How to Develop Your CEO Succession CandidatesBy: Paul C. Winum
In 2017, 919 CEOs either resigned, retired, or got fired at publicly traded North American companies. This was the highest number in at least a decade. As more baby boomers hit retirement age and the pressures of leading an organization continue to mount, several thousand more CEOs are expected to vacate their positions in the next few years. To prepare for these leadership transitions, boards and CEOs need to be preparing the next generation of chief executives now.
In our research for the book, Inside CEO Succession: The Essential Guide to Leader Transitions, we asked board members who collectively served on more than 120 boards to cite examples of CEO successions that had not gone well. One of the most common contributing factors was not investing in internal candidates early enough to properly prepare them for the CEO role.
How could they have addressed this? Here are a few best-practice guidelines.
1. Construct and continually update the CEO position profile. While no one has a crystal ball, boards in partnership with the CEO and CHRO need to align on the future operating landscape for the business, the strategy for the company to succeed in that landscape, and the capabilities required for the CEO to lead. That profile—what we refer to as the Winning Formula®—should be updated at least annually to reflect the changes in the operating landscape and implications for the company strategy and CEO requirements.
2. Assess internal candidates against the Winning Formula profile. Best practice talent management recommends having a deep understanding of all mission-critical talent and those with high potential to assume mission-critical roles. Assessing capability for the position should include focus on the dimensions of the role that all CEOs must be able to do well:
- Set and communicate a compelling vision and strategy
- Drive the execution of the strategy
- Establish an organizational culture that supports success
- Build constructive, trusting relationships with key constituents, and represent the company well to investors, key customers, media, suppliers, and community partners
- Monitor and mitigate risks and threats to the company
3. Build and execute development plans. All candidates in the pipeline for mission-critical roles, including the CEO role, should have development plans that are being worked, based on the strengths and gaps identified through the assessment process. Ambitious, talented executives want to know the investment is being made in their career growth and the best ones want to be tested and challenged. Doing so also helps retain your talented leaders who are undoubtedly being contacted by recruiters on a regular basis. Some more specifics about developing CEO candidates are contained in the white paper, Grooming a World-Class Chief Executive.
4. Keep in close touch with your top talent. The direct manager of every high-potential in the pipeline for a mission critical role should be charged with regular dialogue about how the development process is going. The CHRO and CEO need to check in with pipeline talent at least twice annually on how they are doing. Arrangements should be made for board members to interact with key talent outside the confines of the boardroom so they can get to know the top succession candidates and vice versa.
Taking these steps will go a long way to ensuring that the next generation of CEOs and mission-critical talent will be ready to take the leadership reins.
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