1. business and industrial

A DISCUSSION OF K EY MANAGEMENT ISSUES
VOLUME 28 NUMBER 4
INSIDE CEO SUCCESSION
People & Processes
I
n this concluding Executive Insight article, based on RHR International’s new book,
“Inside CEO Succession: The Essential Guide to Leadership Transition,” authors
Thomas J. Saporito and Paul C. Winum provide an overview of the final four dimensions
board members need to address to elevate their process to the level of best practice.*
SELECT THE CEO Because of the critical opportunity afforded a
accurately through a professional assessment procedure. The as-
company when making the right succession decision, and the im-
sessment of candidates needs to go beyond their CV specifications.
measurable cost for getting it wrong, the CEO selection decision
Those assessing need to carefully consider fit with the unique strat-
must be grounded in a thorough and in-depth assessment of each
egy, culture, board and management team of the company.
candidate. The foundational guide for this is the Leader Profile, a
blueprint that defines the requisite leadership skills and character
traits expected of the successor CEO.
Boards need perceptive information on, and meaningful interactions with, each prospect. Assessments should examine the
PROACTIVELY MANAGE THE TRANSITION Too often, CEO succession is viewed as an event rather than a process. As a result,
the needs, wisdom and experience of the outgoing leader are not
always leveraged and shared with the new CEO. This can lead to a
potential misalignment between the
nominee’s knowledge, skills, competencies, social intelligence and
incoming CEO and the board, which in
other personal attributes in order to form a broad picture of each
turn can cause strategic disconnects
contender’s capabilities and potential. Presentations, CVs or letters
between the new leader and the com-
of praise alone are not adequate. The fact that 60 percent of board
pany’s executive team. Well-managed
members rate themselves as having inadequate interviewing skills
successions allow time for the outgoing
suggests the need for a deeper analysis of candidates from unbi-
CEO to transfer his or her vision and
ased individuals who are independent of the search process.
knowledge of the company as well as
Given the difficulty of knowing what skills will be most important in
the future, integrity, trustworthiness and sound character are criti-
the profiles of the executive team to the
incoming CEO.
cal attributes that transcend any situation. Stable characteristics
Our research indicates that 41 per cent of directors do not believe
such as personality and cognitive abilities are not readily identified
they pay sufficient attention to either the integration of a new
in interviews, but need to be taken into account and can be gauged
CEO with the board or the strategic differences that might arise
between them. This lack of integration is easily one of the greatest
reasons for short, unsuccessful tenures and the high rate of CEO
RHR INTERNATIONAL
WE SEE WHAT OTHERS DON’T.
failures – many within the first year.
INSIDE CEO SUCCESSION
uncertainty seldom rise above the surface in business. Yet they add
People & Processes
a layer of complexity when left unresolved or only shared in private
PAGE 2
with a spouse, close friend or mentor.
Once the successor is in place, the board often breathes a sigh of
Boards and CEOs can be far more productive and successful if these
relief and feels that the transition is complete. However, the execu-
dynamics are openly acknowledged and resolved. By effectively
tive integration process is much more complex than most directors
managing the personal feelings which always well up during suc-
realise. While the first 100 days are critical, current research
cession planning, stakeholders can channel their experiences and
shows that successful integration actually takes between 12 and
energy into a powerful, productive force for the benefit of the
18 months. The situation should be monitored carefully until this
organisation and, ultimately, themselves.
milestone has been reached. The lead director in particular has a
key role to play to ensure an effective transfer of power from the
outgoing to incoming CEO.
THE BOTTOM LINE CEO succession is far more than the transitioning of a company’s leadership; it is a process fundamental to the
sustained success of a company. The only path to a positive out-
MEASURE PERFORMANCE AND IMPROVE PROCESS After the
come is for boards and CEOs to work together openly and authenti-
new CEO is selected and the transition is completed, the board
cally on all aspects of CEO succession planning – from aligning on
needs to address two more important tasks. The first is gauging the
strategy and purpose to maintaining ongoing communications to
new CEO’s performance in the crucial first year to identify any early
continuously cultivating an organisation talent pipeline of leaders
indicators of derailment. The second is to conduct a review of the
for all levels. The 10 Dimensions outlined in our book and this series
succession process itself to capture lessons learned while they are
of articles should give any board a guideline for laying the founda-
still fresh, and immediately make adjustments for the future.
tion for a longer and more prosperous tenure for an incoming chief
Each leadership changeover ushers in unique personalities, behaviours, business dynamics, human relations and interactions. For
these reasons, every succession brings additional knowledge and
executive.
*Excerpts from “Inside CEO Succession: The Essential Guide to Leadership
Transition” Copyright © by Thomas J. Saporito and Paul C. Winum
discoveries that must be added to the board’s governance memory.
This is important since the directors involved in the current succession may not be around five to seven years hence. We believe
boards and CEOs should view performance measurement as a part-
ABOUT RHR INTERNATIONAL
nership where they come together to tackle issues and collaborate
RHR International is a firm of management psychologists and
on solutions. With this in mind, engaging in regular and profes-
consultants who work closely with top management to accelerate
sional reviews of expectations and performance should strengthen,
individual, team and business performance. We focus on four key
not strain, the relationship between the board and the CEO.
areas of client need — Individual Assessment, Executive Development, Senior Team Effectiveness and CEO Succession & Transition.
MANAGING THE DYNAMICS While each of the previous nine
We have been proven difference-makers for more than 65 years,
dimensions to effective CEO succession planning defines a specific
unique in our combination of top management focus, psychologists’
stage in the succession process (with discrete tasks and outcomes),
perspective and high-level business acumen.
the tenth dimension concerns the psychological dynamics within
and among the various players in every stage of the process.
Moreover, this final dimension addresses the personal emotions
and challenges that have a direct bearing on the thoughts and
actions of the executives involved, affecting how they view themselves and their relationship with their peers and superiors. These
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