Dear Chief HR Officer,
As you well know, CEO transitions are a time of great risk for an organization, as the questions raised about who, when and how to effect the transition are complicated, to say the least. No matter what size the organization, CEO selection is the single most important decision made by Boards of Directors.
I’ve learned over the years that there are seven critical points in the CEO Succession process where the right approach can mean the difference between success and failure.
In this instance, success has three characteristics: the right person ascends to the CEO role, the incumbent CEO comfortably and confidently transitions out of the job, and the top management team rapidly coalesces around its new leader.
You’ll find the challenges described here familiar from our ongoing discussion of the process we’ll be following. However, the key to any good process is execution, so our work with you, the Board and the CEO will endeavor to successfully meet each of the following challenges.
- Setting the scope of the process as the entire top management team. As we’ve discussed, a frequent misstep is including only a subset of the top team in the initial executive assessment process, thinking that the process is simply for picking the right new CEO. This misstep sets up an obvious horse race by communicating that some peers are more equal than others. Setting the scope as the entire team is an essential foundation of a manageable process, even if some have no hope (or desire) to become CEO, because it reminds top team members in a tangible way that they have an ongoing role in the success of the leader.
- Communicating the purpose of assessments as individual development. Defining the purpose clearly as focusing on individual development is the key element of initial communications. Succession to CEO is front of mind for most participants, but framing the endeavor as development of the team of the future, rather than the elevation of one above the others makes everyone feel equally enfranchised. In addition, it reinforces everyone’s most important role as successfully executing their day-to-day work at the company versus gathering around the water cooler to handicap the horse race.
- Defining the frame of reference for the assessments as the future rather than the past. The challenge in most CEO selections is thinking outside the box that the past represents, and meaningfully envisioning the future state—environment, strategy, organization—where the next CEO and senior team must successfully operate. This is often the most difficult mental task of the process, since the past is so accessible and the future so uncertain. However, the extra effort pays off, as it helps us craft the individual developmental challenges in real and pragmatic terms, rather than subjective or political ones.
- Maintaining alignment between CEO, Board and consultant throughout the process. The steps and stages of a succession process are dynamic, and with all the senior team involved, Board members with strong opinions about them, and individual ambitions, hopes and fears in the mix, it can frequently feel like a complex mechanism with many moving parts. An agile communication process between CEO, Board and consultant to communicate progress, surface issues and concerns, and manage the right levels of involvement is essential for establishing a bond of trust with participants that the process will be successful.
- Addressing gaps between what you need and what the assessment process determines you have. The conclusion of the assessments brings a critical choice point for the CEO and the Board, especially if there is a gap between what you need and what you’ve got. The decision can be obvious if one person rises to the top—or it can be maddeningly complex if, for example, there is no clear match, the development needs are significant, and the downside risks of delaying or going outside are imposing. It is here that insightful assessments distinguish themselves—by differentiating strengths and fit for purpose of the individuals, by clarifying in behavioral and business terms the development challenges for each, and by articulating the transition risks associated with the various internal choices. As we’ve discussed, Boards increasingly seek in-depth views of the external talent market at this stage, to satisfy their need for objectivity, and sometimes suggest hiring top talent into the team to broaden the slate of potential successors.
- Managing the transition in command. The huge sigh of relief once agreement is reached on the right choice is understandable—but premature. There is not just one but several transitions that must occur. The incumbent CEO needs to relinquish command and be appropriately recognized and celebrated. For that to happen, he must have a destination—a new role that honors his personal desires and supports the success of his successor. The new CEO is taking the full spotlight for the first time in this environment, and must transition into command in a way that builds the confidence of her many internal and external constituencies. The top team members all have a new boss, and must transition into new relationships with her and with their own ambitions. Managing these interdependent transitions successfully is an inherently risky proposition, but it is thankfully one where the risks can be managed by artful choices and careful planning.
- Coalescing the new top management team with no loss of momentum. New leaders spend their early days gathering information, forming opinions and planting seeds within the organization that they hope will help them grow a healthy, vibrant organization; nourishing the seeds planted in the early days inevitably makes the difference between success and failure. Leaders who fail to provide this nourishment are exposed to the wrong sort of publicity, sooner or later, and singled out for blame. However, organizational leadership is increasingly a team sport, and a thoughtful succession planning process supports a new leader’s success by providing structural support for his or her onboarding and engagement of the new team to take charge of their important leadership role.
I hope you find these brief observations helpful. They won’t make the job any easier, but hopefully they’ll make you more confident you’re on the right track!
Adair Leadership Consulting
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