Every organisation will have its top honcho move on at some time. Managing the transition at the top level is a sign of great leadership. The board must articulate a succession planning policy that provides for business impact analysis at the role level, i.e. analyze the various roles in the business to identify the mission-critical ones. The CEO’s role as the captain of the ship is key. For each role identified as mission critical, including the CEO or EDs, a succession strategy to ensure smooth continuity must be put in place and implemented.
At the CEO level, anyone with a seat on the executive committee, EXCO, is potentially CEO material. That is the extent of the talent pool you want to set up for effective succession planning and management, especially for roles identified as mission-critical.
For a smooth transition, you need to prepare the incoming CEO at least for eight months, before the departure of the outgoing CEO. It is recommended that the board of directors sets up a succession planning committee. This committee must work closely with the outgoing CEO to ensure a smooth handover of responsibilities, and to develop a clear plan for the transition.
One of the success factors is the transparency in the new CEO selection process. You don’t want the old CEO to leave some “ghosts in the house” which usually manifest themselves in terms of two competing camps - new CEO vs the outgoing CEO sort of new school vs old school camps, especially if the incoming CEO came from out the outside; and the internal team feels they had a qualifying candidate for the job.
Hiring an external recruitment company to work with the Board’s selection committee is recommended. The objective is to define a clear job description and ideal candidate profile, invite all candidates to apply and make the process as free and fair as possible.
The process of selecting the new CEO from a pool of internal and external candidates and choosing the replacement for their experience and skills in leading such institutions is outstanding. Thereafter, the new CEO should be provided with extensive training and support, including a thorough understanding of the organisation’s culture, goals, and regulations.
CEO succession is not an easy process.
In 2018, John Flint succeeded Stuart Gulliver as CEO, following a well-planned transition process. The transition was widely praised by shareholders and stakeholders, with many commending the bank’s careful planning and execution. The bank’s board Chairman was quoted as saying “This has been a very smooth and successful CEO transition, and we are proud of the hard work and dedication of everyone involved.” However, within just 18 months at the top, John Flint resigned from the CEO role, taking the company back to zero.
The case of Goldman Sachs
Perhaps one of the successful transitions happened at Goldman Sachs. In 2018, David Solomon succeeded Lloyd Blankfein as Chief Executive Officer, following a smooth transition process.
Lloyd Blankfein, who had served as CEO for over 10 years, announced plans to retire in early 2018, setting the stage for a smooth transition. Solomon, who had previously served. Selecting an internal candidate to replace the CEO ensures continuity, and makes the process smooth since the promoted executive understands the business, and the internal dynamics better than an outsider.
Copyright Mustapha B Mugisa, Mr Strategy. 2023 All rights reserved.
