Successful Succession Management

From the latest issue of DDI Directions:

In this excerpt from his article, “Your Next CEO: Why succession planning is more important than ever,” published in the November/December 2008 issue of The Conference Board Review, DDI’s Vice President of Executive Solutions Matthew Paese, Ph.D., offers the following tips for Succession Success:

Start soon and never stop. How soon? Now. Over and over, we see organizations caught unprepared by unexpected crises or opportunities and forced to suddenly look outside for the next CEO. This not only ensures a likely drop in stock value—it introduces significantly greater business risk, since externally sourced CEOs are more likely to fail.

Some have suggested that CEO succession should begin at least three years prior to the anticipated change. This recommendation, or any that prescribes a specified time frame in which to administer the succession process, misses the point. CEO succession must begin immediately and must be a constant, ongoing process that is managed as closely and regularly as the organization’s most pressing business affairs.

Look more closely at candidates. In the same way that emerging CEO demands are difficult to predict, so too are the human beings that occupy those roles. However, the prevailing method for assessing CEOs—to extensively interview candidates—dramatically oversimplifies both the job and the individuals who might fill it. To achieve a more accurate assessment of CEO capability, boards must better define requirements and more deeply assess the capabilities of the incoming CEO.

This means breaking the tradition of private interviews with board members, long many companies’ most important—or even the only—assessment method. Interviews are unquestionably a central component to this process, but the typical unstructured interview is riddled with inherent error and must be enhanced by additional assessment measures, particularly leadership simulations, to more closely examine central attributes that might not otherwise be detected.

Make the growth of top leaders a board imperative. If we are realistic, we must recognize that scenarios will sometimes arise in which no viable internal candidate is available. However, this should not deter organizations from constantly cultivating and growing top leaders’ capabilities. Hesitations rooted in the fear of a horse race, political dynamics, or the job security of the incumbent CEO must be dispatched in favor of more enterprise-conscious strategies. Boards must assume that the CEO role is always unstable, and that the organization’s top leaders must be developed to the very peak of their potential to sustain maximum agility.

This requires that the company identifies a pool of internal leaders as potential CEO candidates and develop them toward that standard. Top management should conduct early assessments and prepare individualized development strategies to be discussed with the board. Since development must support the organization, each development plan should be reviewed for its impact on business progress as well as on individual growth. Measures of success in both arenas should be tracked and reported to the board regularly.

Use CEO succession as a model for talent strategy. CEO succession is not a decision—it is an ongoing process to diligently foster and drive the growth of internal leadership capability. To adequately address the challenge, boards must begin by developing a strategy for CEO succession that encompasses the identification and recruitment of high-potential leaders from inside and outside the organization, the profiling of the CEO role and its core challenges, the assessment of candidates’ leadership capabilities, and the accelerated growth of a pool of leaders toward the CEO target.

While CEO succession is aimed at a single position, the principles apply to talent growth across the entire organization. If done poorly, the organization fights an uphill battle to build sanction, support, and involvement in processes that drive talent growth. If done well, CEO succession not only ensures stability at the top post—it can serve as a model of how talent should be cultivated and deployed for the long-term benefit of the enterprise.

I'd like to wish all of my readers a very Merry Christmas and Happy Holidays 2008!
....and don't forget to leave cookies for Santa tonight.