CEO tenures are falling around the world, and, as a result, companies are planning CEO successions more frequently. Yet, CEO succession does not often go to plan. It’s a complex process, and even the boards that plan out every step often fail to account for the underlying human dynamics at play.
Below, we examine the most common pitfalls and emotional landmines for several key stakeholders who interact throughout any CEO succession process: the board, internal candidates who are being developed for the job, and the outgoing CEO.
The board
A common pitfall of the CEO succession planning process is thinking that a subset of the board can be tasked with managing it. This process failure matters because of the emotional underpinnings of change management and human behavior: People value having input and being heard. In our experience, if the full board is not involved—at a minimum up front to identify and align on the key criteria for success, and then interviewing the compelling finalists and having a voice in the final decision—frustration and resentment toward the subset of directors who are leading the process emerge. Unchecked, these feelings of being excluded may unconsciously contribute to strained dynamics in the boardroom regarding the succession process and the candidate chosen. Worse, those emotional currents can lead to divisive conversations or suboptimal support for the incoming CEO. The latter puts the new leader at a disadvantage out of the gate.
Involving the full board promotes objective decision making versus decisions informed by emotion (and bias). As humans, directors are prey to unconscious bias and emotion, but when all are involved in the process and there is rigor around it, negative and unhelpful emotions are minimized and the stage is set for a constructive, objective, respectful, and successful decision-making process.
Internal candidates
When the board is not aligned on the criteria for the next CEO or has not accurately identified executives who have the expertise and leadership skills to thrive as a CEO, it risks putting leaders who aren’t truly viable through a selection process. If not selected for the top job, these leaders may feel misled, which can ultimately lead to them leaving the company and upending the executive team while it’s already in the midst of transition.
A complicating factor is if sitting CEOs—with the best of intentions to retain a valued leader—have indicated to someone that they’re next in line, forgetting that they’re a single voice on the board. Sometimes they’ve even communicated this to more than one person.
It can also be challenging when the board determines someone isn’t a viable candidate—now or in future—but the company wants to retain them in their current position. In these instances, the board may focus on developing that person for new or expanded opportunities in support of the new CEO.
The outgoing CEO
The outgoing CEO often struggles emotionally. CEOs are used to being very intellectually stimulated, solving problems, having an impact, and seeing results; there’s an adrenaline rush to the job. When that’s fading away, it can feel like a real loss. They may feel depression, anxiety, or loss of purpose. These feelings are exacerbated if the board initiated the transition rather than the CEO themselves. As accomplished as they are, it can be quite hard to name, let alone discuss their feelings, and this is another reason some are not constructive in the process.
Tips for success
Companies can mitigate these emotional landmines by getting ahead of them. A few best practices stand out:
—Ensure all directors are aligned on the steps of the process and the future CEO profile: The board chair should clearly articulate the steps of the process and how all board members will be involved, starting with agreeing on a profile grounded in the business strategy.
—Identify and develop two or three internal candidates: The current CEO is often the first to identify possible successors, followed by the wider board. The overlap in these lists can help narrow down the options and help the full board agree on a few candidates to offer development opportunities to and include in a formal succession process.
—Communicate clearly with candidates about the process, setting expectations and reinforcing how valued they are: Try to determine what the candidates have heard and clarify why they’ve been chosen for development and what the next steps will be. Reinforcing their value throughout, especially if they ultimately aren’t chosen, can help mitigate the inevitable disappointment all but one candidate will feel
—Continue to empathize with the outgoing CEO: This is one of the most significant life changes in that person’s life, so understanding the sense of loss and uncertainty as they approach their transition can help them manage their emotions constructively to optimize the succession process.
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CEO succession is the most important job of the board. Yet, underestimating the myriad and often intense emotions that can arise among the key stakeholders in the process can make the experience very challenging. It doesn’t need to be. By understanding the human dynamics that are at play below the surface, the board can design and lead an effective process that yields the selection of the best qualified candidate, retains valued internal leaders not selected, and maintains constructive working relationships among directors.
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