Who’s Next? Best Practices for CEO Succession Planning

A great CEO is essential for a high-functioning company. And if you’re happy with the CEO you have, you probably don’t want to think of having to replace them.

Discussing CEO succession planning can be uncomfortable, but it’s essential if you want to protect the interests of your company and its shareholders. Here are some general tips for succession planning.

Understand the Difference Between “CEO Succession Planning” and “CEO Search”

Some people mistakenly use these terms interchangeably. However, before you start the succession planning process, it’s important to know the difference. 

CEO succession planning is generally an ongoing process. If you’re doing it correctly, you’re not waiting for your current CEO to leave or start planning an exit — you’re constantly on the lookout for high-potential people.

Your CEO succession plan should work like a pipeline. If at all possible, you should have an idea of who could step in as CEO in an emergency, who will be ready to be a CEO in five years, and who may be ready in 10 years. With succession planning, you’re not usually looking for outside talent — you’re focusing on current employees.

On the other hand, a CEO search is more immediate. If you’re conducting a CEO search — usually with the help of an executive search firm — it’s because you have an immediate opening for a CEO and don’t have anyone suitable for the job. 

This is a situation you might find yourself in despite great succession planning. People can quit, change careers, or take themselves out of the CEO pipeline with no notice.

In a CEO search, the focus is primarily on outside candidates. These candidates are often executives at other companies.

Make Sure the Board Is on the Same Page

It’s easy to jump ahead and start naming potential candidates. But before you do, make sure your board of directors (or your selection committee, if you’re having a committee choose your successors) is in agreement when it comes to the profile of your future CEOs. Otherwise, it becomes more difficult to narrow down your list. 

Ask yourselves the following as a group:

  • What type of skills should the candidate have?
  • What type of personality should they have?
  • Is there a certain amount (or type) of experience a candidate should have to be considered?
  • How will the company’s needs change in the future? What skills will a candidate need to meet them?

It’s also important to clarify who is in charge of managing the succession planning process. If there’s no designated person or subcommittee, it’s easy for each board member to think someone else is handling it.

Start Planning as Soon as You Find a New CEO

Hiring a new CEO is something to celebrate. After an arduous talent search and screening process, the last thing you’re thinking about is hiring a new CEO — but that’s exactly when you should begin succession planning.

The process of identifying and training potential CEO replacements takes time and thought. If you already have some possible candidates in the wings, take some time to review their training and qualifications. 

In many companies, the profile of an ideal CEO shifts over time. You’ll want to make sure your potential replacements have all the skills needed to step into the role with confidence.

Ultimately, it’s best to view CEO succession planning as a continuous process. When you’re constantly cultivating new leaders, you won’t have to scramble if you unexpectedly lose an executive.

Don’t Focus on a Single Candidate

If you’re new to succession planning, it might seem like the best approach is to identify a single employee who shows promise, work with that employee, and have them as a ready replacement for your CEO. It’s fine to do that as part of the planning process, but an effective succession strategy doesn’t involve just one person.

As mentioned above, if you want to look out for the best interests of the company, it’s essential to have a multi-person lineup. When you have more than one potential CEO in the pipeline, you can effectively mitigate risk while still training your business’s future leaders.

Train and Mentor Future CEOs

Identifying potential new CEOs is a major part of succession planning. However, it’s not enough to put together a list of names and then wait until it’s time for a new CEO. 

It takes time for an employee to develop into a competent executive, and the best way for them to develop is to work alongside current C-suite executives. Through mentorship and continuous learning, future executives will be able to confidently take over when they’re eventually promoted.

You also don’t need to wait for an employee to reach a higher rank in the company to start preparing them. If you identify outstanding employees, promote them, and work closely with them, you’ll be able to build your company’s next generation of leaders. 

Don’t Exclude the Current CEO From Planning

Succession planning with a CEO is kind of like estate planning with an older family member — it can feel uncomfortable, and it’s tempting to avoid it altogether. However, just like a solid estate plan ensures a family’s financial security, succession planning is in the best interests of the company’s long-term stability.

If you want your succession plan to be the best it can be, you need to make sure your current CEO is part of the process. Of course, you’ll want to be sensitive in the way you approach the topic. You don’t want to alienate your current CEO, and you also want to make sure that the CEO is willing and able to mentor potential candidates.

Find Security With the Right Succession Plan

No one wants to think about suddenly losing their company’s CEO. But the business world is full of surprises, and every company should prepare for the unexpected. 

When your selection committee agrees on the right criteria, allows plenty of time for selection and mentoring, and focuses on more than a single candidate, you’ll be well on your way to having a robust succession plan.