Brian Cavanagh CONSULTING

Should I stay or should I go – how to avoid the pitfalls of CEO succession planning

Should I stay or should I go? At some time in their career, chief executives will have to ask themselves that question. All chief executives have a sell-by date. Some are better than others at being aware of it. And better to ask the question of themselves, rather than have it be answered by the board!

However, in this article I want to explore a way beyond that simple binary question. And by way of an example, I want to focus how this could benefit the not-for-profit sector.

The creative tension between being stretched and developed, and being overstretched, can be just as counter-productive as that feeling of being underwhelmed, with every day as Groundhog Day. And this applies as much to CEOs as any other employee. Indeed, it could be argued that is even more important that CEOs feel motivated in their role. After all, they have a critical to play in sustaining staff morale and motivation.

This is an issue for CEOs themselves, and for boards of their organisations. Understanding their ambitions and in turn, the expectations of their boards from them, often falls to the Chair, in the first instance. But other than extraordinary breath- taking incompetence, or a significant personality clash, it is less likely, at least in the not-for-profit sector, that a board will ask the CEO to move on. However, is it enough for both parties be satisfied that their expectations and ambitions are being met? Does that result in putting a cap on ambition at the expense of ‘steady as it goes’? Are there conversations between the key actors in terms of sense checking and on a regular basis?  

And if so, how does such a conversation take place, other than initiated by either the upcoming retiral of a CEO, or their seeking a move to another post?

Which brings me to the thorny question of CEO succession planning in for not-for-profit organisations. The corporate sector is characterised by frequent turnover of CEOs. According to a recent Harvard Business Review report, lasting on average of 18 months, and is often driven by shareholder expectations not being matched by dividend returns. Unlike that sector, not for profits do not regard avarice or the lack of sufficient avarice as grounds for a parting of the ways. In contrast CEO length in post is much longer and much more stable in the not-for-profit sector.

So let me ask you to imagine you are a board member of a not for profit, and you have been told that the CEO is moving on. What would be your first reaction, ‘that is a surprise, I thought they were happy here’ or, ‘that is great news’? Either answer is revealing. The first shows that the board is not aware of the CEO’s wants or situation. The second highlights that the board has unresolved issues with the CEO. Now CEOs choosing to move on are not unusual occurrences, and by way of illustration, I want to share an example I have experience of. And whilst the story does not mirror the reactions above, it does highlight how the board were blindsided as to what was going on for the CEO.

A longstanding CEO indicated that it might be time to move on. Loss of spark and no longer growing in the role were cited as primary reasons for thinking about a new post. After taking the organisation through a complex reorganization, and setting it on a path of steady growth, the role had become too operationally focused, and every day had become like every other. Motivation was lacking though the CEO continued to work hard. At the same time, loyalty, and personal commitment to the mission of the organisation, to which he had so much involvement in shaping, made it difficult to move on.

Despite regular review sessions with the Chair, there was no discussion on the personal ambition and motivation of the CEO. Instead, it focused exclusively on performance. At this stage CEO had not indicated his thinking to the Chair, and by extension to the board.

On digging deeper, it was clear the CEO had no personal goals and ambitions for himself. They had become subsumed with running and leading the organisation. Thus, the CEO had no process to assess whether to continue in the post, and what would keep him in it.

To assist, I helped him design a personal ambition plan. The objective was to provide a framework to explore what needed to change to enable continuing in the role and what would offer professional satisfaction, and at the same time strengthen the organisation. It became clear that a workload that focused on developing new projects, and growing the organisation, not being responsible for operational oversight, would retain him in the organisation.

A facilitated meeting with the Chair and members of the remuneration committee took place. After the initial shock of hearing about potential move on of the valued CEO, it forced an overdue discussion on succession planning. As a result, it came up with an interesting solution. This involved the CEO in a new development role and given a year sabbatical to try it out. And during that period would demit being CEO for a year. This created an interim CEO post which was filled internally.

One year on, the former CEO took the opportunity to move on a development role in another organisation. The internal candidate is now operating as a highly effective CEO. And the promotion of an internal candidate has been a strong motivation for ’emerging stars’ in the organisation.

In this instance this was a good story. However, not all organisations would be able to offer a sabbatical, in effect paying 2 CEO salaries. Notwithstanding that, the board did respond in a creative manner. Thus, there are several learnings to share for this story.

Firstly, it is not enough to assess and review the CEO on their performance only. Have regular conversations on professional and personal goals with your CEO. Get to understand their ambition, and their measure of personal and professional satisfaction. Be big enough to recognise that your organisation might not have enough to keep them after 10 years, and what might you have to do to keep them? And is that palatable to the rest of the board?

Secondly, as the example indicates, start looking at other senior staff. Who are the emerging stars that have the attributes to become a CEO? What should your organisation to develop them and nurture them, and if something dramatic happened, is there someone internally who could step up to the role?

Appointing a new CEO can be an expensive business. Again, there is clear evidence outlined in the Harvard Business Review report cited earlier, of no guarantee that an external candidate automatically proves better. Indeed, it highlights that the performance of internal candidates were significantly better, than external candidates recruited specifically to ‘turn the organisation’ around. I hold no preference for external over internal but suggest that the board should not automatically overlook the internal talent base.

In the final analysis, the important issue to be begin the ‘what if’ conversation within your board now. Do a risk and scenario planning analysis. Make your annual appraisal with the CEO one that include succession planning from both perspectives. And regularly sense check.  So, if you have not had that conversation, why not begin now?

Feel free to tell me your thoughts and share your experiences on succession planning.

Scroll to Top