All Chief Executive Officers (CEOs) eventually leave the organisation they lead. A well planned and timed succession is the ideal. However, few Boards are well prepared for this eventuality. Similarly, few Boards are prepared when their CEO becomes ill or incapacitated for a long period.
One of the first things a Board should consider after recruiting a new CEO is the succession plan for their next CEO!
Circumstances may arise where the CEO is required to take an unplanned long-term leave of absence, due to illness, incapacity, or for family reasons. The absence of leadership in this key role is an indictment of the risk-management skills of the Board – the Board should always have a plan to have someone act, on a temporary basis, as an interim CEO.
This could be a person within the organisation that is also being groomed as a potential future CEO, under a planned succession. Alternatively, it could be someone within the organisation, or an associated partner organisation, that has knowledge of the organisation and the maturity and skills to quickly step into the CEO role, but who has no interest in the position as part of their longer-term career path. A third option is the engagement of a person, external to the organisation, who commercially offers interim CEO placement solutions – this HR solution is increasingly common, and provides the Board with engagement on commercial, independent terms which do not impact on existing workforce models and positions.
There comes a time when even the best performing CEOs need to or wish to, move on from the organisation. CEO renewal brings fresh enthusiasm and ideas to lead the organisation. A seamless transfer from the departing CEO represents best-practice but is rare to find.
Consider the following factors in a transfer of leadership:
- Timing– when the incumbent plans to leave, and the time it will take for a replacement to be recruited,
- The talent pool within the organisation, and
- The role the departing CEO will play in the organisation once they officially step down from the role, and for how long.
If the departure of a CEO is well planned, then the Board should leverage the knowledge of that person for the benefit of the incoming CEO. Any conflict arising between differing leadership directions from one CEO to the next can impact staff morale and achievements.
Increasingly, organisations are identifying potential future leaders from amongst their ranks and investing resources in up-skilling them to assume bigger, more responsible roles, including the CEO role. It is never too early for a Board to start planning to position future leaders within the organisation, who will potentially assume the CEO role. If your organisation intends to pursue this strategy, then the Board should have an in-depth discussion with identified leaders regarding their career aspirations and professional development plans.
The jury is still out on whether internal CEO recruitment is more effective than appointing an external candidate, with pros and cons for both options. Where the organisation is performing poorly or facing times of uncertainty, and/or if the Board wants significant change management, and completely new strategy and/or culture implemented, then it is more likely to favourably consider external CEO applicants. However, if the Board seeks stability and continuity of current strategic direction, internal recruitment offers stability and retention of organisational knowledge and culture.
Whether an internal or external candidate, the process must be carefully managed, with defined timelines, budget and scope- recruitment of a CEO can be project managed. The “project” leader should be a Board member formally nominated for that role, with input from a Board subcommittee or working group.
All succession planning should not only consider options for replacing the CEO but also the transition and change management process, and the associated communication strategies needed to support this process. CEO role transfer should not be considered an occasion or event, but always a process with expected outcomes.
If your Board needs advice or support in planning its CEO’s succession, or seeks an interim CEO to step into the role in emergency circumstances, contact Faileen James, who has had extensive experience in these situations.