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Blog/October 18, 2017

Board Involvement in Succession Management

Is your board of directors succeeding with succession? The board is responsible for keeping the company aligned and moving towards fulfilling its longer-term vision. However, an opportunity that many boards miss involves succession management. Succession planning is perhaps a board’s most important role; the choice of the next CEO is a key determinant of the future state of the organization. Rarely in the construction and engineering industries do we see boards fully embrace their opportunity to deeply influence the succession process. This blog post highlights some of the common weaknesses as well as ways in which boards can more effectively support succession.

What are some of the weaknesses that we see?

Boards embrace the next person in line
— Simply because a candidate is known to the current leadership team and board, perhaps through operational successes or expressed interest in the role, they are considered first. However, as the business moves into a new phase or competitive landscape, current operational stars may be a poor fit for the new reality.

Boards seek more of the same
— In firms where the exiting CEO is viewed as very successful, the board seeks a “clone” to maintain the status quo – a mentality akin to “if it ain’t broke, don’t fix it”. The current CEO may not actually have been as effective as the board believes, plus the firm’s next phase may require a totally different set of competencies in its senior leader.

Boards lack strong long-range planning
— Boards often miss the early planning and strategizing in executive selection, finding themselves at the decision-making table with a short candidate list. Successful transitions are best managed with multiple years spent building appropriate role expectations and skilled potential successors.

Boards allow the emotionally-attached CEO to defer planning
— Boards sometimes do not press the issue of timing with the incumbent CEO – hence, long-term planning is deferred. While frequently challenging due to a lifetime invested in building their business, the exiting leader must address self-replacement with courage. A high-performing board is one that tackles the toughest issues with unwavering commitment.

Boards do not get involved in looking deep and early
— Boards leave talent management issues to the executives and functionally ignore the pipeline of up-and-coming leaders who could potentially be the future CEO. A great board will push the leadership team to build internal structures and processes that help identify and develop high potential employees.

While boards might demonstrate some of these weaknesses, they can certainly change their methods to be more effective in succession management. Deeper engagement around succession will support a more intentional approach and generate better outcomes.

What might boards do to support effective succession management?

  1. Boards can help the organization clarify its identity: that which makes them unique and differentiates them from competitors. Understanding this helps define the best fit leader for a culture of this nature.
  2. Boards should keep the business focused on achieving its vison. By engaging deeply in vision work, a strong board will ensure that appropriate goals are established and progress measured. Clarifying the organization’s near- and long-term goals helps all parties – both board and executive leadership – better understand the competencies needed to capitalize on strategies deployed in pursuit of the vision.
  3. Boards need to ensure that a comprehensive profile is established for the CEO role. While the tendency might be to focus on technical skills, softer skills are crucial for great leadership, and the role profile should reflect that need. FMI recommends a process of defining the role requirements, technical skills, minimum qualifications and required competencies to succeed in the role; we call this extensive scoping document a “Peak Profile”.
  4. Board should expect the use of best practices in leadership selection – specifically, using valid and reliable tools to make selection decisions. A process of this nature involves the use of structured interviews and objective assessments. Many board interviews of CEO candidates are a collection of director-generated, somewhat arbitrary questions. By using a more rigorous, structured interview approach, questions can be tied directly to the desired competencies of the position. Further, the answers to the question will be prove more useful at predicting future performance of the individual under consideration. Boards who use a structured interview guide that includes recommendations for rating and scoring candidates will be more consistent and objective in their ratings. Adding objective assessments that are validated for use in executive selection will add to the information that the board has about the potential CEO, identifying both strengths and potential areas for development.

A board of directors could influence organizational success through many avenues not typically utilized. And while boards are typically involved in the selection of the next CEO, their engagement in the broader succession planning process is at best spotty. Business succession represents a critical board role: its opportunity to ensure strategically-aligned role development, and sound CEO candidacy decisions. When well executed, the result is a new CEO who is ideally positioned to lead the organization to a truly bright future.

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