Five Practices Your Board Needs to Adopt Now

Courtesy of DDI

Most boards fall into one or more of the six pitfalls above as they plan for their future. But there are five critical practices that can help you beat the odds:

1. Declare C-suite succession as a top tier business strategy.

Given economic headwinds, business-driven succession processes are more critical than ever for organizational sustainability. C-suite succession planning is a competitive differentiator that can be readily influenced—more controllable than markets or the global economy. Proactive succession practices are fundamental to your leadership supply chain and should managed as aggressively and transparently as other business processes.

A supply chain perspective assumes an ongoing business process that never stops. Some organizations begin consideration of successors shortly after a new CEO is seated. We recommend exploring options at least 3 years before an anticipated transition. This affords time to identify and groom a diverse slate of leaders with varied background and profiles. It also supports focused candidate development and demonstrated growth against future requirements.

2. Make context a part of scenario planning.

Every piece of your succession planning strategy has to answer the question “Who is ready for what.” It’s essential to play out the context of your future business strategy, and weigh potential successors’ strengths against those likely circumstances.

Consider various strategic directions depending on changing market, financial, operational and R&D investments. As strategies evolve, so should the scenarios against which CEO profile should be evaluated. A turnaround CEO requires a different success profile than a CEO charged with growth through acquisition. Your board should routinely reevaluate and agree on the top few business drivers that frame the critical competencies, personal attributes, and values you need in your next CEO.

3. Demand objective and predictive data.

CEO selection is a long- term investment decision. It can’t be made on gut feeling from the board, nor can it be made based on past performance alone.

You need data that is both objective and predictive. Structured board interviews capture relevant examples of industry knowledge, experience, and cultural indicators. More rounded methods, especially immersive role simulations, heighten objectivity and predictability because candidates must demonstrate what they are capable of versus relying on claims. Adding in personality measures around enablers, derailment risks and motivation provide a window into what an executive “will do” versus what they know or might do.

4. Assess the “whole leader.”

At the CEO level, there’s very little room for weakness or failure. Some lack the personal temperament to succeed, while others may struggle more with setting strategy, maintaining key relationships, or creating a culture of ownership. While no CEO will be 100% ideal, it’s critical to know that they have the key strengths to be successful in your context. And it’s just as important to know where their weaknesses are so that they can work on developing in those areas as well as hiring others on the executive team who can mitigate those weaknesses.

As a result, your board’s due diligence needs to include a well-rounded assessment of the whole leaders so you know the full portfolio of assets and risks a potential CEO will bring to your organization. And the board needs to make sure that the assessment data is mapped against what’s needed for the specific business context you’re facing.

5. Declare leadership growth to be a board imperative.

CEO succession is about far more than a “point in time” decision. It is a vital, dynamic business process designed to ensure leadership capability and continuity. Your board’s commitment, time and resources are visible across your organization, consumers and shareholders.

Defining explicit roles across the board, executive leadership team and CHRO will create broader ownership for success. Board committees, like Compensation or Governance, may take the lead in succession strategy and process.

As with other core business processes, it is important to clearly articulate your succession strategy with objectives, accountabilities and metrics. This strategy should outline “the how’s,” including identification and recruitment of high-potential leaders from inside and outside the organization, profiling the CEO role and anticipated challenges, and evaluation of candidates’ leadership capabilities. Longer horizon acceleration tactics for targeted leaders toward a CEO and/or C-suite destination will be a game-plan fundamental.

In today’s environment, playing offense around leadership agility and capacity is truly about survival. Without an “all in” board commitment to acceleration, it will be difficult for your organization to sustain the energy and engagement in processes that drive talent growth. There is an alternative: A powerful Board-Management team partnership dedicated to CEO succession. Thoughtfully executed, this investment becomes an enterprise model for cultivating and deploying leaders across the pipeline. In turn, your commitment to leadership growth will fuel your brand story, investor confidence, and competitive viability.

Conclusion

The most dangerous thing for any board to do right now is to think of themselves as the exception, rather than the rule. It’s certainly tempting to focus only on the moment at hand, rather than what’s ahead.

But no business will escape the pandemic unscathed. For some, it may cause a more radical change than others.

The scale of change makes it inevitable that leadership will shift at the top. And in this newly restricted economy, there won’t be much room for boards to make mistakes. NOW is the time to begin creating a data-driven succession strategy that will set up your company for strength for the future.

Audrey Smith, Ph.D., is a Principal Partner for DDI’s Executive Services. An avidpractitioner, thought-leader, and architect for DDI’s C-suite and senior executive offerings, she has partnered for over two decades with boards, CEOs, and executive teams striving for high performance, business transformation, and growth. Known for leading executives to unique personal and business insights, Audrey is also a prolific author and speaker, and has written and collaborated on numerous books, research studies and articles across a spectrum of leadership topics.

Matthew Paese, Ph.D., is Senior Vice President of DDI’s Executive Services. He and his team help CEOs, boards, senior teams, and executives enhance leadership to grow business, cultural, and personal success. With over 25 years of experience working with executives through all sorts of business challenges, Matthew brings countless stories of C-level success and failure, and insight from comparative data and research to help boards, CEOs, and senior teams carve pathways to success.