According to a survey conducted by the National Association of Corporate Directors in 2014, two out of three US companies have no CEO succession career planning. Only a third of those who have adopted such a program feel satisfied. How, then, to draw up a clever and satisfying planning? Undoubtedly, the choice of a CEO is up to the board, but it’s up to him/her appoint and prepare candidates. See now what is necessary to take into account in that process. And remember: don’t be upset to think about your succession. After all, only who left no legacy can’t be replaced.
1. How to evaluate the candidates
When there is no succession plan and the issue only comes up with the sudden departure of the CEO, the company is at risk. Potentially good candidates may not have sufficient time or encouragement to work on areas for improvement and unpolished talents may be overlooked. The result is that the company may gain a damaging reputation for not developing its management ranks.
Case: Not to have that trouble, the president of an Asian company (whose name is kept secret, according to the regulations of the survey) has named three potential CEOs to the position of co-chief operating officer. Over two years, they rotate leadership roles in Sales, Operations and R&D. No doubt the turnaround strategy is a source of great learning, but it’s not enough.
Conclusion: The CEO successor should take more initiatives, including dealing with new responsibilities, and getting practical training, advices and regular feedback from the leader. Selecting the new CEO is the final step in a leadership development plan, tailored to fit into each candidate.
2. What to take into account
É comum ver a diretoria preocupada em escolher um(a) CEO ideal sem levar em conta as prioridades da empresa para os próximos anos, o mercado e a competição que o(a) novo(a) líder enfrentará após sua nomeação. Para ter mais chances de acertar, leve em consideração três critérios ao avaliar os candidatos:
It’s common to see the board worried in choosing the ideal CEO without taking into account the company’s priorities for the coming years, the market and the competition the new leader will face after his/her appointment. Three clusters of criteria can help companies evaluate potential candidates:
2.1 Know-how, such as technical knowledge and industry experience;
2.2 Leadership skills, such as the ability to execute strategies, manage change, or inspire others;
2.3 Personal attributes, such as personality traits and values.
According to Åsa Björnberg and Claudio Feser, McKinsey researchers, the ideal is that the next CEO – no matter if that person comes from within the company or another one – meet the business needs on a five to eight year view.
Case: The leadership style of a CEO in a media business emphasized a robust approach to cost cutting and firefighting through the economic crisis. However, his successor faced a significantly different situation requiring very different skills, since profitability was up and a changed economic context demanded a compelling vision for sustained growth.
Conclusion: With that case, we see how it’s necessary to review over time the criteria relevant for your company and check out if the candidates’ profiles still meet the business needs.
3. Be careful
Decision-making is biased and three biases seem most prevalent in the context of leadership succession. Therefore, before creating a CEO career planning, be sure that you are none of those CEO types:
3.1 Narcissist: The CEO that tries to create a copy of him/herself.
3.2 Saboteur: promotes a candidate who may not be ready for the top and therefore seems likely to prolong the current CEO’s reign.
3.3 Manipulator: convince the board to seek someone like him/her, disregarding the future context of the company.
Conclusion: If you are CEO, start to notice if you tend to act as one of these above. If so, try to fix your imperfections before making a decision. You must choose the next company leader, not the board or outside experts. After all, it’s the CEO who understands the history of the company’s strategies and its implications for the term of his/her successor, such as the best way to deal with each partner and manager. It’s precisely at this moment when the one who held the lead for a while proves to be able to leave a legacy.
That’s not easy, but it can be much harder if you don’t have the right tools. Evaluate the performance and behavior of potentially good successors, using Runrun.it. The team management software adopted in more than 100 countries worldwide. Try it for free: http://runrun.it