SUCCESSION: WHY YOUR NEW CEO NEEDS A NEXT IN LINE 

When your current executive team is thinking of moving on, it’s already too late

The arrival of a new CEO is a momentous time for any business. It signals a shift in direction, and a recalibration of priorities around the new executive team and its leader. It’s an all-encompassing moment that can dominate a business’s whole operations – but as well as focusing on the here and now, companies should also look to the future, and their next CEO. 

Even before your current chief executive has their feet under the desk, smartly-run businesses should be looking to find who will be their next leader. “Succession planning is becoming more and more important,” says Emily O’Rourke, head of research at Wilbury Stratton, a global talent research firm. “But it can look a little bit of a strange concept if a CEO has a five- or more-year tenure, because if you’re doing succession planning right, your CEO is going to be thinking about their succession pretty much from the point they’re in that role.” 

Preparing for your exit on arrival may seem counterintuitive, but it’s vital to ensure a good transition of power for the next time a shift in leadership is necessary at a company – as well as a measure often required by shareholders as part of good fiduciary duty. 

Wilbury Stratton has advised numerous FTSE 100 and Fortune 500 companies on succession planning exercises, including strategic reviews of the entire executive team. Some of these leaders will inevitably have been in post for only a short time. “If you look at that from an outsider’s perspective, it looks quite hostile,” says O’Rourke,” but it’s a huge, fundamental part of the leadership remit to have that successor.” 

Replacing a vital executive with a strong successor is not something that happens overnight – and finding the right person for the role can take time. For executive team succession programmes, it takes up to three months of focused research to map out and qualify a shortlist of potential succession options. Organisations rarely have the internal capacity to conduct this process, which is where Wilbury Stratton’s dedicated research services come in. 

“We find companies get into a lot of problems when they’re reacting to replacing leadership positions rather than preparing,” says O’Rourke. “If you find yourself in a position where a leader is exiting, even with a six-month notice period, that’s not really enough time to get someone to step into that leadership role.”  

"The intuitive sensing of a developing issue is far more valuable than traditional management information."

That matters when considering the fiduciary duty that businesses have to their shareholders – and more importantly, to regulators. “Any firm that’s regulated, from oil and gas suppliers to financial services firms, there’s a requirement that those positions that are regulated have to have a pipeline attached to those roles,” she says. 

Beyond that, “it’s just very good business sense,” O’Rourke says. It helps evidence to employees that a company is well-run and thinking of the future – and better yet, can act as a method to retain high-flying talent by demonstrating to them a potential pipeline of progression in their career to the c-suite. O’Rourke points to big businesses like Unilever who manage their key talent in global positions across functions to build their knowledge, as well as maintaining their succession plan. 

Most businesses claim to have a succession plan in place or in the embryonic stages, but digging a little deeper can often uncover there’s little detail involved beyond a high-level acceptance that leaders will eventually need to be replaced. That can often result in companies struggling to compete in the market for skilled talent – leading to sub-par replacements for key figurehead roles. “Hiring in senior leaders from elsewhere can become a very, very expensive problem really, really quickly,” says O’Rourke. It can also narrow the pool of talent from which you can select, with knock-on effects on diversity and inclusion. 

What companies ought to do is develop an ongoing process of evaluating what’s needed from executives and their replacements, and that is revisited every six months to ensure things are up to date, according to O’Rourke. “That’s not something that’s done very often, in our experience, by big corporates,” she says. Organisations rarely have the tools internally to identify, manage and curate datasets pertaining to succession. Data often sits statically on Excel, for example, once an initial scoping exercise is done. These processes are not robust enough to constitute a serious succession planning programme. 

But Wilbury Stratton’s expertise can add that robustness and rigour to searching for successors in a way that internal processes run by time-poor talent leaders can’t. “It gives them confidence to know they’ve found the best of the best for whatever that role may be,” says O’Rourke. 

That confidence can radiate throughout companies – allaying fears that some may have about succession planning, that it could prove a surreptitious way to manage them out of their role. “Companies that have really strong succession planning in place have a culture of talking about succession,” says O’Rourke. The best companies who are most prepared for smooth successions integrate succession planning into KPIs and target setting for their employees, making it built-in to what people should be doing as a leader. 

And that goes for businesses, too. “It’s reasonable to view it as a failure of leadership to come to the end of a term and not have someone in place to succeed you,” says O’Rourke. “People think about it the wrong way round.”  

KEY TAKEAWAYS 

1. PREPARATION IS KEY 

Ensuring you have pre-planned an executive succession is vital, as it helps you remain competitive in a changing world. 

2. CREATE A CULTURE OF SUCCESSION 

The idea of succession planning can ruffle feathers - so making sure you’re clear as to why things are happening and when, is vital to ensure that employees and executives feel valued. 

3. BROADEN HORIZONS 

Proper succession planning enables businesses to select from a broader, diverse range of candidates - ultimately helping your business grow in a better way.