CEO succession is one of those topics that’s often put off for “another day.” It seems so far off, so unnecessary. However, the time to start CEO succession planning is when you don’t need it.
Even long-established companies are sometimes unprepared for the departure of the long-time company CEO. The company loses direction. In-fighting may result. Productivity is likely to drop as management focuses on the immediate problem of finding a replacement CEO – one who knows what they’re doing.
The time to start searching for a successor CEO is now. And the company’s current CEO should be part of the selection process.
With a clear, methodical approach, without looming deadline pressures, your company can ensure that CEO leadership remains firmly in place. The process of replacing a CEO should be predetermined so you have a plan to follow that will get business moving forward again.
Successful CEO Transfer of Responsibility
A CEO succession plan should include six broad areas of discussion among the board of directors, company owners, or company management.
These broad areas of effective transfer of responsibility include:
• a company board aligned with reasonable expectations
• a well-considered replacement for the past CEO
• a file of possible CEO candidates collected over the years
• a system of transferring responsibility and accountability to the company’s new CEO
• stock owners, partners, employees, C-suite, managers – all stakeholders should be on board with the decision
• review and approval by the company’s legal counsel, BoD, and others engaged in a search for the right CEO.
Whether you’re a company board member or the current CEO, it’s critical for the smooth transfer of responsibility that succession takes place over time to provide all stakeholders time to weigh options.
Succession planning must be structured to avoid potential internal conflict. Under ideal conditions, even a small business should have a contingency plan in place should the current CEO no longer be available to run things.
Where will the company look for a CEO replacement? What skills should this company leader have? What experience? Develop a written screening process and a detailed job description for a new CEO.
Spread the net far and wide when conducting a search for a new CEO. Keep a list of prospects on file – men and women you’ve met at industry events, men and women who impressed you.
Your best CEO candidate may be sitting next to you in the break room! If you’re on the company BoD, or part of the search committee for a new CEO, don’t forget the multitude of benefits promoting from within delivers.
• You already know the candidates and they already know the job, so the learning curve is shortened and you’re back to full productivity in the shortest amount of time.
• Promoting from within is great for staff morale.
• Promoting in-house builds employee loyalty.
• Sure, look around your industry, especially if you’re in search of highly-refined skills. However, you have a list of potential CEO candidates in the C-suite now.
Your company should always be on the lookout for executive talent to run the company. You’ll find these people at industry trade shows and events, at the local Chamber of Commerce meeting, or working for your company as Manager of Sales.
CEO succession doesn’t have to be traumatic. Start looking today. You’ll be glad you did when it comes time to replace your current CEO.
(For information about succession planning for family-owned businesses, visit Nevada State Bank’s Family Business Resources web page.)
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A.