By Derick Hughes – Derick.Hughes@EthicalBoardroom.com
Transitioning from one CEO to the next is a pivotal moment in an organisation’s history. It is essential that the transition occurs smoothly so that the confidence of investors, business partners, customer and employees is maintained. This will furthermore provide the incoming CEO with a stable platform from which to drive the company successfully forward. A well-designed and properly executed succession plan is the key to an effective and smooth transition.
Whether planned or unplanned, CEO vacancies should be prepared for in advance by the board and the nominating committee of the firm. In either case a succession plan should be in place in advance of when it may actually be needed to avoid being caught out and left in a situation that may harm the future of the company. It is the responsibility of these parties to ensure succession planning is made a continual priority as a necessity for risk mitigation. Further to this proper succession planning brings with it numerous beneficial by products such as providing a framework that drives senior executive development and aligning top tier leadership at the enterprise with the strategic goals of the company. Additionally, through this continuing analysis of the job requirements, the current CEO is provided with the opportunity to adjust their role with changes exhibited in business conditions and strategic requirements.
A smooth and successful transition is extremely important and once a final selection of candidate has taken place it is vital that a rigorous transition plan be set up so that the new CEO has the opportunity to take up the role with a strong start. A solid transition can span up to a full year, and historically, with companies who have been successful in this area involves a number of phases.
The first phase is normally a time in which extensive knowledge sharing takes place. The outgoing and incoming CEO may meet on a frequent basis so that a comprehensive discussion may take place. This discussion may go into operating style and expectations of board members and senior management, as well as other stakeholders (including investors, customers, analysts, creditors and regulators). Certain members of senior management will be included in some of these discussions. The second phase of a smooth transition would involve a proper communication phase with relevant stakeholders. This would be a briefing period, in which the new, incoming CEO may be introduced to the organisation’s stakeholders in a series of sessions set up for the purpose of relevant information-gathering for all parties. This will allow the departing CEO to pass the role over to the new CEO smoothly and mean the incoming CEO will be able to build support and good will with various related parties. A sensible third phase would be to develop a written transition plan alongside the involvement of company senior management. This could be developed as a detailed timeline to facilitate an orderly transition of responsibilities. For the case of an internal appointment this phase may include the elevation of that executive who will be taking over as CEO. Following this, the next phase would be to share the details of the transition plan so that it is effectively communicated both externally and internally. This will ensure that a clear set of expectations have been established and will send a message of stability to all related parties. Recognition of the achievements of the outgoing CEO can be an important component of this communication as this can help gain the support of parties who have become attached and loyal to the outgoing CEO. Finally the last phase of a smooth transition will be to develop and strengthen relationships with board members – both individually and collectively. It is important that the new CEO begins to understand and connect with board members through one-on-one meetings. For CEOs appointed internally they should be phased into board meetings gradually and increasingly over time. As much as possible, the outgoing CEO should guide and coach the incoming CEO throughout the transition process.
Ultimately managing the CEO succession procedure is an important board responsibility. Succession and transition planning should be carefully and continuously reviewed. The costs of the damage to the company from shortcomings in this process can be large and long term and should be avoided as much as possible.
Accreditation Photo– Photologue