- A CEO Succession Plan is what the board needs.
Not if it is a static plan. CEO Succession requires an ongoing process, something the board discusses routinely. Viable contingencies for unexpected transitions as well as those more predictable must be considered. Furthermore, the board must have access to high-level talent so they can get to know their character and interpersonal skills, live and in color.
- The board should delegate succession planning to Human Resources.
False. HR can provide procedures, documentation, and input but the responsibility of CEO Succession belongs to the board.
- A CEO succession process can be done in a few months.
False. A process, done well, begins with establishing alignment among the board members and ends with a CEO who is integrated into the role, working well with the board, bringing the senior team together and gaining credibility.
- We have done CEO succession before so we know how to do it.
False. CEO succession is a low-frequency event. Most directors have seen only one or two. Even so, each event has a unique context. One director I interviewed for some research on CEO Succession said the best place to look for your next CEO is on the board. Why did he think that? It’s all he’s seen.
- A CEO hired from the outside is more likely to succeed than someone groomed from within.
False. In fact, it’s the opposite. CEOs brought from the outside tend to oversee poorer financial results, have shorter tenures, more failures and are more expensive to hire. Exceptions are when performance is already poor and a leader from the outside is needed to make change.
- There are not enough good candidates.
Maybe. If the pipeline is thin, a board needs to insist that this situation is improved. Regardless how fancy the talent review notebooks, if the pipeline is thin something is wrong. Succession is as much about results as any other business process, but isn’t usually treated that way, except by the best run companies.
- The right person will be obvious and naturally rise to the top.
False, false, false. Overwhelmingly, boards think of succession in terms of “who” and “when.” The process is more involved than that. The board must achieve alignment on key strategic issues and organizational needs first. There are always disagreements, but these must be resolved so the criteria are clear. Once the board is on the same page about “who for what”, it is easier to spot talented people that may have been overlooked – a nearly universal phenomena
- Key talent will leave if not selected.
False. It is an unfortunate assumption that CEO transitions inevitably cause the loss of highly talented people. This happens, of course, but many times it can be avoided. Doing so can be surprisingly easy, even if it isn’t obvious.
- Because directors are bright, experienced and successful people, they will get to the right answer.
Not necessarily. Intellect, experience and good judgment are important but do not make people immune to human limitations and dynamics such as: overconfidence, groupthink, and the inability to tolerate conflict. Even smart people can make errors of judgment. What helps? Good process, diligence, ability to surface and manage disagreements and an advisor who is agnostic about anything except excellence in the process.