Succession Planning: Developing Future CEOs

I’ve been interested in succession planning throughout most of my career. As many readers of this blog know, my novel Playing the Game deals in part with CEO succession in a family-owned business—an issue the organization was not prepared for and had to face as the novel begins. The novel, of course, is fiction, but the topic is real in many businesses.

A National Association of Corporate Directors survey reports that two-thirds of U.S. companies admit they have no formal CEO succession plan in place. See CEO succession starts with developing your leaders, by Asa Bjornberg & Claudio Feser, McKinsey Quarterly, May 2015. And even those corporate boards who have some plan underway are not satisfied with the results of their succession planning.

leadership sign 2The McKinsey article focuses on the need for a long-term plan for developing CEO successors. Succession is not a short-term project that can wait until the current CEO is ready to step down. Any board members, executives, or Human Resources professionals with significant experience have seen situations where illness, death, poor performance, or a significant lapse in judgment has required an immediate change in corporate leadership.

The authors state:

“Ideally, succession planning should be a multiyear structured process tied to leadership development. The CEO succession then becomes the result of initiatives that actively develop potential candidates.”

Developmental tools that companies can use include new assignments (including international and cross-divisional moves), coaching, mentoring, and outside leadership development programs.

Based on my experience, the important components to include when developing executive talent are

  • providing broad knowledge of the world in which the business operates,
  • a deep understanding of the organization’s unique strategies and goals, and
  • the interpersonal competencies needed to motivate and focus large groups of people through a multi-tiered organization.

The authors of the McKinsey article stated and “clumped” these attributes somewhat differently, but the themes are the same:

“. . . three clusters of criteria can help companies evaluate potential candidates: know-how, such as technical knowledge and industry experience; leadership skills, such as the ability to execute strategies, manage change, or inspire others; and personal attributes, such as personality traits and values.”

It is likely that each potential internal candidate for the CEO role will need an individual leadership development plan. The goal of the succession plan as a whole should be to have two or three strong candidates ready when the role needs to be filled.

Even organizations that want to develop a good CEO succession plan face risks. The plan will not work unless the current leaders have some idea of the future needs of the business. Those involved in selecting potential candidates must base the selection on these future requirements rather than on interpersonal factors not related to strategy. For example, sometimes current CEOs want to perpetuate the roles they have played in the organization. Other times, current leaders who plan to remain a while want weaker candidates in the succession plan, so no one is nipping at their heels.

And, of course, the analysis of future strategic needs and of the candidates themselves cannot be static, but must evolve over time. Too often, once someone is the “golden boy” (or girl) that person remains in the line of succession, regardless of performance.

It is also important to constantly compare the internal candidates with potential outsiders. So those involved in succession planning must know other leaders by staying involved with industry associations and community groups.

But the biggest risk is ignoring CEO succession needs altogether. Starting a plan now is better than waiting until the CEO role is suddenly vacant.

Which succession strategies have you seen work in your organization? Which have failed?


1 Comment

Filed under Human Resources, Leadership, Management

One response to “Succession Planning: Developing Future CEOs

  1. Pingback: Tips for Succession Planning in a Family Business | Sara Rickover, Behind the Corporate Veil

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