A successful transition

Choosing and training the successor CEO of a corporation is an essential duty of the new corporate governance that seeks increased transparency at the time of looking for No. 2

Juana Duque (*)
Assuring a successful transition of an organization’s leadership has ceased to be the primary responsibility of the active CEO, as used to be in the past decade.

Solid corporate governance demands that non executive directors assume co-leadership of this process with the active CEO and demand a higher exposure of the internal candidates as well as the inclusion of external candidates. 

This change represents a point of no return towards increased transparency and integrity of corporate governance. Interest groups and the society in general clearly demand, reward and increasingly sanction the discretional handling of high impact critical processes.

Social conscience regarding the meaning of leadership and its implications is ever growing. And even though we are still witnessing anti-examples, we have reached a point of no return with respect to the opening of information, the ruthless exposure of reality and an increasing demand of consequences for our own human actions.

What is and what isn’t this new way to define and support the inauguration of the new CEO?

1. Even though this is a political process, the primacy and the decision lie in the sustainability of the organization. It is the joint task of the active CEO and Directors with a common purpose: the future of the organization and its extended impact. 

2. Having a solid managerial train does not mean having a ready successor. It’s about anticipating. A replacement process requires from 18 to 24 months to minimize the risks of change. 6 to 12 months will be used to create a pool of candidates and to select one, and the remaining months will be used to make the transition between the new and the retiring CEO. 

3. Being the current CEO does not mean knowing what the required profile is. It’s not about looking for a successor for today’s business or assuming a generic CEO profile. It’s about creating a CEO profile that will be capable of modeling the organization that will reflect the Business Model, the Vision, the Strategy, the History and the projected corporate culture in the future.

4. Successful executives in their current roles are no guaranty of success in the CEO role. It is fundamental to evaluate internal and external candidates through multiple sources and instruments and determine their gaps with respect to the future CEO profile. 

5. Experience as an executive is not enough. It is necessary to create opportunities for candidates to be exposed and interact with the Directors during the selection process; this is an important source of diagnosis information.

6. The process of “taking charge” is not instantaneous. Once the successor has been identified, then a plan shall be agreed between the retiring CEO and the incoming CEO, approved by the Directors, which should allow: 

a. Educating the candidate in corporate governance issues,

b. Transferring key relations for the business,

c. Gradually increase responsibilities, typically in 6 month blocks defined in
a very structured way.

d. Defining and acting on the implications for the executive team and the organizational structure generally.  

e. Creating an organizational communication plan that clarifies and energizes collaborators with regard to the new leadership.  
Implementing a succession process in this manner minimizes the risk of change, grants more transparency to the interest groups and prevents bias.

During the transition, it requires an active CEO that is able to display, in the words of David McClelland, its Socialized Power, that is, the ability to project beyond himself, to impact the successor so as to make him feel strong and capable of doing that which he must do.

Furthermore, and based on experiences with a large number of organizations throughout the five continents, fundamental value must be granted to begin thinking in the organization of the future and its impact in the market, the customers, the environment, society and its workers…, that is, understanding the heart and mind of the organization.
This understanding will inspire the succession process and will become an essential guide to find a candidate that will successfully lead the construction of the organizational future as well as its impact on society.

(*) Director of Consulting for the Andean Region
Hay Group