This is the second in a series addressing the imperatives and challenges CEOs face through the entire spectrum of the role—from preparation for the job to exit. (Read part one: CEO1000: The Life Cycle Of A CEO)
Here’s part one.
To maximize their viability as CEO candidates, executives in the succession pipeline must move through various roles, not only to acquire the necessary skills, knowledge, and depth and breadth of experience but also to demonstrate a track record of success. They need to cultivate a deep and accurate appreciation of their strengths, weaknesses, and tendencies under pressure, as well as insight about their motivations and impact as leaders. Boards and incumbent CEOs have a major role in ensuring that there is a thorough assessment of potential successors and proactive, focused development of pipeline candidates.
What must you prepare your potential successors to do? There are eight core responsibilities that span across most CEO positions:
• Set and communicate the vision and strategic direction of the company
• Drive execution of the strategic plan, including managing the organization’s financial and physical resources
• Evolve and lead the organization culture and values aligned with the strategic direction
• Manage the current and future talent resources of the organization, including selecting and developing the senior leadership team
• Manage key relationships and represent the company to community, media, industry, key customers, analysts, and investors
• Align with, leverage, and potentially manage the board (depending on role on board)
• Monitor and mitigate risks (e.g., regulatory compliance, crisis management, debt obligations, competitive, and vendor/customer risks)
• Model integrity, commitment, resilience, and a strong moral core
Preparation for the top role becomes more intense within eight to ten years of the transition, when specific job assignments become paramount. To capture the learning from complex roles, executives need sufficient time to see the impact of their decisions, ideally three years. Less time will still provide exposure but short-circuits the longer feedback loop required for learning and truly integrating the experience—thus, creating a less solid foundation. Important experiences include: running a P&L, leading a turnaround, running an international unit while living outside one’s country of origin, serving as a group head, and serving on a public company board.
Most pipeline candidates will need to increase their knowledge and skills to prepare for the next role. Key areas to consider are the following:
• Financial savvy: Candidates must have a solid understanding of how the company makes money, with an ability to map the key business drivers (noting the dependencies and risks) and understand what aspects impact how the company is valued.
• Strategic skills: How adept are they at developing strategy and driving strategic choices?
• Engagement of external constituents: They will need multiple opportunities to speak to and engage with analysts and investors, regulators, key customers, and suppliers.
• Robust and broad external network: It is important to develop a well-honed external radar to recognize early trends, best practices, or technological advances and their implications for the company.
• Ability to “see the whole”: Most executives have deep experience in one part of the organization; can they balance their perspective to avoid overly weighting or focusing on the familiar at the expense of new terrain?
Self-Insight and Development
Now is the time to ensure your potential successors fine-tune their personal energy management and resilience, addressing any areas that may limit their ability to sustain a peak performance mentally, physically, and emotionally. They need to hone their core values and be ready to articulate what they stand for, as it is virtually guaranteed to be tested at some point in the new role. In their personal life, successors need to ensure their significant other is aligned and on board with the implications of taking on the CEO role. How will they make their family life work? Finally, they must cultivate a balance of confidence and humility through ongoing development. They need to know their strengths and limitations and seek feedback about their impact as leaders.
To prepare successors well requires ongoing investment of time, energy, and regular follow-up on progress, along with course corrections. You also need to provide opportunities for your board to get to know your pipeline candidates through formal and informal interactions. After all, the directors will ultimately have to decide if they want to select an insider to succeed you. It takes a secure CEO to fully engage in the critical task of preparing potential successors.
The next article will focus on the second phase: Transition.