Appointing the wrong CEO comes with hefty costs, impacting morale, productivity, reputation, culture, and finances. Yet, many companies overlook CEO succession planning, as highlighted in a recent report by Odgers Berndtson. Here are some of the key pitfalls in CEO succession planning and how to address them to ensure the appointment of suitable CEOs.
Neglecting External Benchmarking: Companies often overlook external benchmarks when considering CEO successors, relying solely on internal candidates. This approach hampers their ability to gauge whether internal talent meets industry standards. Benchmarking against external candidates allows for a comprehensive evaluation, considering leadership skill gaps, fresh perspectives, and market competitiveness.
Overemphasizing Past Performance: Boards frequently prioritize a candidate's past achievements over their adaptability and long-term vision. Assessing CEO candidates should encompass considerations of the company's future challenges and the leader's capacity for agility and transformative thinking.
Assuming Internal Candidates Are Ready: Just because someone is in the C-suite doesn't mean they're CEO-ready. Leadership development and assessment are essential to differentiate between prepared and unprepared candidates.
Handling Overconfident Executives: Succession planning must challenge assumptions of executive readiness for the CEO role. Failing to do so risks appointing leaders with a narrow functional focus, hindering organizational collaboration. Ongoing leadership development and incentivization of the right behaviors can mitigate this risk.
Relying on Inadequate Data: Gut feeling shouldn't drive CEO selection. Rigorous assessment methods, including psychometric assessments and competency-based interviews, are crucial for informed decision-making. Hiring an outside firm can also help bring a level of clear-eyed assessment to the process.
By addressing these common mistakes, companies can enhance their CEO succession planning processes, ultimately leading to the appointment of effective leaders poised for success. If you’re interested in talking about succession planning, or are ready to hire in a C-Suite or Senior Finance role, get in touch with us! Email Paul, Brent, Troy, or Tara, or give us a call at 519-673-3463 or 416-847-0036.