Matt Paese

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Matt Paese, Ph.D. leads DDI’s Executive Services business.

Five Succession Practices CEOs And Boards Need To Adopt Now

"I literally wrote our succession plan on the back of a napkin over a drink with the chairman,” one CEO told us. When it comes to choosing successors, CEOs and board members often rely on their instincts. After all, their judgments have served them well. Why cloud gut instinct with too many extraneous inputs? But executive leadership is fraught with failure. Gut feel and back-of-the-napkin succession plans don’t have a good track record. One reason is boards and CEOs rely on their instinct to make these decisions, despite high rates of failure in C-Suite roles. In other cases, the board doesn’t want to make succession a priority if things are going well. According to one former CEO, “They really didn’t take my interest in retiring seriously!” These casual approaches open up vulnerability that may sink companies in the ultra-competitive post-pandemic economy. Already, departures across the C-Suite are rising rapidly, with few internal successors ready to step up. What can you do to prevent a C-Suite disaster? The most successful companies follow five critical practices:
1. Take a supply chain perspective on C-suite succession.
A strong C-Suite succession plan is a competitive differentiator—more controllable than markets or the global economy. A supply chain perspective with an emphasis on speed and practicality can turn a weak bench into a strong one in 2 years or less. Still, we recommend exploring options at least three years before an anticipated C-Suite transition. This affords time to identify and groom a diverse slate of leaders with varied background and profiles. It also supports focused candidate development and demonstrated growth against future requirements.
2. Conduct context-driven scenario planning.
Every piece of your succession planning strategy has to answer the question “Who is ready for what.” Executive skill sets are highly differentiated, and so are business and cultural contexts. Fit matters—a lot. It’s essential to play out the context of your future business strategy, and weigh potential successors’ strengths against those circumstances. Consider various strategic directions depending on changing market, financial, operational and R&D investments. As strategies evolve, your board should routinely re-evaluate and agree on the top few business drivers that frame C-Suite success profiles.
3. Demand objective and predictive data.
C-suite selection may seem like a brief moment of decision making, but of course each is a long- term investment in an organization’s future. These decisions can’t be made on gut feeling from the board, nor based on past performance alone. Making the right executive selection decisions requires data that is both objective and predictive. Structured board interviews capture relevant examples of industry knowledge, experience, and cultural indicators. More rounded methods, especially immersive role simulations, heighten objectivity and predictability because candidates must demonstrate what they are capable of versus relying on claims. Adding in personality measures also provide insight into enablers, derailment risks, and motivation that support or hinder success.
4. Assess the “whole leader.”
At the C-Suite level, there’s very little margin for error. Some lack the personal temperament to succeed, while others may struggle more with strategy or culture. Success in prior roles may not predict success in the next. As a result, your board’s due diligence needs to include a well-rounded assessment of the whole leader so you know the full portfolio of assets and risks they bring to a C-Suite position. Again, fit matters. While no executive is 100% ideal, it’s critical to know that they have the key strengths to be successful in your context, and can mitigate their weaknesses.
5. Declare leadership growth to be a board imperative.
C-suite succession is about far more than a “point in time” decision. It is a vital, dynamic business process designed to ensure leadership capability and continuity. Your Board’s commitment, time and resources are visible across your organization, customers, and shareholders. Defining explicit roles across the Board, executive leadership team, and CHRO will create broader ownership for success. As with other core business processes, you need to clearly articulate your succession strategy with objectives, accountabilities, and metrics. This strategy should outline “the hows,” including: 1) identification and recruitment of high-potential leaders from inside and outside the organization, 2) profiles of C-suite roles and anticipated challenges, 3) evaluation of candidates’ leadership capabilities, and 4) acceleration tactics for targeted leaders toward C-suite roles.
Conclusion
The most dangerous thing for CEOs and boards to do right now is to focus only on the business at hand, and not the people. In today’s rapidly changing post-pandemic environment, playing offense around c-suite agility and capacity is truly about survival. NOW is the time to begin creating a data-driven succession strategy that will set up your company for strength for the future.
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