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CEO Succession Planning: The Important Role of the CEO.

CEO Succession Planning

Pat O’Donnell, Managing Partner at Principal Connections outlines the important role of the Chief Executive in CEO Succession.

The board’s primary role in CEO succession planning is well-recognised. And the era in which a Chief Executive Officer (CEO) could oversee this process and effectively choose their own successor has long since passed. The board holds the ultimate responsibility for selecting the CEO. However, has the emphasis on the board unintentionally reduced the significant contribution of the CEO in the overall succession planning endeavour? 

At its core, the CEO’s responsibilities are clear-cut. To lead management succession at senior levels. Identify potential internal candidates for the CEO post early on. Ensure the organisation is cultivating executives who are ready for succession across all senior management roles. And to act as an advisor to the board regarding CEO succession. In practice, however, many CEOs grapple with questions about their involvement in the process. By example, Which aspects should I lead? When is it appropriate for me to pull back? What are the board’s expectations of me? And, what do the board directors believe would better equip them to choose who will lead next? 

Through our countless discussions with chairs, board directors and seasoned CEOs over the years, the following are some insights which current CEOs may find valuable when participating in succession planning for their successor. 

1. CEO succession planning, start early. 

Board directors recognise that the responsibility for CEO succession planning lies with them. However, initiating discussions on this topic can often prove cumbersome. Boards may be particularly hesitant to address succession planning when a strong and effective CEO is currently in post. Especially if a transition does not appear to be on the horizon. The CEO can play a pivotal role in prompting the board to consider succession planning earlier than they might otherwise do. And certainly well before any transition is expected. 

When should the succession planning process commence? Although it may seem counter-intuitive, it is advisable for this process to begin early in a CEO’s tenure. Potentially from the moment the CEO assumes the role. Initiating the process early and establishing a regular rhythm around executive development and long-term C-suite succession planning enhances the likelihood of identifying multiple strong internal candidates. Candidates who can be assessed, provided with specific development opportunities, and prepared for a transition when the time comes. 

Delaying the succession planning process may result in insufficient time to address the developmental needs of otherwise promising candidates. Furthermore, beginning the process early allows directors to engage with potential candidates over time. And when C-suite succession is treated as an ongoing process rather than a reaction to an impending transition. It minimises the risk of a chaotic and potentially disruptive competition for the position or the necessity for an urgent CEO search. 

2. Leverage talent development.

Based on our observations, boards seek deeper insights into the senior talent emerging within the organisation. Especially beyond what is typically shared during standard board meetings or social gatherings. The CEO is ideally positioned to ensure that directors receive the necessary insights. They can do this by collaborating closely with the Chief Human Resources Officer (CHRO) to establish a comprehensive and forward-thinking strategy for executive talent development.

The cornerstone of CEO succession planning is the strategic vision of the organisation. This of course informs the profile and selection criteria for the future CEO. In a high-performing company, the CEO plays a significant role in this aspect of the process. Accurately defining the profile is essential. As the criteria for the CEO serves as a blue print for developing internal candidates and a framework for selecting among finalists. In a top-tier process, both the board and management team engage in a thorough due diligence process. And this aligns their understanding of the strategic direction and company culture, from which the future CEO profile is derived. 

At least once a year, the CEO and CHRO should facilitate a discussion regarding the anticipated leadership needs of the organisation and specific executive roles. This should take into account the strategic direction, updating the CEO criteria as necessary in response to evolving circumstances, and conducting an in-depth evaluation of talent against that framework.

The CEO, in collaboration with the CHRO, should formulate development plans for potential internal candidates. This should assume a forward-looking perspective, evaluating individuals based on the future demands of the business. And translating those needs into specific developmental objectives. The CEO should keep the board apprised of initiatives aimed at enhancing candidates’ readiness for succession. For instance, assignments that provide targeted operational experience or exposure to external stakeholders. Additionally, the CEO and board may find it beneficial to engage external assessment expertise when evaluating these initiatives.

3. Recognise the appropriate moment. 

The CEO plays a crucial role in the planning of CEO succession. Serving both as an advisor to the board or the committee. And overseeing the process and in managing the overall succession within the company. However, as the transition period approaches and the focus shifts to the board’s selection of finalist candidates. Including the possibility of an external search, the CEO’s involvement tends to decrease. 

Succession planning can present significant challenges for current CEOs, both personally and professionally. They must come to terms with the fact that the board is leading the process rather than they themselves. Even those CEOs who have actively prepared potential successors must ultimately step back as the board progresses toward making a selection. It is essential for CEOs to recognise that their role will change as the transition approaches. And they should not take it personally if the board assumes more control or has differing views. Especially, regarding the process, candidates, or timing. 

4. CEO succession – facilitate the growth.

It is not uncommon for many CEOs to feel emotionally unprepared during the final phases of succession. Particularly when it comes to delegating certain responsibilities to internal candidates. However, providing potential successors with the opportunity to grow and acquire the necessary skills for the CEO post is one of the most significant contributions a current CEO can make to the succession process. In fact, it is during these critical development stages that successors may acquire experiences that only the CEO can provide. For instance, such as increased interaction with the board or external stakeholders. It is the responsibility of the CEO to facilitate these opportunities. These interactions can help identify potential issues early on. And when there is still time to address them or to rectify any misunderstandings that board members may have.

5. Departure enshrines legacy.

During the concluding stages of the succession process, organisations often become preoccupied with the impending transition. And of course speculation regarding potential candidates. Combined, this may lead the current CEO to feel somewhat sidelined. In this challenging phase, it is crucial for CEOs to concentrate on their contributions to the organisation. Taking pride in the fact that a vital aspect of their legacy involves ensuring that the board implements a succession process that will culminate in a successful outcome for the company. Collaborating with the CHRO, the CEO can also monitor the organisation’s response to the perceived competition among candidates. More importantly however, it allows time to prepare strategies to maintain focus on the business objectives. 

Once the board selects the new CEO, the outgoing CEO may collaborate with the lead board director or committee chair to engage with the unsuccessful candidates. As well as other senior leadership team members, aiming to retain as much of the team as desired. Together with the CHRO, the CEO typically ensures that key management team members or external advisors are discreetly involved in executing the transition plans. 

Another pertinent issue which can arise, is the extent of the departing CEO’s involvement with the company following the commencement of the new CEO’s tenure. The outgoing CEO should discuss with the board the potential role they may assume post-transition. If the CEO also holds the position of chair, they might be invited to remain on the board as a non-executive chair for a designated period. Alternatively, it may be anticipated that they will vacate both positions. In some instances, the departing CEO may assist during the transition by introducing the new CEO or serving in a temporary consulting capacity. The CEO should be ready to engage in discussions with the non-executive chair or lead independent director regarding their future with the organisation. And be prepared to adhere to the board’s guidance.

In summary

CEOs can play a crucial role in the success of an effective succession planning process. By prompting the board to initiate planning well in advance, supervising a comprehensive executive development program that cultivates candidates ready for succession, and allowing internal individuals the necessary space and experiences to advance, the CEO significantly contributes to the formation and maintenance of a robust leadership team, as well as the identification of suitable successor candidates. Being mindful of this legacy can assist CEOs in navigating the personal and professional challenges that may arise during the succession process and the subsequent transition phase.

About the author

Pat O’Donnell is Managing Partner at Principal Connections – executive search, part of Agilium Worldwide LLC. He is a leading authority and trusted advisor in recruiting CEOs, Board Directors and C & D Suite executives for companies across Ireland and internationally. Mr. O’Donnell is especially talented in conducting confidential and complex engagements as well as sourcing diverse candidates from the global market. He is also noted for his exceptional understanding of boardroom dynamics.

Mr. O’Donnell holds’ an Honours undergraduate Law Degree from the National University of Ireland Galway, a Master’s Degree in Commercial Law from University College Dublin’s School of Law and a Diploma in Human Resource Management from the National College of Ireland amongst other academic accolades. He is Certified Level A and B by the British Psychological Society as well as a Certified Hogan and EQi Assessments Practitioner.

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