Succession Planning or Picking Names Out of a Hat?
According to new research at Rock Center for Corporate Governance at Stanford University, more than half of companies today cannot immediately name a successor for their CEO, should the need arise. Boards spend, on average, only two hours a year to discuss this topic, and less than 50% have a written document detailing the skills required for the next CEO. There are large planning and communication gaps, but we have found some helpful suggestions for boards.
If a succession plan exists, but it is intangible, companies can feel a false sense of security. Boards should draft a succession plan one to three years prior to needing one. This is so candidates can be groomed to acquire the knowledge and skills necessary to handle the responsibilities of the role if and when it falls upon them. It is also important to create open and direct lines of communication between the board and potential internal candidates, while keeping the “runners up” happy, just in case.
Small companies may think they lack the time to do such planning and development, but a good process only requires a few hours up front and a steady focus over time. A little advanced planning and organizational development, when combined with an effective external search process, will offer your company the most viable pool of candidates. It’s much better than picking names out of a hat.
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