CEO succession planning is most successful when started early.
It’s no secret that strong, steady, continuous leadership is key to the success of an organisation, particularly amidst turbulent times. However, many businesses fail to correlate this understanding with the need for succession planning – and the consequences can be dire.
Just ask Disney.
The entertainment giant felt the effects of poor succession planning, suffering a 40% drop in share prices, the lacklustre performance of Disney+, and a severe blow to its reputation.
The lack of alignment of the new CEO, Bob Chapek, particularly with regards to company values and management style, led to internal disruption and public embarrassment. This was compounded by a murky exit strategy for beloved incumbent, Bob Iger, which undermined Chapek’s leadership, and caused division within the company.
After less than 18 months in the role, Chapek was ousted and Iger returned to the role of CEO – though for how long is anyone’s guess.
Disney’s experience is a timely reminder of the need to prioritise structured, long-term succession planning; which ensures future CEOs are equipped to lead and enables a smooth transition when the time comes.
To secure your future, start now
CEO succession planning is most successful when started early.
How early?
The day the new CEO starts.
Finding, developing and nurturing future leaders takes years, and needs to be worked on continuously, to create a solid pipeline of talent, particularly as we see the tenure of CEOs shrink.
Boards are particularly concerned about the need for a stable of potential successors, as it ensures they have strong leadership to navigate potentially turbulent times ahead. According to the Australian Institute of Company Directors, 19 per cent of directors list CEO succession as one of their top 3 issues most likely to “keep them awake at night”.
It is not only Boards that are worried – succession planning has implications for CEOs, too. Russell Reynolds Associates’ 2022 Global Leadership Monitor Survey reports that 72 per cent of leaders cited availability of talent and skills as the leading issue impacting business health. Without proper succession planning, organisations risk losing quality executives.
When done well, however, the recognition and development of executives results not only in a high-performing C-suite, but retains the most promising employees.
In addition to aiding in retention and providing a smooth transition between CEOs, succession planning protects against the impact of an emergency change of leadership. In the case of an unexpected exit or health crisis, it is essential to have someone willing and able to step in.
Creating a profile for success
Before beginning the process of planning for succession, Boards must first define what they need in a CEO, creating a success profile according to the specific needs of their organisation. Rather than looking for a carbon copy of the current CEO, Boards must consider what they want the future of the company to look like.
Beyond business targets and objectives, this profile should also include the values the organisation will embody and the challenges that lay ahead.
Look within
Once this model has been created, Boards can then think about the knowledge and experience required for potential candidates – and these candidates should be within the organisation already.
Internal promotion not only aids in retention but means your CEO is aligned with company goals, strategy and culture, mitigating the risk associated with bringing in an outsider.
Promoting internally also allows for future leaders to shadow the CEO, and take part in joint decision-making, ensuring they are ready to take hold of the reins when the time comes.
Indeed, the incumbent CEO should have succession planning within their KPIs, tasked with identifying up to three candidates and aiding in their development.
For this to occur, succession needs to be discussed openly, and regularly, with the current CEO, creating a transparent process in which they feel comfortable, and empowered to play an integral role.
Inspirational leadership
When assessing internal candidates, organisations should be looking for someone that has the intellect and experience to lead through change, driving performance while handling ambiguity.
Effective leadership looks different now. Rather than ruthlessly controlling business outcomes through a top-down approach, a good leader inspires excellence in their organisation and utilises the specific skills of their team to achieve their goals.
An inspirational leader uses influence to execute on strategy, meaningfully engaging with stakeholders and management to create a cohesive environment for success. This kind of CEO is far better equipped to handle the complexity of the modern corporate world.
In addition to the ability to influence and engage, board should assess candidates based on the following five criteria:
- Intellect, problem-solving, and systems thinking
- Ability to work well with ambiguity and conflict
- Aptitude for continuous learning
- Drive to excel at an extremely high level
- Leadership style versatility
Once potential leaders have been identified, organisations should create a tailored development plan for each person.
By acknowledging the particular strengths and growth areas of each candidate, and creating a clear path for progression, Boards can secure the future of the business and create a more effective C-suite.
Aimee Williamson is Managing Director and Global Head of Assessment, Russell Reynolds Associates