The board’s role in succession planning is unique and one nof its highest-priority activities. Boards need to think about the rest of the management team and consider whether an incoming CEO, when combined with other key members of the executive team, has the set of qualities that are most valued by the company’s stakeholders.
There has been a shift in what boards look for in CEO candidates. In the past, boards often looked for a strong leader with a fixed, specific point of view, nurturing a specific candidate for the CEO role. This approach has its merits and evidence links this type of succession with improved company performance.
Now when selecting a new CEO, factors to consider include:
Talent plays a huge role, but it is important to consider: fit with the company strategy and vision; what is happening at the company; and company needs given company industry, history, maturity, and other unique characteristics. However, with a shifting geopolitical and economic operating environment, different qualities are now prioritised, such as openness to innovation, humility and agility. As both board members and companies have become more flexible, so too has the candidate selection process. As a result, some boards might consider casting a wider net and designing a selection process around multiple candidates.
In terms of the process, the structure will, and should, vary based on a company’s culture, norms and industry. The following things should be borne in mind:
Communication with candidates who are not selected is key. Boards want to see a combination of qualities, agility, resilience, team leadership and vision, that can be hard to find in one person. Sometimes an individual may be highly qualified but just not a good fit for the CEO role at the time.
While communication and transparency are important for everyone in the process, they are especially key for internal candidates. Failure to be transparent could be seen by candidates as an indictment of their leadership or work quality. It could also prompt high potential internal candidates to seek opportunities with other companies.
Many prospective candidates are starting to work with coaches and mentors who specialise in CEO-level roles. Sometimes serving on another company’s board can provide future candidates with a valuable perspective on the link between governance and succession planning. CEO selection involves many parties with varying influence in the decision- making process. In most cases the outgoing CEO will have an influential voice in the selection of their successor. Even if a candidate seems otherwise qualified, without a strong vote of confidence from the current CEO they are unlikely to be selected. Even more so when retiring CEOs often stay on as executive Chair or in a similar capacity.
For the full Report go to: https://www2.deloitte.com/us/en/pages/center-for-board-effectiveness/articles/the-never-ending-story-ceo-succession-planning.html
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