As I shared in my article “Succession Planning: A Strategic Imperative,” proactively and thoughtfully addressing succession planning minimizes chaos when confronted with the unpredictable and the uncontrollable, and it enables a smoother leadership transition for the organization overall. While succession planning for all leaders of the Pivotal Leadership TrioTM (PLT-Board, CEO/Executive Director, Executive Team) needs to be addressed, the most critical is succession planning for the CEO/Executive Director (which I’ll shorten to just CEO for the rest of this article). Unfortunately, this necessary step is something of an “elephant in the boardroom,” often put off too long because of the many sensitivities innate in any transfer of power.
In my role as a CEO backer, executive coach/confidante and board confidante, I am a catalyst to surface the truth that the elephant exists, is unwelcome and needs to be removed for good. I urge the leaders I work with not to put off having a sound succession plan for the CEO, and ideally for the entire PLT. While it is not easy for a board (small or large) to coalesce on a succession plan, it is far more challenging to align on the search for a CEO when unprepared, having to potentially resort to interim leadership and having crisp “know how” to minimize further leadership gaps at different levels of the organization.
CEO succession includes, but is not exclusive to, executive retirement (as with IBM and Microsoft, for example), unhealthy behavior at the helm of an organization (i.e. HP) or unexpected/tragic circumstances (such as the deaths of Apple CEO Steve Jobs and SurveyMonkey CEO Dave Goldberg).
On July 14 2013, Steve Ballmer, then CEO of Microsoft, was quoted by Business Insider as saying, “Our board always has a succession plan.”
A few months later, on September 25, 2013, Forbes reported: “Microsoft did lack CEO succession planning…Ballmer and a board that includes Microsoft founder Bill Gates had more than a decade to develop a succession plan, one of their most fundamental responsibilities in guiding the company.”
In 2013, Microsoft was 35th on the list of the Fortune 100. Whether it has been proven that it did or didn’t have a succession plan, the fact is that there was uncertainty and doubt about it, and Microsoft had accepted unnecessary risk by apparently failing to address a controllable situation. In this day and age, regardless of the size and the type of the organization, CEO succession planning can’t be avoided. It needs to be a standard, well-structured process given the complexities of successfully building, growing and sustaining organizations. The employment and paychecks, and sometimes retirement benefits, of every employee depend on sound organizational leadership. If we keep in mind that in an instant, dramatic unexpected change can happen, it becomes clear that boards can’t delay this important process.
CEO succession planning is unquestionably the board’s duty, since one of the board’s core responsibilities is to identify and recruit the CEO. Omission or lack of clarity of a succession plan is a breach of good governance by the board and its directors. Strong accountability by the entire board (which includes the CEO), common sense and strong emotional intelligence are instrumental for the board to avoid being caught off guard, unduly challenging the success of the organization and its leadership.
A lack of a CEO succession plan is a vulnerability that can significantly hurt the organization and negatively affect confidence of employees, customers, strategic partners and all stakeholders, eventually eroding shareholder value and brand loyalty and perception. This vulnerability is unnecessary and avoidable as creating a CEO succession plan is the right thing to do—and sooner, rather than later. No legal or regulatory pressures should be required. Having a plan is just common sense.
Why is CEO succession planning procrastinated?
Succession planning for the CEO and the executive team is another board leadership issue for 2015, according to NACD’s Critical Issues for Board Focus. The sad fact is that not nearly enough boards have a succession plan for the CEO and for key leaders within the board and the executive team.
Over the years, I have been in situations with clients where the CEOs of private and public companies, or the Executive Directors of non-profits, needed to be replaced for a number of reasons. It was utterly stressful for all parties involved and significantly impacted the company’s spirit, momentum and culture when there was no plan for succession. The situation, fraught with uncertainty, was disruptive internally and externally. There was an unnecessary level of reaction adding to the existing turmoil for a situation that could have been effortless.
Succession planning becomes an “elephant” because we are dealing with human beings in the boardroom who have to deal with the fact that CEOs are not irreplaceable.
Most often, the board sees “replacing” the CEO as a daunting task, and when it is not needed, the board would certainly prefer to not have to deal with it, putting off addressing the issue, which becomes stickier over time. CEOs sometimes take succession planning personally, not eager to be replaced and threatened by the prospect even being considered. The elephant grows when boards view this planning as a potential source of confrontation with the CEO. But ultimately, both the board and the CEO have to find the maturity to do what’s right for the organization, without taking anything personally, and deal with reality.
The board’s responsibility: good governance and exemplary common sense
Imagine the consequences of not having a clear CEO succession plan– no plan for an internal replacement.
There are significant costs and opportunity costs associated with a lack of succession planning for a CEO, as well as for every leadership role within the PLT. Don’t underestimate these.
Reactive succession can create serious and unnecessary disruption within the board, disruption and confusion with management, frozen productivity throughout the organization and a diluted sales pipeline– all of which affect momentum, organizational culture and growth. The executive team and the board, as well as many lines of management, end up unduly stretched and stressed, subject to scrutiny and criticism internally and externally. And an organization that has to scramble to respond to the CEO’s departure risks losing high performers throughout the organization. The costs involved in finding a new CEO on the fly are typically burdensome, and can include hefty severance packages, unbudgeted legal and recruiting fees and emergency board meetings.
Everyone can understand how fragile and volatile an organization can be if there is no proper succession planning of the CEO. Let’s commit to be conscious of the urgency of having a succession plan for the key leaders of the PLT, specifically of the CEO.
Succession planning doesn’t have to be an elephant in the boardroom.