Who’s up next?: Be prepared to build bench behind CEO

Edward Gilligan, the president of American Express and the heir apparent to the CEO, died recently during a business trip. Boards normally plan for the potential demise of a CEO, not the second in command. Now, American Express has to accelerate the development of its upper level managers in the search for a new number two

You cannot anticipate death, but you can prepare your senior executives for the challenges of the next levels of responsibility. In baseball, you need to have strength in the middle of the lineup and a strong bench and bullpen. Yes, you will lose some of your future starters as they lose patience and through free agency. That is the price you pay for being prepared.

In October 2010, Stanford University performed a succession planning study and found 10 percent of companies surveyed rated their succession planning as excellent. Thirty-eight percent rated their plan very good, leaving more than 50 percent feeling their succession plans where less than good, or even poor. That indicates that one out of every two companies is ill-prepared for the death or departure of a key executive.
Other key statistics were:

  • 14.4 percent of the respondents said they had a viable successor ready to take over in the next 12 months.
  • 19.3 percent of the companies had established benchmarks for succession candidates.
  • 36.8 percent felt extremely or very strong about the strengths of the potential successors when asked if they understood the strengths and capabilities of the next two levels below the “C” levels.
  • 50 percent of the companies surveyed had a detailed job description for the CEO position.

Standford’s report stresses that there are steps that you can take to prepare your company should there be a need to replace the CEO or her successor internally as a result of a death or resignation. They are as follows:

Define what the future needs of the company are in terms of its next president or CEO.
Whoever is selected or recruited to be the next president or CEO should have the skill sets needed to lead the company in achieving the vision, mission and objectives set out in the strategic plan.

Assess internal candidates against a forward looking profile.
Candidates from within the company should possess the necessary leadership qualities to stabilize the ship and navigate the potentially turbulent waters ahead. They need to step in where the previous president or CEO left off and sail the corporate ship on the correct course.

Communicate with key candidates.
The board must keep the key candidates informed during the evaluation and selection process to prevent anyone from jumping ship. It is not unusual when a company is going through the turmoil of replacing a key executive that competitors will try to “raid” its team.

Evaluate candidates based on viability versus “ready now.”
In a process similar to Major League Baseball, you need to determine who is ready for the “big show” and who needs more seasoning. You don’t have a great deal of time to mentor the new key executive. They need to hit the ground running or you may lose your competitive edge and the market’s confidence.

Ensure that the new CEO has a robust on-boarding.
When the successor is selected, the “on-boarding,” also known as the new hire induction process, must begin. This individual must be brought up to speed as quickly as possible by his or her direct reports and the board. If he or she is from outside the organization, he or she must be immersed into the corporate culture and assimilated into the business.

If American Express cannot prepare a member of its starting lineup to hit cleanup, it must look elsewhere for a viable candidate. This begs the question, “What are you doing to protect your company from the ‘sudden impact’ of a death of a member of your starting lineup?”

It’s time to take inventory of your talent pool and identify your next leaders. If you cannot isolate your next leader, you need to find a viable candidate from outside your organization. If you are running a fast-growing entrepreneurial firm, you need to identify someone who can continue the journey you have mapped out as the CEO.

– Cary Silverstein, MBA, is the president of SMA LLC and The Negotiating Edge. He leads a group that provides services in the areas of strategic planning, negotiation training and conflict resolution, with offices in Fox Point and Scottsdale, Ariz. He can be reached at (414) 403-2942 or at csilve1013@aol.com.

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