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10 potential traps to overcome in CEO succession planning

Written on the 26 October 2021

CEO succession planning is one of the most important responsibilities of a board but planning and effecting a successful CEO transition can have its complications.

A global survey conducted in 2020 discovered that 56% of Australian and New Zealand companies did not have a contingency plan for CEO succession, 23% did not regularly discuss CEO succession and 52% did not have an effective plan for CEO succession.

We explore 10 potential challenges you could face and how to overcome them to ensure a smooth CEO transition.

  1. Thinking “if” not “when”

Don’t fail to adopt the mindset of a CEO departing being a certainty. Many boards see it as something that will occur at a much later stage, but changing this mindset is a vital part of beginning succession planning. With many CEOs aged 50 years and over, a CEO exiting due to retirement, ill-health or simply pursuing other opportunities is an occurrence that can happen sooner than you may think. Shifting into planning mode to prepare for that scenario is the first step to being prepared for sudden changes in leadership during times of crisis.

 

  1. CEO succession is a HR responsibility

A common misconception is that CEO succession planning is the responsibility of HR when really it is the board’s responsibility. Many businesses aim to integrate succession planning into their quarterly planning and reporting, ensuring they’re prepared for interim and long-term leadership changes at any given time. This allows boards to make and update succession plans based on current and future staff organisational structures as they shift over time, and is something that should be done multiple times throughout the year.

 

  1. Unclear CEO selection criteria

A board that cannot define or agree on the required professional experience and qualities of future CEOs will impede their own ability to implement a CEO succession plan. Creating a profile that possible candidates can be reviewed against to ensure they meet the selection criteria is crucial.

 

  1. Setting and forgetting

Organisations who set CEO selection criteria and choose candidates but don’t review these decisions regularly will find themselves selecting the wrong CEO when the time comes to appoint someone new. It’s important to undertake frequent reviews of criteria to ensure they meet the company’s strategic vision and overall mission. As the company’s corporate mission and strategy shifts, so too should the criteria for future CEOs.

 

  1. Lack of disclosure of succession planning outcomes

Many organisations make the mistake of keeping succession plans confidential from current employees and CEOs, or they minimise the importance of it to keep morale high. Similarly, many executives are reluctant to initiate succession planning in case their colleagues become suspicious of their motives. Succession planning should be an open and transparent process for the board, and should include the current CEO. After all, who’s better placed to advise on the position than the person who currently holds the job?

 

  1. Board lacks skills and experience in CEO succession planning

Many boards simply aren’t equipped with the tools and proper knowledge around processes to begin succession planning. Ensuring the board understands all aspects of succession planning, or appointing a search partner to provide support as needed is critical in creating a succession plan that works.

 

  1. CEO is not on the same page

A CEO who doesn’t share their board’s view on starting succession planning, or one who offers biased advice can hinder the process considerably. Making succession planning transparent can serve as reassurance to the current CEO that their job is secure, and that the plans are part of the overall company planning strategy moving forward.

 

  1. No CEO succession planning function

Without a planning function that strategically chooses selection criteria in line with the overall company vision, any CEO succession planning put in place is likely to be unsuccessful. Whether the wrong candidates are chosen or there’s a lack of alignment between board members’ preferences, an absence of a planning function will critically delay the implementation of a succession plan.

 

  1. Lack of resources

Choosing not to invest in vital resources will leave boards without the proper tools to implement a succession plan. Failure to carry out the required processes boards must undertake shows a gap in knowledge that is indicative of a need to engage with search partners who can assist and educate the board during their planning.

 

  1. Rushing the planning

Don’t rush the process. While it’s imperative that boards begin succession planning as soon as they can, rushing the decision making process will be negative in the long term. Failing to define suitable selection criteria or scrambling to find candidates without careful consideration of credentials can leave organisations with the wrong CEO down the track.

 

It’s important to take steps to prevent any potential issues with CEO succession planning. Partner with a search firm, educate boards on how to succession plan and ensure there are clear selection criteria in place. By making the succession planning process transparent and a regular part of organisational planning and reporting, boards will be well equipped to handle changes in leadership in both the short and long term.

Chris Morrison

Chris Morrison

Chris Morrison is the founder and Director of Meritos, an executive search and recruitment business working with purpose-driven organisations. If you're interested in connecting with Chris, you can find him on LinkedIn here. You can also reach him on 02 9055 6836 or via email at [email protected]

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3. How does a manager get the best out of you?

4. Describe the best team that you’ve ever worked in.

The reasons why I ask these questions:

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Insights by Chris Morrison