CEO Succession: It’s a Process, Not a Plan

As the saying goes, “the best laid plans of mice and men often go awry.” In the case of succession, an unexpected CEO vacancy can throw even a healthy organization into disarray.

A smooth transition from one CEO to the next is essential in maintaining the confidence of stakeholders, particularly during a time of vulnerability. Smooth succession, or lack of it, has increasingly been a litmus test for a strong board. Effective planning allows momentum to continue and changes to be made swiftly. Additionally, it results in greater employee confidence and retention of senior talent. As proven by Apple, Microsoft and GE, life goes on.

McDonald’s has long been an example of successful CEO succession planning. The board was able to quickly and decisively replace two CEOs within eight months of one another—Jim Cantalupo and Charlie Bell—who both departing unexpectedly. Years later, the board employed a structured plan to replace outgoing CEO, James A. Skinner, who announced his sudden retirement, with then President and COO, Don Thompson. This ability to seamlessly transition under unforeseen circumstances hinged on the company’s ongoing practice of maintaining a robust succession process.

Conversely, the financial crisis illustrated that numerous financial institutions had flawed succession plans. Several banks’ boards drew harsh criticism for lack of preparation and for having no immediate succession solutions. The lesson learned is that having a long-term succession plan is important, but even more important is an ongoing succession process that allows a board to make quick and informed decisions in the event of a crisis. Today, companies are seemingly revisiting the issue in light of increased shareholder activism.

The Process
Succession planning should begin the day after a new CEO starts and should be a recurring topic on the board agenda. It is imperative that all understand the required competencies of the future CEO and that they align to the corporate strategic plan.


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