5 Steps for CEO Succession Planning

Businesses depend on effective leadership. That is one of the main reasons that organizations need to have a solid succession plan in the event their CEO leaves. Yet, while many understand succession planning is important, research has found that companies could do more to guarantee a smooth transition.

Research from Deloitte found that 86 percent of leaders see succession planning as an urgent or important priority. Yet, the same study found that just 14 percent felt it was done well. Unfortunately, many organizations either avoid succession planning or develop a plan that does not sufficiently consider the individuals involved, it should come as no surprise that in 2020 there are a whole host of succession planning tools that companies can make use of to ease the burden.  

The why of succession planning

There are several benefits that organizations gain by having a succession plan in place regardless of whether the CEO has indicated they are planning to leave or not. These include:

• A list that includes a wide range of qualified leaders
• More investment into making quality decisions that impact the direction of the company
• Opportunity to enhance employee retention of top talent by signalling an opportunity to move up in the organization
• Employee confidence in the organization’s ability to grow in the future
• Provides stability, which impacts the company’s place in the market

However, many of these benefits are not fully realized by organizations. Often, succession planning discussions are simply avoided by those who should be developing them. While there are a number of reasons for this, as researchers at Deloitte discovered, it is important that executives overcome these stumbling blocks. Keep in mind that if your organization does not have a succession plan already in place, you are facing a huge risk if something unexpected happens. 

Best practices

Succession planning for CEO positions doesn’t require a handbook or a template. Rather, the way that an organization handles the issue should fit into the company culture. This is something that is bound to be different for every business. Yet, there are a few steps that organizations can follow along the way. 

1. Focus on the long term. When creating a succession plan, it is important to realize that it is a long-term plan for the company. By keeping the focus on developing quality leaders over the years, organizations will be able to develop successful succession methods.
2. Regular reviews. Organizations should be regularly looking at employees’ talents and skills and assessing where they are best employed. Having discussions with qualified talent about succession opportunities is a good way to gauge their interest and capability. Keep up-to-date records on accomplishments and performance of employees who have been identified as possible future leaders. 
3. Create a team. Having a team dedicated to developing a succession plan is one of the best ways that an organization can guarantee success. Those involved should include company leadership but there should also be room for some outside voices as well. These can be individuals like lawyers, accountants or other consultants that can provide some objective feedback about the process. 
4. Write it down. Even if your organization is more informal in its approach, it is important to have some documentation around your succession plan. Write down key information such as:

• The succession timeline
• Who is involved
• How is the succession plan going to be communicated to stakeholders?
• Ways to gauge succession plan success

Keep these documents updated so that the succession plan doesn’t go stale. 

5. Training. Once you have identified leadership candidates, it is important to start some training with them. This can be formal sessions like workshops or classes but should also include more informal guidance such as mentorship. In fact, many CEOs who hand-select successors often develop mentor-mentee connections with these individuals. This can provide an opportunity for the current CEO to share their wealth of knowledge and experience. It also allows the potential successors to understand the role and build some networking connections. 

CEO selection 

Deciding who will be the next CEO can be a delicate process. Many times the current CEO will pick one or two individuals that they feel are qualified. These individuals are then given extra training and guidance in the event that they are selected as the next CEO. 

But it doesn’t always work out that way. 

Sometimes one or both of the leaders-in-training decline to take the position when it is offered. Perhaps they have both moved on to other opportunities with new organizations. It may also be the case that they are no longer interested in the opportunity. 

Additionally, it is not unheard of for the direction of the company to change when it comes time for CEO succession. For example, if an organization has been experiencing a large amount of growth, it may need a candidate who has the skill and expertise to handle the situation. 

While most organizations prefer to promote from within, there may be a need to find a qualified candidate from outside the company. This can prove to be a positive game-changer. Hiring someone from outside the current organization can breathe new life into the company. Organizations that want to improve on things like diversity or technological capabilities might find a more talented individual who has not already been modelled by the company culture to be the best fit. 

Conclusion

Succession planning is a very important part of an organization and its future. In the situation that your CEO leaves unexpectedly, it can create panic, chaos and disorganization. Therefore, even if there is no indication that your CEO will be leaving in the near future, having a succession plan in place is key to providing stability and security for those in the organization. Having open discussions about succession planning within your organization is the first step to developing a successful plan. Keeping focused on the long term, having a succession planning team in place and helping train and develop qualified candidates are other ways that organizations can help develop a successful succession plan. 

For more information on how mentoring can fit into your succession plans, contact Together.