For any company, the transition to a new CEO marks an important period of change. Regardless of whether the transition was pre-planned or occurred suddenly, new leadership is always accompanied by new ideas, priorities, and procedures. Depending on how your organization handles this process, there may be a smooth or a difficult transition ahead

CEO succession planning aims to reduce the upheaval associated with new leadership by grooming in-house employees to step into the role. Rather than searching for candidates through resume reviews and corporate politics, succession planning establishes a bench of qualified succession candidates who are ready to assume leadership when the time comes.

Benefits of CEO Succession Planning

When board members and leadership teams take the initiative to create a proactive CEO succession plan, the benefits are substantial. Not only is the development of in-house talent more efficient than hiring externally, it also demonstrates a company’s confidence in their employees. It can be motivating and inspiring for team members across the organization to watch one of their own climb the ranks to an executive leadership position. This type of professional development makes CEO succession planning highly motivating for employees.

CEO succession planning also benefits organizations by providing a sense of stability. Regardless of how the transition occurs, CEO succession tends to cause companies to panic. There’s a significant amount of uncertainty associated with such a large change, and employees are rightfully weary of unknown individuals who take charge and immediately set a new course. Having a responsible board create a transparent CEO succession plan will help ease these fears.

Other wide-reaching benefits to CEO succession planning include:

  1. Risk Mitigation: Proactively grooming two to three candidates to step into the role of CEO immediately, mid-term, and long-term mitigates the risk of forced succession. Many companies have no choice but to select someone who is unprepared for the role after the loss of previous CEO(s) to illness, resignation, or early retirement.
  2. Stronger Leadership: Whether or not the succession candidates you are grooming for CEO succession end up stepping into the role, your company will benefit from the competencies they acquire while being coached to take on executive leadership roles and responsibilities.
  3. Improved Strategic Alignment between Board and Upper Management: A proper CEO succession plan involves the collaboration of board members, existing CEOs, and upper management. This succession planning process encourages strategic thinking, alignment on goals and future priorities, and better communication. These kinds of strategic conversations are beneficial for the company and all stakeholders involved.

Advantage of CEO Succession Planning for Board Members

Several aspects of CEO succession planning benefit board members in particular. Unfortunately, governance boards, committees, and executives often neglect proper CEO succession planning for seemingly good reasons. Some see it as a distraction from daily priorities, while others consider such investments to be an unnecessary expense. Proactive CEO succession planning may cost time and money, but in the long-term it improves talent pools, employee motivation, and operational efficiency. Succession planning at any level has a net positive impact on the organization, but board members reap a few key benefits in particular:

  • More Stable Stock Values during CEO Transition
  • Increased Investor Confidence in Stability through Long-Term Succession Planning
  • Retention of High-Level Leaders

How is CEO Succession Planning Conducted?

A proactive CEO succession plan is generally created by a governance board or select committee in conjunction with the sitting CEO and a third-party consultant, such as SIGMA. This process includes assessing the existing talent pool and developing a long-term plan to augment the expertise and leadership competencies of potential candidates. As with any succession plan, the focus is on developing critical leadership skills to create stronger candidates for the role. The eventual goal is to promote one of the top succession candidates to CEO. Should need or interest arise, external talents can also be considered.

SIGMA Delivers Results

Since 1967, SIGMA has helped thousands of organizations across North America develop their leadership potential and increase organizational effectiveness. We have a team of experienced succession planning professionals who will work diligently with key stakeholders to develop a custom CEO succession plan for your company. We also offer the executive coaching necessary to help your candidates develop along the way.

If you have not yet created a defined CEO succession plan or prepared a CEO succession planning process, contact our succession planning experts below. We’re here to help prepare your company for ongoing success.

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