Succession is not always successful – stakeholder buy-in and support is critical.
Boards and CEOs have many defining moments, but the moment of truth is more often than not the announcement of the new CEO.
In recent weeks, Yahoo and Leighton Holdings chose to replace their CEO. The chance of a successful outcome in both instances will depend on key stakeholder buy-in and support. Boards are ultimately accountable for CEO succession and selection. The incumbent CEO is a key stakeholder in making this challenging decision. The challenge for the Board is forming a view on potential successors in a highly informed, transparent and robust manner that respects the incumbent CEO and other stakeholder relationships.
The recent Booz & Company analysis of CEO succession clearly puts the onus on CEOs to help Boards make informed decisions. Boards need to move fast to replace underperforming CEOs or address unplanned departures. Boards must work with the CEO on succession and ensure they have an intimate knowledge of potential internal and external successors.
The CEO should be personally prepared for transition. There should be a robust selection process involving key internal and external stakeholders. The CEO’s input is clearly important, but the final decision belongs to the Board.
With internal candidates often advantaged over external candidates, the benefits of early short-listing, coaching and systematic development are obvious.
Stakeholder support increases the chance of a successful transition. Early focus on improving stakeholder relationships pays dividends.
Stakeholder input, particularly from a robust 360-degree assessment tool such as that offered by The Leadership Circle, will ensure that subsequent coaching takes into account input from all stakeholders.
Ensuring stakeholder involvement and buy-in helps the incoming CEO and helps the stakeholders – it is a classic “win/win”. Honestly identifying development needs and opportunities is of enormous benefit to the potential CEO.
Ensuring that Board, peer, direct report, customer or key advisor input are sought and considered is important. However, sophisticated Boards must test for bias and for personal or political agendas. If a stakeholder expresses a contrarian view, it may be their problem, not the candidate’s. But if many stakeholders have the same issue, then it is probably the candidate’s problem!
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