As most corporate directors know, CEOs come and go. For that reason, boards must be adequately prepared to facilitate smooth transitions between leaders regardless of whether the current CEO is exiting due to a new opportunity, retirement, or because they’ve been asked to leave.
Although it can be a stressful time for any company, CEO succession can be a highly strategized and monitored evolution. Here are some of our CEO succession “best practice” suggestions:
- Craft a written succession plan.
This may seem like a no brainer, but it must be said. This policy can and should include emergency plans in case of sudden death or a completely unplanned vacancy.
Russell Reynolds Associates suggests, “The entire board, together with a senior human resources executive, should review the succession plan twice a year, including an examination of the relevant bylaws and succession procedures and a review of the baseline capabilities requirements for the next CEO.”
- Set and communicate clear time frames.
Nothing throws a company into turmoil quite like a period without clear leadership. Employees start to get antsy and worry whether the transition will have an adverse effect on their position. To avoid this unsettling time as much as possible, the board should establish clear succession time frames. As Ivey Business Journal shares, “CEO succession planning must begin immediately following the installment of a new CEO.
The planning must be a constant, ongoing process that is managed as closely and attentively as any of the company’s critical business issues.”
- Create a company culture that builds a talent pipeline.
Ask yourself, “Who’s on deck?” Although every succession is different, some of the simplest transitions occur when a new leader has been cultivated from within your organization. By investing in a leadership development program, your board will have more options when it comes to selecting the right CEO for the future.
Leadership consulting firm Spencer Stuart explains, “An internal succession candidate will rarely will be entirely ready, but the board will be much more comfortable betting on the individual’s continued progress if directors have seen growth and a sense of his or her trajectory over a longer development period.”
- Recognize the importance of the process.
Ultimately, selection and a smooth CEO succession planning are the most important decisions made in the boardroom. Board members must uphold their fiduciary duties to shareholders by selecting a leader who can bring value to the organization, so it’s vital that they consistently invest in the process of CEO succession.
- Help the new CEO get off to a good start.
No company can set it and forget it. Once a new CEO has been selected, the board still has work to do. It’s their duty to ensure that the new leader understands his or her responsibilities as well as their working relationship with the board.
Corporate directors should step in to help the new CEO familiarize himself or herself with the company while also measuring their performance—especially if they’re stepping into the role from an outside organization. Ivey Business Journal states, “Once the successor is in place, it is tempting for the board to breathe a sigh of relief and feel that the transition process is complete.
However, the executive integration process is much more complex than most directors realize. While the first 100 days are critical, current research shows that successful integration actually takes between 12 and 18 months. The transition should not be considered complete until this milestone has been reached.”