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Leadership Succession: 4 Key Board Considerations

Published on July 21, 2020

 “A person who does not worry about the future will shortly have worries about the present.”

Ancient Chinese proverb

Here is a sobering thought: over 50% of non-profit and private sector boards do not have a formal CEO succession plan in place. The obvious question is: Why? Put simply, many boards find leadership succession planning difficult. Consequently, leadership succession planning ends up on the bottom of the board’s list of priorities.

For boards without succession plans, deferral quickly turns to panic when a CEO (and especially a long-tenure CEO) announces their departure unexpectedly. In these instances, the board pushes for a “quick” process to fill the vacancy.

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We’ve experienced this phenomenon first-hand in our work with boards of directors. Boards believe their organization is a great place to work. They also assume there is a large, qualified pool of candidates who will leap at the opportunity to come and lead the organization. There is the old saying: “if wishes were horses…” Good CEO succession and search processes take time. And, in the global war for talent, the idea that qualified CEOs will leap at the opportunity to at your organization is wishful thinking. Great CEO candidates have options. You need to demonstrate why your organization is the best choice for the right candidate.

So, what can boards do to prepare for leadership succession? Here are four key steps:

1. Start planning for the short-term

Boards need to know who can step in on an interim basis to lead the organization in the event the CEO leaves unexpectedly or becomes ill. This starts with identifying candidates below the CEO who have the capability and experience to step up and in. In smaller organizations, the list of qualified candidates below the CEO might be very small – or possibly non-existent. In that event, the board should determine whether a director could step in, or whether there is a qualified external candidate who could step in temporarily.

2. Begin planning for the long-term

Start by taking stock of the organization. What challenges and opportunities are emerging? Where is it at in its lifecycle? What kind of leader will the organization need in the future? What is the profile of the new CEO? Long-range succession planning is a vital part of the Board’s role. It shouldn’t just be developed and left on the shelf. The Board should review and update the plan periodically. This will ensure it reflects the organization’s changing needs.

3. Nurture talent inside the organization

In sports and war, it’s often said that the “best defence is a strong offence.” The same is true in succession planning. The best defence against unexpected leadership changes is to have a solid plan, and a pool of qualified, trained leaders within the organization. Boards should work with their CEOs to identify upcoming internal leaders and create robust development plans.

4. Develop your “employer value proposition”

It may seem odd at first blush to talk about an “employer value proposition”. But consider this: in a global war for talent, your board is selling a vital commodity (the CEO role) to a market of qualified candidates who have options. So, think about what makes your organization the stand-out choice for the right candidate. It may not solely be compensation. Maybe it’s the organization’s public reputation. Perhaps it might be the organization’s people and culture. Or, it could be the opportunity to lead an organization that does well by doing good. Regardless of what drives your “employer value proposition”, consider it a critical part of your organizational story. And, start developing it now.

Finally, don’t rush. Be prepared to invest time and effort to develop a leadership succession plan that will ensure your organization remains resilient and well-led – now and in the future. A good, carefully-managed planning process sends a strong signal internal signal about the board’s commitment to the organization’s people, its mission and the clients and communities it serves.

Contributors

John Kay
Client solutions in strategy, governance, leadership, and finance

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