Ford Motor Company, for example, has been grooming Alan Mulally’s successor, Mark Fields, for more than a year (Mulally will step down as CEO of the firm before year-end). Fields, COO, runs a weekly review meeting, and holds a regular Wednesday morning meeting with key executives, according to The Wall Street Journal.
Once a decision has been made, researchers from the Corporate Governance Research Initiative (Stanford Graduate School of Business) and The Miles Group say that the switch should not be drawn out. The longer the succession period from one CEO to the next, they say, the worse the company will perform against its peers. Yet, nearly 40 percent of companies they researched say they do not have an internal succession plan in place.
While the decision ultimately belongs to the board, many chiefs want to ensure their initiatives continue on after they’re gone, and feel it is their responsibility, or right, to choose a successor who will carry on their work. Jim Skinner, former CEO of McDonald’s, mentored his replacement for seven years before he retired, according to Workforce.com.
By the time a succession plan is needed, however, these experts say it’s generally too late to start creating one. That’s why Russell Reynolds Associates suggests boards not only have a written succession plan, but also conduct “regular, in-depth interviews” twice a year.
The initial board process they recommend would look like this:
- Review the succession plan twice a year
- Review and update the capabilities requirements for the next CEO
- Examine the company’s 5- to 15-year direction and strategy, factoring in the impact of various globalization scenarios
- Seek experience that meets the needs of those future challenges/scenarios
- Observe successful CEOs from both inside and outside the industry; identify traits that have contributed to their success
- Distill these considerations into a set of required capabilities.
When implementing a succession plan, The Rawls Group suggests that companies look not simply for the best and brightest, as that is not an absolute guarantee of a good fit or of success. Instead, look at characteristics such as persistence, determination, average intelligence and a focus on outcomes.
“When you’re looking at the succession pool, look for people who have proven they can master a body of knowledge and apply that knowledge to real-world situations and produce results,” says succession strategist Dan Schneider, from the Rawls Group.
When thinking through your succession plan, look for someone with the skills your company will need five to 10 years down the road, rather than today. These include digital media, collaboration and even multiple languages.