By Jane Stevenson, Global Leader for CEO Succession and Vice Chairman, Board & CEO Services, Korn Ferry, and Victoria Luby, Senior Client Partner, Korn Ferry Hay Group
CEO tenure is always a hot topic, and easy to gauge through surveys. But ask about CEO failure and, of course, finding any specific figure is a different story. Selecting a new CEO, one who will remain long enough to deliver and sustain business results for shareholders, is not something boards take lightly. Nor should they.
Clearly, few factors can have a greater impact on company value—for better or worse—than the selection of a new CEO. Choosing a CEO is a high-stakes proposition and arguably the most important decision a board can make.
Fortunately, boards don’t have to reinvent the wheel when it comes to establishing a CEO succession process that will produce the most reliable results. Here’s our blueprint, which can be adapted to a specific board’s and company’s culture, that will get and keep boards on track.
These are seven steps we consider the defining tenets of a “gold standard” CEO succession process:
1. Align the board on future CEO profiles that are driven by business strategy. Engage the board in a strategic alignment process to define short- and long-term business priorities. Then link strategic priorities to the experiences, competencies and personal traits required in the next CEO to create a CEO Success Profile to evaluate internal and external CEO candidates.
2. Assess candidates against industry benchmarks, valid indicators of executive potential and the CEO profiles you’ve developed. Acquire an accurate, unfiltered, multidimensional view of candidates’ strengths and weaknesses in a mix that includes quantitative assessments that can evaluate not only relevant competencies and experiences but beneath-the-surface personal traits and drivers that will align with success.
3. Think two to three CEO moves ahead, not just about replacing the incumbent. Companies should develop a dual focus that includes both preparing capable near- and mid-term leaders and identifying those deeper down in the organization who possess future leadership potential.
4. “Cross-train” generations of CEO successors with a mix of on-the-job training, intensive coaching, mentoring and education. Help future CEOs to blossom with individually tailored development plans geared to both individuals’ needs and what the organization will require in a future leader.
5. Get to know the bench and its potential. Future CEOs should gain regular exposure to the board so directors can continue to assess their potential as possible future leaders. Insight into leadership traits and motivations of a leader are as important as an individual’s experiences and proven track record.
6. Maintain CEO succession as a standing board agenda item since it ensures a multilayered, multigenerational process. CEO succession is an ongoing, “evergreen” process that continues, even immediately after the appointment of a new CEO.
7. Ensure that your talent management and development planning is linked to your longer-term business strategy. During both regular board meetings and at intensive off-sites, many companies now link strategy sessions and talent development sessions to ensure that any shifts in the strategy will inform what is required in future leaders.
Growing and maintaining a high-quality succession and management development process represents an investment that will be paid back many times over. It enables companies to continually strengthen the leadership needed to deliver strategic priorities for high performance, while simultaneously developing the next generations of leaders for an ever-changing world. This approach also enables organizations to attract top talent who seek personal development and career growth. Finally, almost nothing is more tightly aligned with protecting shareholder value than meeting this “CEO succession gold standard,” as it assures the probability that the right leaders will be in place to deliver sustainable, successful results.