When a new CEO is needed, it is crucial to make the right choice because the fate of the affected company depends on it. Many questions have to be answered:
Do we have the right person to lead the company in this very industry at this very time? Will she or he cooperate with the board or rather fight against it? Do we have suitable processes so that not only the next CEO, but also the next but one can grow up, be identified and appointed?
We have observed, worked or talked to many board members, executives and experts. On this basis, and with the help of our own experience in mediation and consulting, we have developed ten principles that executives and board members should consider when planning for top management succession.
1. Think of the importance of a clear strategy.
“If you don’t know where you want to go, you may not get there,” American baseball legend Yogi Berra once warned. Berra was famous for such “yogi-isms”, but this one reveals an essential truth: Undefined strategies and ineffective leadership usually go hand in hand. On the other hand, board members and executives who know where their company should go are most likely to be able to get it there.
2. Implement an evaluation methodology.
What is needed is a system that connects the company’s strategic requirements with the skills and performance of each candidate. The focus of this performance assessment should be on integrity and ethics, team building, excellence in execution, shareholder return and appearance – as well as the ability to work together on the board.
3. When evaluating the current CEO, consider how well the company is building succession planning for the next generation of top talent.
We asked the HR managers of several large companies whether they had a coherent system in place to evaluate and reward the current CEO’s performance in terms of succession. And even where such a system existed, it was often said to be too weak to serve as an effective guide for the CEO. Take care of it as soon as possible.