Why great executive leaders are always looking for the best person to replace them?
You’re at the top of your game, helming an organization with flair and insight. Your teams are inspired and productive. Every measurable indicator has your company rocketing into the stratosphere. So laying out the groundwork for your own sidelining might seem counterintuitive.
Outstanding leaders know better. And effective boards should never be too far from a serious consideration of who comes next.
Succession ambivalence abounds
The more irreplaceable a leader, the more crucial it is for that leader to make their own succession plan a priority, and for boards to encourage and support those efforts. This means making room for the next generation of executive leaders and ensuring that they will have the experience to pivot confidently around the challenges of the future.
Yet only 35% of studied organizations have a formalized succession planning process, with only 14% rating their process as highly effective. That means less than 5% of these organizations have any confidence that they will find effective leadership past their current CEOs.
Those are disquieting figures. Any organization that doesn’t already fall into that prescient 5% should be feeling the pressure creep.
According to Harvard Business Reviewresearch, nearly a quarter of Fortune 200 companies are led by CEOs who have been in place for a decade or longer, ten of whom are founders. CEO tenures of that duration aren’t limited to Fortune lists either, they’re very much in line with the pre-pandemic average. It’s a matter of common wisdom that the longer a leader is in place, the harder it will be to move on from them.
With such a significant segment nearing the end of their CEO runs, it’s hard not to feel some trepidation for the looming leadership crisis.
The trap of the great executive leader
The bind of having iconoclastic leaders is that it’s difficult to think of anyone else in those roles.
For boards, this too easily becomes a crisis of confidence and imagination, resulting in half-hearted efforts to ‘clone’ existing executive leaders, rather than looking for the right leader for tomorrow’s challenges.
For the leaders themselves, it can be an even more complex negotiation of ego, loyalty and foresight. On the one hand, we can feel irreplaceable and ambivalent about the urgency of the succession search. Or — embracing the succession imperative — we might feel that elevating a trusted lieutenant is the right thing to do, even as we question their aptitude for standing at the top of the pyramid.
In fact, the right leader for tomorrow could be unlike anyone we’d be likely to consider on our own.
Bad succession is no succession at all
Missteps along the road to succession can have catastrophic impacts.
The succession of Jeff Immelt to GE’s top spot saw the company go from being the world’s most valuable company to falling below the threshold for inclusion in the Dow Jones Industrial Average. Immelt had been at the helm for 16 years by the time GE reached the bottom of that 35% decline. It’s a matter of debate whether he was the wrong choice to take over from Jack Welch in the first place or whether he simply needed to be succeeded himself a good deal earlier.
Ill-conceived successions can also lock organizations into unproductive rinse/repeat cycles. Bob Iger’s two-year term as newly reinstalled Disney CEO and Howard Schultz’s fourth succession attempt at Starbucks are fine examples of how volatile iconic CEO transitions can be.
This challenge is no less volatile for smaller companies. Executive-level changes can have even more outsized effects on less expansive organizations.
Leaders for the challenges of the next era
Finding the right person to succeed a vaunted leader is no easy task. The process needs to be approached with appropriate reverence and tact. But, above all, it must be approached with objectivity and foresight.
Today’s business environment is nothing like what’s looming over the horizon. The massive upheavals we’ve been heralding for years under the banner of Industry 4.0 are just now starting to hit their stride.
We are at the bottom of a sigmoid curve of revolutionary disruption. For most of us, figuring out how to manage the ascent up that curve will be test enough. But the next generation of inspired executive leaders will have to be the ones who are already focused on what lies beyond the arc.
Succession as competitive advantage
For today’s great executive leaders, the key outcome of successful succession planning isn’t just selecting the right candidate, it’s about helping the company identify who they should be looking for. This means understanding current trends, anticipating future disruptions, and — perhaps most importantly — taking the initiative to develop the right team and culture to support tomorrow’s leader.
Bringing on an executive talent search partner early in the succession strategy can significantly smooth the process, expand the breadth of candidates, and minimize conflicts within the organization.
In particular, CEOs and boards will want to consider the following as they formulate their succession strategies:
1. Better too early than too late
This provides sufficient time to test internal candidates with a variety of responsibilities, moving them through two or more leadership roles as they prove themselves. And outside talent can be folded into the organization on this timeline, giving them room to flourish or founder.
2. Challenge your perception of a successor
Given more breathing room, candidates of greater diversity and wide-ranging experience can be explored as options.
An extended succession runway also offers opportunity to nurture and seriously consider “skip-level” employees, plucking talent from a large internal pool of potential successors beyond the C-suite ranks. There’s growing evidence that leapfrog leaders, candidates plucked from deeper roles in an organization, often outperformed more conventional choices.
3. Map the way forward or get lost
The board and CEO must establish their roles in the succession-planning process. Initially, the board should act in a supportive capacity, but as the transition approaches, they should take the lead.
The CEO should understand that they will no longer drive the succession decisions and may find this transition difficult if it is not adequately prepared for. If steps have been taken to ensure a successful transition, the outgoing leader should be confident in the process.
4. Question any assumption and welcome dissent
C-suites and boardrooms can often fall prey to bias traps. This is no less true when it comes to succession planning — and, potentially, it’s far more impactful.
Boards should embrace a diversity of perspectives to challenge assumptions, use a red team approach in stress testing decisions, and ensure all reservations are considered — it is common for board members to silently oppose candidates, feeling their views won’t be valued.
5. Don’t undermine the leader you choose
When replacing a successful CEO, boards often try to maintain continuity by keeping the same management team. This rarely works, as the new CEOs are not empowered to succeed.
Research suggests that when the outgoing CEO continues as board chair, there is a higher chance of the new one being dismissed early.
For a successful transition, the board must empower the incoming CEO to own the role from the start. Simply put, you can’t give your new CEOs a flying carpet if you’re already pulling the rug out from under them.
Lean into a successful succession plan
Effective succession planning is crucial for any organization that wants to ensure continuity and success past the tenure of its current leaders. It requires a proactive, objective, and forward-thinking approach.
Start the process early, challenge assumptions, consider diverse candidates, map out a clear path, and empower the incoming leader to succeed.
By prioritizing succession planning, companies can ensure that they have the leadership they need to navigate the challenges of tomorrow and beyond.
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