3 Steps That Can Help Boards Always Be Prepared for CEO Succession

Recent media headlines are shining a spotlight on what seems to be a growing trend over the past few months—that of top leaders suddenly departing their companies. In some cases, we’ve seen a graceful stepping down; in others, sparks have flown between the board of directors and the CEO. Whether the stated reasoning was declining profits, inability to innovate, lack of product strategy or poorly focused investments, each case has a lesson to teach fellow CEOs and company boards about working together, managing expectations and planning succession.

The truth is that cases such as those at Starwood Hotels & Resorts, Sanofi Aventis, SeaWorld, American Apparel and Mattel aren’t as unique as they may appear in headlines. Last year, more than 1,300 CEOs “vacated their posts,” MainStreet.com reported in January. And experience has taught us that such cases are not rare. In fact, they are far more common than they should be.

With a bit of forward thinking on the part of boards, similar situations can be avoided—or at least significantly mitigated. Boards should always be thinking about structuring their relationship with the CEO around ways of working that are clear and comprehensive— leaving no room for surprises and addressing succession planning and performance management on an ongoing basis.

“Make sure top management is aligned under one umbrella and maintaining a “business as usual” approach.”

When surprises do occur—as Murphy’s Law guarantees they’re bound to, regardless of forethought—there are a few key steps boards can take to ensure the process of succession is managed as seamlessly as possible.

1. Immediately, make sure the top management team is aligned and poised to act as the “office of the CEO”—all under one umbrella and maintaining a “business as usual” approach. The ease with which board members can step in on an interim basis to fill the leadership role will depend heavily on the strength of relationships they’ve forged with other senior leaders over time, through open and frequent dialogue.

2. Next, the board should very deliberately look internally for the next CEO, before turning outward. In a moment of crisis, Boards are nearly twice as likely to look for a new CEO externally as they are to pull from internal leadership (27% vs. 15%). Yet looking internally for new leadership from employees who already share the firm’s culture and outlook helps to build internal confidence and reinforces continuity. Enabling a successful internal search typically means boards need to plan ahead and ensure a leadership development program is in place that makes internal hires feasible.

3. Finally, once a new CEO is in place, the board must establish a way of working that incorporates routine performance and priority checkups with the new leader. The board should regularly ensure that the strategy is on track, milestones are met, the organization is positioned for success and the right investment decisions are being made. This feedback loop requires strong governance and open two-way channels of communication between the board and the CEO.

Gone are the days when CEOs and boards could operate at arm’s length from each other. Modern boards and CEOs must work in a more integrated fashion if they are to effectively head off crises and mitigate risk. If it does come down to the board asking the CEO to leave, that should be the cue for the board to turn the spotlight on itself and ask why—and how—they can avoid the situation in the future.

Christine RiversCory MorrowChristine is a Vice President and works with boards and senior leaders to execute their strategies through the development of strong leaders. She is based in Hay Group’s Boston office and can be reached at [email protected].

Cory is a Senior Principal and executive compensation consultant that specializes in the design and delivery of cash and equity-based compensation programs for executives, non- employee directors, and employees.  Cory is based in Dallas and can be reached at [email protected].


MORE LIKE THIS

  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events

    Roundtable

    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)

     

    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.