Ensuring a Successful Leadership Transition
In this issue, Clarke Murphy and the CEO/Board Services Practice set forth the specific elements and timeline of a successful CEO succession plan, as well as the steps necessary to ensure a smooth transition.
The transition from one CEO to another is a critical moment in a company’s history. A smooth transition is essential to maintain the confidence of investors, business partners, customer and employees, and provides the incoming CEO with a solid platform from which to move the company forward. A properly designed and executed succession plan is at the center of any successful transition.
CEO vacancies can be planned or unplanned; in either scenario, by the time a succession plan is needed it is far too late to start building one. Because of this, it is the responsibility of the board to make succession planning a priority, even in the face of more immediate and tangible issues. In addition to being necessary for risk mitigation, succession planning brings with it several beneficial byproducts:
It gives the CEO, through an ongoing analysis of the job requirements, the opportunity to adjust his or her role in light of changing business conditions and strategic imperatives.
It strengthens the relationship and information flow between the board and the senior management team through the regular contact that is part of the board’s review of candidates.
Russell Reynolds Associates regularly advises boards and CEOs on Chief Executive Officer Succession Planning, and from this experience we have developed the following practical guide to the succession planning process.
Establishing The Foundation
Succession planning is usually directed by the governance or compensation committees, or occasionally a special ad hoc committee. The current CEO’s involvement varies (depending on whether the succession is planned or unexpected) with primary responsibility being the development of internal candidates. The Lead Director often acts as the single point of contact between the board and the sitting CEO on succession matters.