Taking Stock: Succession Planning Is for Everyone

Succession planning for the CEO is one of the highest-stakes transitions a company will face. At the NCEO, we talk with a lot of companies that have gone through multiple successions. We have learned a few lessons not only about minimizing the risks of the transition, but also about how to build it into the fabric of the company.

Focus On the System, Not the CEO

Although the CEO is where many of a company’s functions converge, a well-managed transition plan acknowledges that the company is a complex system and relies on the strengths and sustainability of that system. For example, the CEO transition profoundly affects the rest of the executive team. Part of the process of onboarding the CEO should include revisiting the job descriptions of the CFO, operations executives, sales directors, and senior human resources director. Well-managed transitions will allow both professional growth for other executives and the rationalization of the executive team.

Another part of the system is your company’s employee ownership, and your evaluation of CEO candidates should include ensuring they have the temperament and values to nurture the company’s commitment to employee ownership.

Do Not Simply Replace the Current CEO

Even if the current CEO of the company has led the company to extraordinary success, the next CEO should be the person who matches the company’s future, not its present. This idea is simple to write, but to execute the company must have done sufficient strategic planning to know how (or if) it wants to be different in five years from how it is now. The CEO’s responsibilities are holistic, so they must demonstrate both understanding and support for your company’s strategic plan, from easily quantifiable financial objectives to higher-touch goals around people and culture.

The Board Needs to Be Ready

The board is neglecting its responsibilities if it lets the selection process crowd out its plan for supporting CEOs in their first years. The board should develop clear expectations and a process for regular check-ins with the new CEO. Preparing for a CEO transition may be the most time-intensive task a board takes on, but the board should expect the year after the transition to put greater-than-usual demands on its time and attention. This is not an invitation for the board to micromanage the CEO, but the board should be assertively inquisitive.

Involve People in the Transition

Imagine a workforce that learns in an unannounced company meeting that someone unknown will become the company’s CEO. That workforce is being asked to take a leap of faith and entrust its economic well-being to a stranger, and that new CEO is being asked to start their new role at a deficit. How much better for a CEO to start knowing, at a minimum, that some or all members of the workforce had a chance to ask questions and share their impressions with the search committee.

Succession Planning Is for Everyone

The best way to improve is practice, and companies that build succession planning into what they do annually are simply better at it. Some of our member companies ask every employee-owner, as part of their professional development, to consider who ought to be their successor, both in case of an emergency and as part of a long-term plan. Universal succession planning is a natural way to encourage everyone to think about the career path of their supervisees. A positive career path is among the best ways to retain talented people. If those people know that everyone at the company is focused on growth and building the future, it becomes easy for them to feel excited about the prospects for the growth of the company and their stake in it.