The Board Director’s Guide to Managing the CEO’s Role in CEO Succession: Part 2
Courtesy of DDI
In the previous episode, the CEO Role Management Guide covered the following topics: The role of the CEO in succession, managing the role of the CEO in succession, and questions the board should ask about the role of the CEO in the succession process. Readers can follow the previous episode here
Today, we'll dive into the questions that committees should ask in the CEO succession process, determining the success profile of the next CEO, and coaching and developing potential successors to prepare them for growth.
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Questions the Board Should Ask about the CEO Succession Timeline
- Where is the impetus for CEO succession coming from? Has our CEO established succession as a priority and provided the appropriate amount of attention and resources?
- Is CEO succession a routine topic of board discussion? Or has the topic been tabled because the current CEO is seen as likely to be in position for the foreseeable future?
- Do we have a good idea of our CEO’s intentions and how long they are likely to remain in the role?
- Is there an emergency succession plan in place? Are there clear instructions for how succession (and communications surrounding it) will be handled if the incumbent is suddenly unable to fulfill the role?
How Should the CEO Cultivate a Diverse Successor Pool?
A continuous sense of urgency is also necessary to build a broader, deeper, more capable and representative pool of leaders with the potential to take on multiple C-suite assignments, including the CEO role.
Time and again, organizations report the absence of sufficiently experienced candidates as a principal reason for the predominance of white men in the C-suite and in CEO roles. While we can point to various antecedents for this dilemma, there is one thing that every organization can do to address it: start sooner—much sooner. And think more broadly.
When starting to consider CEO succession candidates, most boards and CEOs look reflexively to the senior team. Who among them shows the promise of becoming CEO?
From the standpoint of building diversity of thought, experience, skill, and identity, this is a nonstarter. Succeeding in the development of more diverse enterprise-level leadership requires reaching much further down into the organization, starting far sooner, and actively building developmental experiences for people who can begin to show the organization different versions of what successful leadership looks like. Your CEO (with guidance from HR and DEI leadership) must champion these efforts.
Questions the Board Should Ask About the CEO’s Planned Successor Pool
- Is our CEO interested in starting the succession and development process early, with leaders at least several levels below the CEO?
- Is the list of potential CEO candidates more than one or two people (ideally 6-10) and are their backgrounds, experiences, skills, and identities diverse?
- When our CEO discusses the CEO succession candidate pool, do they reference its diversity and have a perspective about how to expand it?
- Does our CEO seek to involve a diverse group of stakeholders who can provide unique perspectives and offer insight into how best to promote diversity in the C-suite?
How Should the Board and CEO Define the Success Profile of the Next CEO?
While the board will make the final succession decision, the CEO’s judgments about candidates, capabilities, developmental progress, and final readiness will play a large (perhaps the largest) role in influencing that decision. So the CEO’s perspective and implicit definition of leadership matters a great deal.
This should not be left to the independent discretion of any one person. All CEOs and board members have their own beliefs about leadership and what it takes to succeed at the top, and in a decision process as consequential and complex as this one, that variability represents risk.
CEO success is determined by a mix of experience, skill, personality, and motivation, all combining uniquely within each individual to align (or not) with the organizational context. There is no simple prototype or critical “it” factor that determines success. For that reason, it is essential for the CEO and board to align around the success profile and leverage multiple objective inputs and data to make evaluations against it.
Questions the Board Should Ask About the Next CEO’s Success Requirements
- How does our CEO identify leadership potential? What criteria are considered primary? Does the board agree?
- Does our CEO have a philosophy about leadership and what it takes to be successful at the top? Is it a broad definition that goes beyond track record and experience, or does it zero in on a narrow band of characteristics? Does the board share the same perspective?
- Have the CEO and board together confronted the future leadership challenges that the CEO and senior team are likely to face? Does the CEO success profile address them?
How Should the CEO Coach Their Potential Successors for Growth?
Much can be done to prepare successors for the CEO role, but not if the incumbent CEO isn’t actively facilitating and catalyzing that development. This requires a mindset anchored by the assumption that leaders can grow—significantly.
 The Chairman and CEO of a major energy sector corporation adopted this mindset more than four years ago as he began to consider retirement. Having been somewhat surprised by his own ascent into the CEO role, he knew that growth could happen in significant and unexpected ways. For him and his board, CEO succession became far more than preparing one or two candidates. Instead, development was aimed at the entire senior team (and some below it).
A two-year effort was aimed at defining enterprise leadership success factors, assessing leaders in the C-suite, and building aggressive development strategies for each individual and the entire senior team. Some leaders swapped roles. Others were given assignments to handle high-stakes strategic initiatives. Speaking roles in earnings calls were spread around the senior team, giving everyone access to these key leadership moments and many others.
The results stunned everyone. As the time came to select a CEO successor, the available data about each team member was extensive. Not only did the board understand the unique profile of each leader, they understood what each had done to enhance their skills over the last two years. Now, two years into the new CEO’s tenure, the team remains entirely intact, and company performance hasn’t skipped a beat.
Questions the Board Should Ask About How the CEO is Coaching and Developing Successors
· Does our CEO exercise creativity in both identifying potential successors and in finding ways to cultivate their growth (e.g., special assignments, collaboration on key projects, exposure to unique audiences and situations)?
· Does our CEO convey confidence in the ability of leaders to grow beyond expectations? Do they display a belief that people change and develop?
· Has our CEO zeroed in on one or two potential successors, or is there an effort to create a culture of growth across the entire senior team?
How Can the Board Ensure that the CEO Succession Process has Appropriate Rigor?
Succession and development can feel like work that is outside the boundaries of managing the business. And as a result, many CEOs downplay its importance and take a more casual, informal approach. This is obviously a misguided judgment in one of the most consequential decisions any board can make and has led to many unforced errors in corporate leadership.
CEO and C-suite succession is best administered as a permanent process of senior leadership development that is periodically interrupted by the need to make a decision about who will be the next CEO (or CXO). As such, some degree of structure and commitment to tangible indicators of progress is warranted.
At the most fundamental level, every succession system should include phases to confirm the CEO success profile, identify a diverse pool of successors, assess successors’ leadership capabilities against the CEO success profile, and engage successors in development activities that catapult their capabilities forward in ways that benefit the business.
Questions the Board Should Ask About the Rigor in the CEO Succession Process
· Has our CEO communicated a clear process that will be followed in administering the CEO succession process?
· Are there clear phases and milestones in the succession process, and is the board being briefed regularly and fully on progress in each one?
· Is our CEO getting professional guidance about how to plan and structure the CEO succession process?
· Is our CEO succession process leveraging benchmarking data and insights that ensure we are utilizing the most contemporary methods and criteria?
CEOs Are Inexperienced at Succession
While experienced board members may end up guiding multiple CEO successions over the course of their board involvement across organizations, very few CEOs have ever seen the inner workings of a succession process outside of their own. Thus, even an incredible CEO who outperforms in every other area likely has a very limited frame of reference to guide their own succession.
And frankly, many CEOs also struggle to think of someone else being able to fill the role as well as they do. It’s a part of human nature.
That’s why it’s so essential that the board keeps a very high level of visibility into the process and maintains a sense of urgency at all times to ensure that growth is happening. In fact, managing CEO succession and the CEO’s role in that process may be the most fundamental thing the board does to mitigate risk and ensure continuity as unexpected challenges emerge.
For more about the specific conversations the board, CEO, and CHRO should have throughout the succession process, check out our four-part series on the CEO succession planning conversations you MUST get right:
Matt Paese, Ph.D., Senior Vice President, Succession Management & C-Suite Services, DDI.
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