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WORKSPAN
WORKSPAN DAILY |

CEO Departures: Planning for the Inevitable

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kupicoo / iStock

Even though existing leadership and boards may see planning and preparation as a necessary tool for just about anything, the numbers suggest it usually does not include the succession of top leadership.

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Succession planning had been viewed as either absent or so inadequate that the U.S. Securities and Exchange Commission (SEC) found it necessary in 2009 to include it in the Sarbanes-Oxley Act for publicly traded companies. Whether an organization is publicly traded, privately held or in the trust of a community board, it is incumbent on both boards to make sure there is a succession plan for leadership, starting day one of a new leader’s tenure.

Carve Out a Plan

We know that the greatest gap in succession planning is not having one. Putting a process in place is the first step. Work with your human resources team to understand what process is used in other areas of the organization for performance management, talent management and succession. Ask yourself:

  • Who on our board will be responsible for succession?
  • Will the entire board assume this role, will we establish a new sub-committee, or will we use an existing committee? Most organizations use the entire board for this function.
  • What critical strategies do we need the CEO to establish?
  • What skills, experience and personality traits are most critical for success in the changing environment of your workplace? What cultural aspects need to change in the organization to improve outcomes?

The board should carve out time at least once a year to review the market and strategic plan. They should also assess the skills required of both the current and new CEO to meet the changing landscape. This “success profile” of skills and experience should be implemented with consensus from other c-suite executives too.

  • Which existing leaders within the company can be groomed to be potential candidates?
  • Are we having conversations with these individuals and are we proactively supporting them to gain the necessary skills needed for a successful transition? Can we execute an external talent search if needed? 

Boards need to have an internal and external recruitment plan in place that they can implement quickly should the need arise. Additionally, interim leadership solutions should be agreed upon before the need arises.

  • Do you have an outline that walks through with the necessary action steps?

This should include items such as a communications plan, timely deadlines, recruitment agency partnerships, interim guidelines and a detailed hiring process.

Send the Right Message

Communication is a critical success factor, as CEO transitions can be scary for everyone. Board members need to develop a unified message that carries a sense of stability and future prosperity.  Depending on the reason for the departure, a clean, transparent message can ease anxiety and make for more trusting relationships throughout the process.

Succession planning can be threatening to leaders, perhaps making them realize they are not indispensable. It can be destabilizing if changes are not communicated properly. However, when the expectations of succession planning are communicated, there are far more benefits to all levels of an organization.

Transparent communication leaves no room for question and keeps everyone on the same page, no matter their role in the succession process. Honesty from leadership will drive accountability and engagement at all levels.

Choose the Right Successor

Studies show that companies in top-performing quartiles had planned successions 79% of the time, while companies in the lowest performance quartile have poor succession practices and are twice as likely to force out CEOs.

With the right successor, culture, stakeholder relations, employee morale and financial performance can thrive. Another study found that 94% of CEOs believed a strong succession plan supported higher levels of employee engagement.

Assessments can complement your recruiting process and offering personality assessments ensures a thorough interview process and uncovers a candidate’s areas of leadership potential that align with the organization.

Ensure Board Awareness

Too often, the board is out of the loop on issues that require their attention. Like an hourglass, the CEO generally sits at the narrowest part and serves as a guide between the boards’ needs and the expectations of the rest of the organization.

While the board should avoid getting into the weeds with operations issues, they should maintain a list of key stakeholders, procedures for emergency planning, internal contacts they might need to access and information on outside advisors. 

For organizations governed by a board rather than investors, there is a possibility that a transition can be a “clean break,” where the predecessor is no longer present to cast an opinion of the successor. A short overlap of the two leaders can be orchestrated so there is a knowledge transfer with a defined timeline and objectives. But in many circumstances the outgoing leader may be gone by the time the successor steps into the role, and the potential for any undermining by the predecessor is eliminated.

While there are several steps an executive board can take to ensure a smooth leadership transition, a formal succession process is the most meaningful. It allows for a smooth transition even if the departure of a leader was not anticipated. More importantly, it is a tool for boards to use in upholding their legal fiduciary duties that the organization is well-governed, even in trying times. 

Ultimately, it’s the best chance to heed Benjamin Franklin’s warning to plan for success rather than “planning to fail.”

About the Authors

Dr. Laurie Cure is the CEO of Innovative Connections.

Robert Thorn, MBA, FACHE is a director at Pinnacle Healthcare Consulting.


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