The Proactive Board: How to Build a Perpetual CEO Succession Pipeline
According to Fortune magazine, a CEO’s average tenure at a company is 9.2 years. Considering most organizations' lifespan, that isn’t long. However, the business must ensure that a high level of service is maintained regardless of who is at the helm.
Therefore, the board often guides a plan for the development of internal and external candidates that moves beyond a reactive search. This article outlines the steps involved.
Who is Responsible for CEO Succession Planning?
The Board of Directors is primarily responsible for succession planning. They will determine the characteristics to look for in a candidate, launch and guide the talent acquisition process, and oversee onboarding. They may partner with a talent advisory firm for guidance.
The current CEO will also play a role, providing insights to help the board understand what to look for. They may offer talent recommendations and suggest candidates.
Building a CEO Succession Pipeline
Building a succession pipeline requires the following steps:
Defining the Ideal CEO
The company should outline the ideal CEO based on the following characteristics:
Key Competencies: The soft and hard skills the candidate should possess.
Vision and Culture Alignment: The CEO should naturally align with the organization’s vision and culture.
Potential Gaps: Gaps may exist, but the company should have a plan for further development to address shortfalls.
Organizations should create a document outlining the ideal CEO and keep it on hand for review. The document may be updated over time and should be used as a guideline for creating ads and conducting interviews during the search process.
Creating a Development Plan
A development plan should also be maintained and updated throughout the current CEO’s tenure, ensuring it aligns with the company's needs when the current CEO resigns. It may include:
Stretch Assignments: These assignments are designed to push the candidate outside their comfort zone, helping them build resilience, broaden their skill set, and increase visibility across departments. Examples include new market initiatives, acquisition integrations, and change management programs.
Mentorship & Coaching: The new CEO may be mentored by the resigning CEO, other company leaders, or a third-party team.
Formal Education: The company may provide workshops, training programs, and classes to ensure the new CEO can handle the required tasks and excel in their role.
Stakeholder Engagement: The new CEO should engage with stakeholders through board meetings and listening tours, helping them build strong relationships and understand diverse perspectives throughout the organization.
Launching the Search
A reactive search must be integrated when the CEO announces their resignation. The process typically includes:
Setting a Budget: Determine the CEO’s market rate for compensation, benefits, and other perks.
Find potential candidates: Use professional networks, executive search firms, and online job sites. Often, companies choose to hire internally, which can help streamline the search and training processes. However, hiring externally can bring new perspectives to the company.
Vet and Interview Candidates: During the interview and vetting process, the hiring team will conduct interviews, check references, evaluate cultural fit, and assess skills to determine the ideal candidate.
Make an Offer: Once a final decision is made, the company will extend a compensation offer. Some negotiations may be necessary. Once all parties agree, they move on to the onboarding process.
Tips for Successful Succession Planning
Make it an Evolving Process: Succession planning should be continually refined. It should evolve with your company’s needs and prepare the organization for unexpected turnover.
Focus on External and Internal Candidates: Internal candidates may be easier to hire and onboard, but companies should not discount external candidates that can bring value to the organization.
Bring the Current CEO into the Process: It may seem awkward to speak to your current CEO about succession. After all, no one wants to think about losing their job. However, these conversations can bring valuable insights to succession planning.
Create a Successful Process: Your succession planning should establish clear timeframes for hiring and training. It should set criteria to ensure alignment among stakeholders and decision-makers. The plan should also establish a thorough interview and screening process, development and progression plans, and safeguards for emergencies.
Monitor and Improve: Continue to monitor and improve your succession planning based on your current CEO and evolving business needs.
Partner with an Experienced Talent Acquisition Firm
CEO hiring is a careful process that requires time and experienced insight. Stahl Recruitment can lead the way with a consultive, professional, and ethical approach. We can guide external and internal hiring within the rail industry, ensuring you find the best candidate for your leadership role.
Contact us for the talent acquisition planning you need to guide your team to success.
