CEO Succession Planning

I had the opportunity to participate in an NACD (National Association of Corporate Directors) Master Class on CEO succession planning with two highly experienced directors. With CEO tenure getting shorter, all participants agreed that whether your company recently hired a new CEO or has had one for 5 years the most important function of the board of directors is to ensure they are prepared for CEO succession.

The candid discussion for NACD members touched on the keys to a successful succession. Here were a few takeaways from the conversation.

Communicate! Communicate! Communicate!

Whether the CEO is brand new or one that’s been around for a while – the BOD needs to be in communication about what is needed for the next CEO. At the very least there should be a revisit of the subject at a full board meeting once a year.  Although the board always needs to be prepared for CEO succession – there will always be events along the way that you aren’t anticipating, so should think through a number of scenarios. And, every board member should be part of the conversation and have an opinion about the candidates – not just those on the succession committee. 

One size does not fit all

Internal vs external candidates? All panelists agreed that it really depends on the company and the current state it is in.

One of the most important things to keep in mind is that sometimes internal candidates exit if they do not get the role of CEO. The best way to prevent this and keep talented people is to ensure there is an open, transparent process by explaining upfront that the company will be considering both external and internal candidates. This will increase the chances of maintaining internal candidates who don’t get the role of CEO and ensure they feel like their contributions continue to be valued even if they are not in the CEO position.

Tap Board Member Expertise

Every board member will have different experiences, so each brings different perspectives to the table. There are more issues for boards to address than ever before including digital transformation, privacy and cybersecurity. And then there’s the unexpected like a global pandemic, which changed the conversation in the board room about planning ahead. The need for an emergency plan and for a lead or presiding director to take the role and make tough decisions is even more important. And the need for CEOs to adapt, be flexible and resilient and get in front of disruption and drive innovation are increasingly important. 

While more and more CEOs are making the decision on when it’s time to go and it is time for the next person to lead, it’s not always any easy one. Board members can help CEOs and the transition for their companies by being transparent about the process and helping them get to a place where they can comfortably acknowledge “it’s time for the next person to lead.”