CEO transitions cause anxiety for both internal and external stakeholders. When a chief is departing, there is worry about the successor's ability to maintain positive momentum and his or her ability to change course if that's what the organization needs, according to Stephen A. Miles's recent article in Forbes.
Mr. Miles, vice chairman and managing partner of leadership advisory in the Leadership Consulting Practice at the executive search firm Heidrick & Struggles, suggests CEO transitions are so difficult because historically they have neither been planned nor executed well.
In the past, it was common for CEOs to hand-pick their successors, which often led to choosing someone too similar to the departing CEO when the company really needed a leader to take them in a new direction, according to Mr. Miles. Now, it is much more common for the board of directors to pick the CEO's successor, though they too often aim to recruit someone from an outside company instead of considering internal candidates.
"The challenge is to have a plan adaptable to the dynamic nature of the succession process and the shifting demands on the CEO position. And as with any other sort of plan, the hard part is actually executing it," said Mr. Miles. Successful execution, he suggests, comes with the CEO and board being on the same page about succession candidates.
To avoid mistakes in succession planning, consider the following succession planning myths to overcome.
1. External candidates have better potential for success. Internal candidates are usually much lower risks than outsiders, though boards tend to seek external candidates to replace CEOs. According to Mr. Miles, this could be because board members can't imagine someone who has been with the organization for years in a lower position suddenly at the helm, or they "prefer the devil they don't know to the devil they do."
2. The successor must be a "ready now" CEO. Mr. Miles points out it is only possible to know if a candidate is really "ready now" in hindsight, and that this concept should be thrown out. A candidate's "readiness" is not necessarily based on experience, either. Rather, readiness depends in part on the context of the existing leadership team.
3. Succession planning is all about the CEO spot. According to Mr. Miles, a succession plan should not be made by solely considering the candidate's qualifications and the role he or she will be entering. Successful succession planning is achieved with the careful matching of the candidate's skills sets and leadership style with those of the rest of the executive team, as well as other factors, such as the company's strategy and economic conditions.
4. A new CEO should work the same as the past successful CEO. When searching for a replacement for a very successful CEO, there is a danger in looking for a candidate that will serve as her predecessor's replica. Succession planning must always address the organization's future needs, and be open to fresh perspectives and leadership styles.
"An individual who sees the company and its industry through a new set of lenses may be best prepared to recognize and seize new opportunities," according to Mr. Miles.
5. We know a promising internal candidate so we don't need to consider external ones. Just as some boards have a tendency to automatically search for candidates outside of the organization, others have the opposite tendency. It is important to run internal and external searches at the same time, using the same forward-looking skills and experience criteria against all candidates.