Despite today’s focus on corporate governance, some boards still fail to address one of their main responsibilities: to reduce the risk of a leadership void should there be a sudden CEO departure. Exits at the top may happen for any number of reasons: poor performance, personal reasons, or the CEO being poached by another company. Whatever the cause, the unplanned turnover of Chief Executives is an expensive, time consuming and unsettling process for organisations. This makes it all the more surprising that many public and private companies have no strategic CEO succession plan in place.
Our experience in CEO succession planning is unrivalled. The team of Elisabeth Marx Associates has managed succession plans in FTSE 100 companies and Fortune 500 companies as well as private companies, family-owned businesses and private equity backed companies.
We believe succession planning must be viewed as a critical process: a structured rather than a reactive process and one that is inextricably linked over time to leadership development. Too many companies become interested in the idea following a recruitment failure. To reduce that risk and as part of their governance responsibility, the board and the incumbent CEOs need to prepare and develop candidates to take over. This is a longer-term process in which we have played an integral role with many organisations and with demonstrable excellent results.
There is not only the risk of a void; the introduction of a new CEO can mean a lengthy period of adjustment and adaptation when that individual is faced with a new culture. All of which can have a detrimental impact on business performance. To pre-empt this potential risk, the logical step is to set up a systematic internal development programme for potential CEO candidates, with the aim to enhance their chances for the CEO role in the future.
There is a clear competitive advantage to be gained from strong succession planning. A well- groomed internal CEO successor can lower the risk of underperformance or of a potential cultural misfit.
Installing a succession programme in itself often forces organisations to question whether the right talent exists within for them to be able to reach their business goals.
We can support organisations with succession planning in the following ways:
- Tailored planning and implementation of succession programmes
- Review of executive teams in high growth scenarios
- Benchmarking of internal candidates against external candidates for key positions
- Development of potential successors for CEO, CFO and COO positions