- Posted by Intersect International
- On July 21, 2015
- CEOs; succession planning
We do a lot of reading and research, so you don’t have to. And like you, we spend lots of time on planes – a time to catch up on reading and reflect.
This blog reviews the all important question around whether your Board candidly addresses that uncomfortable topic of CEO succession planning on a regular and routine basis? Or does it become an episodic, annual item of discussion?
If you answered yes to the first question your board likely knows the significant costs of getting CEO succession wrong, but more importantly, they recognize the financial return in getting succession right.
In their 15th CEO study (Strategy + Business, Issue 79, Summer 2015 by Favaro/Karlsson/Neilson) the authors of “The $112 Billion CEO Succession Problem” share their math. And getting it right they note is “worth more than you think.”
CEO succession planning is a “core strategic business issue” making it a topic that a board cannot over-delegate to the incumbent CEO and the senior HR executive. This critical accountability of the board has one of the greatest financial and qualitative impacts on employees, customers, shareholders and the overall health of business.
Here are some lessons from these authors’ research on the financial performance of companies with both well-planned and poorly-planned CEO Successions:
- The board must own, lead, fully understand and do the necessary work: this is not a delegated staff responsibility.
- Succession should be a standing item of every board meeting agenda.
- Whether your organization’s next generation of leaders contains ready, willing and able future CEOs requires an in-depth, realistic board appreciation of the plans. This will help
develop these leaders together with regular opportunities to meaningfully engage with them.
- CEO succession plans and ultimately, CEO selection, is based on a well-informed future strategic view of the business by the board; design and hire looking forward, not in the rear view mirror.
- Create an explicit, formal CEO succession plan and ensure it is private; avoid internally disruptive, divisive and uncertain processes.
The authors conclude that “getting CEO succession right is one area where companies can control their own fate.” Are you leaving your business up to fate?