Four CEO Succession Decision-Making Complexities—And How Boards Can Overcome Them

Article

April 19, 2024

9 min read

Leadership Strategies Leadership Succession Board and CEO Advisory Executive Search CEO Succession Assessment and Benchmarking Development and Transition

Executive summary

There are four decision-making complexities boards face when choosing their next CEO. We explore what they are, and what boards can do to overcome them.

Justus O’Brien

Stamford

Dean Stamoulis

Atlanta

Selecting a new CEO is one of the board’s most important responsibilities—no other appointment will be as impactful on risk and organizational performance.

It’s a long-term, strategic process that encompasses complex stakeholder engagement, multi-faceted leadership implications, and uncertain market factors. Every board decision is also naturally influenced by hidden psychological forces, such as unconscious social expectations, informal relationships, or unspoken leadership assumptions, and even more so when it comes to CEO succession decisions.

This complexity is reflected in our Global Leadership Monitor—only 52% of board directors are confident in their ability to design a successful strategy for leadership succession at the C-level. The executive team’s confidence in the board is even dimmer, with 38% of CEOs and 28% of C-suite leaders feeling confident in the board’s ability to strategize on leadership succession.

To help boards address this disconnect, we analyzed data from our Global Leadership Monitor (which surveyed global CEOs, board directors, and CHROs on the state of CEO succession and stakeholder perspectives), and gathered perspectives from our board and CEO advisory experts, identifying four CEO succession decision-making complexities for boards to be aware of, their accompanying psychological traps, and our recommendations on how boards can overcome them.

Chapter 1: Underestimating strategic alignment efforts
Chapter 2: Forgetting to create sufficient optionality
Chapter 3: Distorting the leadership evaluation when assessing candidates
Chapter 4: Failing to consider the ripple effects of the CEO selection decision

Decision-making complexities at a glance

Chapter 1: Underestimating strategic alignment efforts when defining success factors

Strategic alignment takes a lot longer than you might think. Boards that start the CEO succession process early will find it easier to articulate and align on a forward-looking mandate.

Learn more about the psychological traps impacting strategic alignment and how to overcome them.

Chapter 2: Forgetting to create sufficient optionality when determining the talent universe

While boards naturally devote energy to defining and aligning on what is needed in the next CEO—the demand side of the equation—it’s also important for boards to ensure they have a strong understanding of the supply side—to set selective, yet realistic, expectations.

Learn more about the psychological traps impacting optionality and how to overcome them.

Chapter 3: Distorting the leadership evaluation when assessing candidates

As candidates are presented, it’s important for key decision-makers to actively manage biases as they conduct leadership assessments and deliberate on trade-offs.

Learn more about the psychological traps impacting leadership evaluation and how to overcome them.

Chapter 4: Failing to consider the ripple effects of the CEO selection decision

Boards may be tempted to believe that appointing a new CEO is the end of the process. For a truly successful and complete CEO succession process, it’s critical that boards understand how CEO succession decisions will cascade through the organization and work to mitigate undesired consequences.

Learn more about the psychological traps when boards fail to appreciate CEO succession consequences and how to overcome them.

Methodology

Data sourced from Russell Reynolds Associates’ H1 2023 Global Leadership Monitor, which surveyed 500 CEOs, board directors, and CHROs on the state of CEO succession and stakeholder perspectives, and interviews with 14 of our Board and CEO Advisory Partners consultants.

Authors

Joy Tan and Tom Handcock of RRA’s Center for Leadership Insight conducted the research and authored this report.

Learn more about the authors and The Center for Leadership Insight

Justus O’Brien is a senior member of Russell Reynolds Associates’ Board and CEO Advisory Partners in the Americas. He is based in New York.
Dean Stamoulis is a senior member of Russell Reynolds Associates’ Board and CEO Advisory Partners in the Americas. He is based in Atlanta.

Acknowledgements

The authors would like to thank contributors from Russell Reynolds Associates’ Board and CEO Advisory Partners who participated for their time and their valuable perspective: