CEO Succession: How do I Find a Successor?
Introduction:
One of the most critical responsibilities of a CEO is to ensure a smooth transition of leadership when the time comes to step down. A well-planned CEO succession process is essential for maintaining business continuity, investor confidence, and the long-term success of the organization. However, many companies struggle with this process - a study by Stanford University found that only 54% of companies are grooming a specific successor, and 39% have no viable internal candidates16.
As a CEO, it's never too early to start thinking about your eventual successor. Whether you plan to retire, move on to new opportunities, or unexpectedly need to vacate your position, having a solid succession plan in place is a must. In this comprehensive guide, we'll walk through the key steps to finding and preparing the right successor for your role as CEO.
Steps to Finding a CEO Successor:
Start early
The CEO succession planning process should ideally begin as soon as a new CEO takes the helm19. Identifying and developing potential internal successors takes time, often years. Starting early allows the board and CEO to take a long-term, strategic view and build up a pipeline of strong internal candidate1. Even if the current CEO has no near-term plans to depart, instituting a succession planning process as a matter of good governance is a best practice.
Align the board on future CEO criteria
Before considering specific candidates, the board and current CEO need to agree on the skills, experiences and characteristics that will be required for the next CEO to successfully lead the company into the future19. This "success profile" should be forward-looking and tied to the organization's strategy and vision1. Some key questions to consider:
- What direction is the company headed and what will it take to get there?
- How might the business context and competitive landscape evolve?
- What leadership style and cultural attributes are needed?
Gaining alignment on these CEO criteria provides a roadmap for succession and focuses candidate development1.
Identify potential internal successors
With future CEO requirements defined, the next step is to assess current executives and high-potential leaders to see how they stack up. The board and CEO should cast a wide net, looking two to three levels down in the organization, and consider diverse candidates19.
Formal assessments can help evaluate candidates' strengths, development areas and readiness against the target profile19. Involving objective third parties in this process, such as an executive search firm or leadership consultants, can yield valuable insights.
Invest in candidate development
For each potential successor identified, create a customized development plan to close any gaps and round out their experience in preparation for the CEO role1. Job rotations, stretch assignments, mentoring, and education focused on building general management and leadership capabilities are all powerful development levers19. The board should check in regularly on candidates' progress.
Benchmark against external talent
While a strong internal successor is often preferable, best practice is to also stay abreast of potential external candidates, as a point of comparison17. Conducting an external talent mapping exercise every couple years allows the board to pressure-test the readiness of internal candidates against the outside market19. In some cases, the board may ultimately decide an external hire is warranted, if internal options aren't sufficiently prepared or if a change agent is needed.
Manage the transition
Finally, once a successor has been named, it's critical to implement a thorough transition plan to set the new CEO up for success. This should include a substantive orientation to the role, key stakeholder introductions, and ongoing mentoring and support from the board19. Clearly defining the outgoing CEO's role, if any, post-transition is also an important consideration1.
Conclusion:
In today's fast-paced and ever-changing business environment, a well-orchestrated CEO succession is more important than ever. By taking a proactive, disciplined approach to succession planning - starting early, defining future needs, developing a bench of strong internal candidates, judiciously leveraging external talent, and managing the transition closely - companies can minimize risk and position themselves for long-term success, even in the face of leadership change. As a CEO, one of the greatest legacies you can leave is a high-performing successor who is well-prepared to take the reins.
