CEO succession planning has long been identified by boards as an area of relative weakness. The challenge of “getting it right” has been further complicated by the unprecedented challenges and demands on corporate leadership presented by the COVID-19 pandemic, social unrest, the recession, and business disruption, resulting in strategic pivots and resets for many companies. All of these factors have put a premium on effective board oversight of CEO and leadership succession planning—particularly when a near-term CEO change, planned or unplanned, is at hand.
How can boards create and maintain effective succession plans in the face of uncertainty? And how does this up the ante for emergency succession plans, given the possibility that boards may need to contemplate a situation in which more than one member of the C-suite is unable to fulfill their roles at the same time? I recently spoke with board member D’Anne Hurd about how CEO succession planning is changing. Below are some takeaways from our conversation.
The profile of the CEO is shifting. In the current environment, hard skills, such as digital expertise, knowledge of disruptive technologies—including artificial intelligence and data analytics tools—and an understanding of the risks and opportunities posed by environmental, social, and governance initiatives, are imperative. However, soft skills, such as empathy, have become even more important and the ability to convey values and culture to stakeholders more critical. Boards are also looking for more diverse CEO candidates.
As Hurd noted, companies “that are solid on their values and leadership, where the CEO can convey those values, are… resilient.” In any crisis situation, if the values of the organization are adopted and ingrained throughout the company from the top down, Hurd said that people feel empowered to make decisions. “They’re able to ask themselves, ‘Would this be something my leader would approve?’ The ability to assert action based on values gives agility, and agility… is what is going to be critical for these companies moving forward.”
Boards need emergency succession plans. While an aspirational leader who can articulate the company’s culture and values is a priority in the search for a long-term CEO, in the event of an emergency succession, the company’s leadership needs are often different. In emergency cases, the right successor is usually “someone who understands the company well enough to step in immediately and settle the boat,” according to Hurd. That is a different skill set and often a different candidate is required.
Whether an emergency or planned CEO succession, Hurd offered this suggestion for boards to avoid a “horse race” that may leave management ranks depleted: see a CEO candidate in action as a leader and part of a team and make helping other candidates a part of the criteria for their success. The board should still be prepared for the reality that would be successors who do not get the CEO role may leave the company.
Searches may look different. While face-to-face meetings are preferable, the constraints posed by COVID-19 on in-person meetings, combined with the ease of virtual meetings, mean that at least some of the board’s search process may remain virtual in the future.
The pipeline and education process are also changing. The current environment may require rethinking the type of experience and skills candidates need. After the board has gone through the process of aligning the company’s long-term strategy with the desired CEO attributes to create a CEO profile, the board should measure internal candidates against that profile to identify holes in experience or skills, as well as areas for improvement. The board should then develop an education program to help candidates fill those gaps. For example, Hurd believes that all companies are, to some degree, technology companies, so the board can encourage candidates to learn more about emerging technologies and the risks and opportunities they present.
Selecting the right CEO is one of the board’s most fundamental and critical responsibilities. The COVID-19 crisis and the uncertainties and disruptions ahead have intensified the spotlight on that responsibility. Is the board prepared for the right person to step into the CEO role—at a moment’s notice—and take the reins, whether for the near or the long term?
This article originally appeared in the May/June 2021 issue of NACD Directorship magazine.