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A CEO Succession Planning Primer - Harris Search Associates

A CEO Succession Planning Primer

In today's corporate world succession planning must be driven by strategy.

Succession planning is not just about picking the next CEO. Nor is it merely about picking a talented executive. It is about creating a ''fit'' between what the company must do strategically and the person who can best implement that strategy. That fit will optimize the company's ability to compete successfully in its present and future environment.

The goal of CEO Succession is bringing in the right leader at the right time

Many boards make the mistake of selecting a CEO based on a track record. It is tempting to assume that past success is a guarantee of future performance, but it's an incomplete way to make a decision. Skill sets and talent that enable a person to run one business satisfactorily don't necessarily guarantee that he'll be successful as your CEO. Simply using past performance as the primary criteria for hiring a CEO fails to take into consideration what the company needs to do to move ahead and whether the candidate is the right person to meet those specific challenges. Factors that should help determine who is the right person at the right time include industry dynamics, the company's health and competitive position, the corporate culture.

CEO succession is a board-driven, collaborative process

Succession planning is one of the board's two or three most important tasks in its role of protecting the shareholders' interest. Until recently, CEO’s have picked their own successor with the board providing a rubber stamp of the CEO's decision. This practice is no longer viable or acceptable. However, selecting a new CEO must be a collaborative effort with the existing CEO. The board must have the final accountability, but it must be done collaboratively. In addition, the board's responsibility is not merely a matter of evaluating the present CEO or even selecting a new one. Board members should understand that it is also their responsibility to ensure that a long-term plan is in place that can ensure continuity of leadership.

CEO succession is a continuous process

An all too common scenario illustrates why CEO succession planning must now be a continuous process… After exhaustive effort, the board finally finds and installs a new CEO. Since the board realizes it should pick the right person and then let that person govern, it seems natural for the board to simply step back and forget about succession issues until the next time they're in the middle of a search or crisis. But change is part of life. CEO’s can leave unexpectedly, and tragic events can happen without warning. It is a wrenching crisis for a board to discover that it does not have a satisfactory candidate to take over in case of an emergency.

The board must ensure that the CEO develops and encourages a talent-rich organization

The board not only has the right and responsibility to name the CEO's successor; it must insist that the company have a pipeline of talent on hand who are appropriate for moving the company forward. One of the hallmarks of a well-run company is that it has developed executive bench strength from within. That is why it is also up to the board to make sure that a plan is in place that will build management talent for the entire top-level of executives. While it is true that most corporations have programs for assessing talent, such assessments will be futile unless the process incorporates a follow-up plan for developing that talent. In addition, both the assessment and executive development must be done in the context of the company's future needs.

Selecting the ''Right'' CEO

Matching the CEO to the corporate strategy is the very foundation of succession planning. The CEO, as well as the talent pool of potential replacements, must be a solid match with the company's current and future business challenges.

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