide ranks among the world’s top 40 executive search organizations.
Agilium Worldwide’s member firms offer personalized, specialized, client-oriented services. By eliminating the formally structured, pre-programmed approach they can remain proactive and secure prompt, skilled and expert service to their clients, to help them find the “Perfect Fit” – the right person for the right position, at the right time, at the right location.
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