The never-ending story: CEO succession planning

The board’s role in CEO succession planning

It may be a truism to say that every topic on the board’s agenda is important. But governance experts generally believe that CEO succession is among the most important director responsibilities. The CEO is usually the most visible and prominent position within a company. When things go well, an effective succession planning strategy can result in a CEO with transformative leadership potential who executes on the company’s long-term vision and adds value for shareholders and other stakeholders. And, just as importantly, business history is littered with cautionary tales of what can happen when the succession process goes awry.

Therefore, the board’s role in CEO succession planning is a unique role and one of the highest-priority activities in which they engage; after all, the CEO is one of the most highly visible positions in any company. At the same time, the position cannot be viewed in isolation; boards also need to think about the rest of the management team. Being holistic in this area means considering whether the incoming CEO, when combined with other key members of the executive team, have the set of qualities that are most valued by the company’s stakeholders.

Key questions for the board around CEO succession planning

• What candidate qualities and characteristics should boards look for when selecting the next CEO?
• What about the process of CEO succession planning—what is the board’s involvement relative to other stakeholders?
• What is the best way to manage communication with candidates who aren’t selected?
• For those who are interested in CEO positions, what are the best ways to be competitive?

Endnotes

¹ Kristin V. D. Berns and Patricia Klarner, “A review of the CEO succession literature and a future research program,” Academy of Management Perspectives, May 2017.

² Jay W. Lorsch and Rakesh Khurana, “Changing leaders: The board’s role in CEO succession,” Harvard Business Review 77, no. 3 (May 1, 1999): pp. 96–7.

³ Dennis C. Carey, Dayton Ogden, and Judith A. Roland, CEO Succession: A Window on How Boards Can Get It Right When Choosing a New Chief Executive, 1st edition (Oxford, UK; New York: Oxford University Press, 2000).

⁴ Ram Charan, “Ending the CEO succession crisis,” Harvard Business Review, February 2005.