CEOs are leaving their positions in record numbers, according to executive research group Challenger, Gray, and Christmas. In 2023 alone, 1,500 CEOs left their posts, the highest number on record.
How can today’s boards prepare for tomorrow’s leadership? Transition plans are never an exact science, but the following guidelines can help executive teams develop a strategy to replace their most critical members if and when the time comes.
Emergency vs. Strategic Planning
Boards can start by distinguishing between emergency and strategic transition planning. Emergency planning is exactly that: having a protocol in place in the event of a sudden departure of a critical board member or CEO. An emergency plan might involve appointing an interim position while you conduct a search for a full-time replacement.
Strategic planning involves a more careful, deliberative process. A strategic approach to transitioning seeks to find the right candidate at the right time and typically involves a longer process of developing leaders to fill these roles. Developing a robust pipeline of internal candidates can make the transition process much smoother, especially since promoting from within will ensure that the future CEO aligns with the company’s vision and priorities.
When to Start the Planning Process
When your company appoints a new CEO, there might not be much thought given to the idea of replacing that person. After all, you’ve found the leader your company needs. Why extend the search process? But ideally, your transition process should be iterative, not stopping once a position is filled.
In other words, the transition process doesn’t have a definitive starting or ending point. Instead, boards can focus on maintaining a CEO pipeline and finding opportunities to nurture existing employees to become future leaders. That’s important, because developing this kind of executive leadership takes time — years, in fact.
Developing a leadership pipeline will help your organization commit to a maturation process so that you have an available talent community to draw from when the time inevitably comes. Mentoring programs can likewise be used to develop leaders internally and may even assist in boosting company retention rates.
Internal vs. External Hiring
Every transition team will face the age-old question: whether to hire from within or enter into an executive search process.
Developing an ongoing CEO pipeline will provide you with a more qualified pool of internal candidates to draw from. A robust pipeline will shape these candidates into leaders who embody the values of your organization. You will then have a greater chance of finding internal candidates who align with your mission, values, and strategic goals.
If you choose to hire externally, you may find that the process demands both time and focus. For this reason, many boards outsource their most critical hires to third-party executive search firms.
The advantage of doing so is that these firms possess the experience, expertise, and time to devote to finding the best candidates. The flip side is that you could be adding expense to your search process while running the risk of finding a candidate who simply doesn’t match your organization’s philosophy or ideals.
Tips for Ensuring a Smooth Transition
In some ways, the “how” of a leadership transition is more important than the “when” or “why.” Boards can take steps to ensure a smooth transition process to maintain the continuity of the current business culture and even the existing leadership team.
Designate a Transition Period
Rather than creating an abrupt transition, it may be more effective to designate a transition period. During this time, the outgoing and incoming CEOs will both be in place, though with some modifications.
This period will allow the outgoing CEO to incrementally hand over more of their duties to the incoming leader, and the board can superintend this process to ensure that such handoffs are happening smoothly.
The goal, of course, is to provide maximum continuity of leadership during the transition. This process may also mollify stakeholders concerned about what changes new leaders might bring. This transition is also a final opportunity to mentor incoming leaders before passing the baton.
Immerse the New CEO in Company Culture
Boards should make every effort to immerse the new CEO in company culture. Ideally, new leaders should have the opportunity to meet as many of the company’s workers as possible. This will give the CEO a clearer picture of the company’s day-to-day operations, and a chance to meet the CEO may help workers feel appreciated and therefore more engaged.
These sorts of meetings need to happen right away, ideally within the first few weeks of the CEO’s new post. Any delay can create a disconnect between the new leader and the company’s workers, which can have a lasting impact on employee morale. Additionally, it’s vital that the CEO understands the company culture — not just on paper but in the details of the daily workplace.
Communicate with Employees and Stakeholders
At every step of the process, executive boards should strive for open, honest communication with employees and company stakeholders. Seek to bring clarity to the following key questions:
- When is the current CEO retiring or leaving?
- What is the expected transition process?
- How soon do you expect the position to be filled?
- What is the leadership model in the interim?
- What changes is the company seeking in a new CEO?
Answering these questions as clearly as possible can stifle rumors before they even happen and provide employees and stakeholders with assurance about the company’s future. Boards should develop a clear communication plan (along with a timeline for sharing the news) so that every board member stays “on message” regarding the future succession.
The Inevitability of Change
Change never comes easily. But very often, change is necessary. Learning to navigate change is an important part of every board’s leadership. The way the board handles the transition is every bit as important as the transition itself.
By communicating clearly and taking steps to preserve the company culture, executive teams can develop a succession plan that keeps everyone’s best interests in mind and paves the way for a new and bright future.