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A smooth transition of CEOs 'crucial responsibility of a board'

In an age of enhanced corporate governance it may come as a surprise to find that one of the most overlooked responsibilities by many corporate boards is the effective execution of sustainable succession planning.

A transition in the leadership, from one CEO to another, is a vulnerable time in the life of a business.

There are many questions to be asked: If the outgoing CEO has had a good run, will the new appointee be able to continue the legacy? If they've underperformed, will the incoming CEO be able to correct the errors swiftly?

Ensuring a smooth transition is one of the most crucial responsibilities a board has to its stakeholders.

If you ask most HR directors, they will tell you that they have a succession plan.

Dig a little deeper and it soon becomes clear that while they may have a detailed plan, little or none of it has actually been put into practice and much of it does not address the real needs of the company.

To examine this effectively one must look at the worst case scenario from the outset.

The wrecking ball approach

This occurs where a new chief executive is appointed and decides to take out much of the executive management team because he/she feels that they are surrounded by a team lacking in the ability to take the organisation forward.

Immense pressure is then placed on the new incumbent to perform to an exceptional level to firstly please the board, secondly, bring the troops of the corporation with them on this new journey, and thirdly, the pressure in making the correct new hires takes significant time and adds stress to the new chief executive. The organisation can, as a result, start to creak.

Picking the wrong person for the role

When this happens at CEO level, the result can be catastrophic. Many major corporations are suffering as a direct result and are struggling to survive today.

On the other hand, those corporations that have navigated through uncertain times and are showing growth, have had the right leadership in place.

This begins with the correct leadership at senior management level. Don't get me wrong, we are happy to work with a board and CEO to clear out the management team and work diligently to make the correct replacement – after all, it pays well – but putting the sufficient building blocks in place in the management team at an early stage, pays huge dividends, particularly in times of crisis.

Bad Practice

Boards often neglect to look at their human capital, failing to see the ideal successor right under their noses.

Other times, they may wish to play it safe and go with someone they know rather than introduce an unfamiliar face to the table.

An executive search process should reach far and wide, often across a number of locations internationally. When choosing a successor all options must be considered.

Unfortunately, many corporations neglect a thorough external process and as a result they often end up with a sub-par replacement at the helm.

Putting the right process in play

There appears to be no movement at the helm and the executive management team seems robust and accountable: the corporations that are most successful on a global scale in the long-term take this moment in time to assess their future needs – just when everything seems to be excelling internally.

By conducting an internal review, a board can identify those who fit the criteria outlined for the future CEO and begin to groom them for the role.

Healthy internal competition has huge benefits for the development of the individuals on the executive management team.

Significantly, such a review can also highlight shortcomings of such individuals.

To fill this void, they may look to recruit externally, thus bringing a new dimension and skillset to the business and allowing them time to develop the new appointment into a potential future CEO via alternate positions.

Often the external executive search partner is given a brief with a specific job description, but also added to this is the reference that there is no harm in attracting an executive to the table who can bring so much more than just the fulfilment of the job spec requirements.

This is true succession planning and challenges the executive search partner to deliver to the highest standard and earn the fee for which they have been commissioned.

John Harty is a director at Harty International, a leading Irish Executive Search firm with a global reach of 35 offices across 24 countries.

Irish Independent