Principles of CEO Succession Planning

September 1, 1999
The National Association of Corporate Directors (NACD) recently established a Blue Ribbon Commission on CEO Succession Planning to develop guidelines that a board could use in developing - or selecting - the right CEO for the company. An extensive report entitled, “The Report of the NACD Blue Ribbon Commission on CEO Succession” includes five key principles that companies should follow when involved in succession planning. The report explains:

  1. Succession planning must be driven by a strategy. Succession planning is not just about picking the next CEO. Nor is it merely about picking a talented executive. It is about creating a fit between what the company must do strategically and the person who can best implement the strategy.

  2. The goal of CEO succession planning is to bring in the right leader at the right time. Many boards make the mistake of selecting a CEO based on a track record. It’s tempting to assume that past success is a guarantee of future performance, but it’s an incomplete way to make a decision. The skill sets and talent that enable a person to run one business satisfactorily don’t necessarily guarantee that he or she will be just as successful as your CEO.

    Second, using past performance as the primary criteria for hiring a CEO fails to take into consideration what the company needs to do to move ahead and whether the candidate is the right person to meet those specific challenges. Factors that should help determine who is the right person at the right time include industry dynamics, the company’s health and competitive position, and the corporate culture.

  3. CEO succession planning is a board-driven, collaborative process. Succession planning is one of the board’s two or three most important tasks in its role of protecting the shareholders’ interests. Selecting a new CEO must be a collaborative effort with the existing CEO, but the board must have final accountability. Board members must also understand that it is also their responsibility to ensure that a long-term plan is in place that can ensure continuity of leadership.

  4. CEO succession is a continuous process. Because CEOs can leave unexpectedly and tragic events can happen without warning, board members must keep succession issues top of mind and make sure that emergency successors are always available.

  5. The board must ensure that the CEO develops and encourages a talent-rich organization. The board not only has the right and responsibility to name the CEO’s successor, it must insist that the company have a cadre of talent on hand that is appropriate for moving the company forward. One of the hallmarks of a well-run company is that it has developed executive bench strength from within.

Workforce, September 1999, Vol 78, No 9, p. 76  Subscribe Now!