When our Firm initiates a new CEO search or Succession Plan, we work with the owners and/or Board of Directors of the client company to build an “Ideal Candidate Profile.” This profile, while useful, is a target which can seem unrealistic when you start to see real live candidates.
I often simplify the Profile to a short list of Knowledge, Skills and Abilities (KSAs) that are critical. This becomes a “must have at a minimum” list. We recently produced a list of critical “musts” for a community bank CEO search. Listed below are the five traits that we all agreed were needed by any bank CEO of the future:
Ability to see local community needs and think outside the “Banker Box” to envision how the Bank can satisfy the unmet needs.
Ability to inspire all constituencies with a vision that creates value for customers, staff and shareholders.
Keen risk management skills to manage risk under all economic scenarios.
Ability to manage a wide diversity of products and service lines.
In-depth understanding of how technology is changing the marketplace.
Given enough time, some of these critical KSAs can be developed with internal succession candidates, but there must also exist within such candidates a propensity to think broadly and deeply enough to be simultaneously analytical, creative and eloquent. Often, an outside candidate is able to strengthen an already strong internal team with these KSAs.
I would be happy to present this and other succession planning topics to your owners, Board and/or your Management Team as an introduction to our Succession Strategy, Executive Development and Executive Search services. Call me at 919-732-2716 or complete the request form below and I will reach out to you.
Boards of Directors have a difficult, but critically important job to do with CEO succession planning. If a Board selects the right person to succeed a departing CEO, shareholders, employees and regulators will be happy with the results. On the other hand, a failure with CEO succession can bring about the failure of the enterprise. If it is not THE most important thing a Board does, it is very close.
I am often asked whether a retiring CEO should be on the Search Committee. There are times when the answer is an obvious “no.” However, there are situations wherein the Board feels more comfortable with their role if they have a long-term, successful CEO heavily involved in the process. My 35 years of participation in these processes has taught me that no two companies are exactly alike, so there is no right or wrong answer to the question. To me the ideal is for both the CEO and the Board to have important, but different well-defined roles in the process.
The most productive role for a CEO in succession planning starts the day they become CEO. From the beginning, a CEO should start preparing their potential internal successors by assessing strengths and weaknesses, getting them training, development and coaching as needed while exposing them to the Board. The CEO should be sure the Board understands the efforts being made to develop successors internally and frequently share candid assessments with the Board. If this work is done properly, the Board should have a good idea of their “bench strength” in case of an emergency and when it is time for the CEO to retire.
CEO and Board work together until decision time
The role of the Board (usually with the help of a Search Committee) is to select the best candidate from inside or outside the company. If the departing CEO has done his/her job, the internal candidates should be strong contenders, given their intimate knowledge of the company and its culture. Nonetheless, today, most Boards feel like it is their fiduciary duty to look outside the company as well as inside. So, most often the Board or Committee will have some good internal and external choices. When it comes time to make a choice, a long-term, successful CEO should be available to the Board, but should take a passive role except in extenuating circumstances.
The departing CEO will justifiably favor the internal candidates, and any external candidates the CEO brought in early. However, the departing CEO is most often not going to have to live with the consequences of the selection. The CEO can still be on-call with the Board to answer technical questions about the job, but the sorting and grading of the candidates should not include the CEO unless there are strong reasons to include him or her. Sometimes, the Board will choose a successor a year or two before the departing CEO steps down, in order to give the new CEO time to learn from the departing CEO. In other situations, the departing CEO will be staying on in a Board role, which has its own issues that we will discuss in a future blog.
For now, suffice it to say that including a CEO in the final selection of their successor is fraught with issues and should be avoided unless there are compelling reasons to keep them involved to that extent. If it would help your Board to have a full discussion about this issue, call me at 919-732-2716, or click here and give me your contact information.