The Realities of Succession

No two companies are the same—and CEO succession plans are equally varied. However, there are some common threads that can be drawn across all cases. Best practices that transform a risky situation (such as a change in leadership) into a successful one.

We’ve seen it all. And we’d like to share some of our experiences with you here, to give you an idea of what CEO succession planning looks like in real life.

CONTENTS

1. Keeping steady through upheaval

2. The search for a globally literate successor

3. Narrowing down a close race

4. A hard act to follow

1. Keeping steady through upheaval

Public-owned • Historic family business • Multinational

Faced with a tricky merger and an industry-stalling pandemic, a world-leading consumer business partnered with us to set up a CEO succession plan to find a leader capable of keeping the business strong through the present and into the future.

The leadership challenge

The organization had just acquired another company and was in the middle of merging and integrating it. Adding to the complexity of the situation was the fact that the current CEO was experiencing health challenges.

The board knew it would need some expert assistance throughout the succession process—particularly as the company was a decades-old family business. They knew they needed to keep the company thriving but had to decide whether to look to family members for succession purposes.

The options of a family member, internal successor, or entirely new face each came with pros and cons. The challenge lay in identifying the biggest strengths of each candidate—and what route would be best for the company and the family in the longer term.

The succession process

The board enlisted RRA to get expert advice and support throughout what ended up being a four-year-long CEO succession process.

To start with, the board agreed with the best practice we suggested. So, we crafted an ideal leader profile through workshops with the board and other key stakeholders. This profile explored the current, immediate, and future needs of the business, as determined by the board’s direction and the general movement of the industry and society.

We were then able to benchmark the internal candidates against external executives. We compared all prospective candidates against the profile, with each undergoing an assessment interview that included behavioral and industry expert psychometrics profiling, a 360° survey, and a debrief with the current CEO and the CHRO. The interview with the board came later. 

Core deciding factors that set candidates apart were their strategic thinking skills and their ability to make complex decisions—they would need these attributes to steer the company confidently. Later, we further pruned candidates by their communication skills (their ability to face members of the board and family and have candid discussions) and their ongoing performance to date. This was especially necessary as, amid the process, the onset of the pandemic plunged the company into net-negative earnings.

The resolution

When the board needed to find a new CEO unexpectedly, they were ready. They knew their options, including each candidate’s strengths and weaknesses, and were able to quickly decide on the next leader for the business. The new CEO swiftly stepped into their new role, with the support of the board and our leadership advisors.

To date, it’s been a big success. The new CEO has flourished in their role, helping to rebuild the company’s financial performance.

We’re continuing to support the new CEO in their role as a trusted partner to the company, running leadership team effectiveness programs to help develop the new executive team.

1. Keeping steady through upheaval
2. The search for a globally literate successor
3. Narrowing down a close race
4. A hard act to follow

The wider situation

The company, a multinational manufacturer of materials handling equipment, was facing a challenging situation. Their current CEO—who had led the company through a successful digitalization journey—had privately announced to the board their desire to step down from the role in coming years. However, as there was no clear successor, they intended to stay long enough to assist with the succession process.

At the time, there was no concrete succession plan in place, and the board was uncertain of the suitability of existing internal candidates. While great in their individual roles, their suitability to lead a multibillion dollar, multinational corporation was in question.

The chair of the board reached out to RRA for assistance. Having worked together previously to fill other executive positions, the chair was comfortable with the team at RRA and was confident that they would be able to offer expert advice, coaching, and support throughout the succession planning and CEO search process.

The succession process

The process began with a thorough planning session to get early alignment on success criteria. The RRA team conducted stakeholder interviews to determine the company’s future plans (both in the short and long term) and create a Leader Profile. This included the skills the next CEO would need, what kind of experience would help a candidate succeed within the role, and how they would benchmark and identify the right candidates.

The company’s specific needs were especially important here. The bulk of their sales came from highly technological, off-the-shelf industrial products used in warehouses, but they also have a intralogistics solutions segment. The right CEO would be able to meet the needs of both these business avenues in addition to service, spare-parts and maintenance efforts.

Once the conditions for success were determined, the team assessed all the internal candidates to determine their compatibility with the CEO role (as outlined in the Leader Profile). All candidates would be judged against this ideal leader profile rather than against each other—ensuring that the candidate selection process remained focused on the identified needs of the company as opposed to a Candidate A vs Candidate B situation.

Fairly quickly, the board’s initial thoughts were proven to be accurate—the executives in the leadership team were great at their jobs, but weren’t quite right for the upcoming CEO role. They could have been prepared with training, however it was determined that the company would do better to keep them in their roles and extend outward in their search for CEO candidates.

The RRA team cast a wider net, keeping the Leader Profile in mind. A number of candidates were identified and, after preliminary interviews, a shortlist of six was trimmed down to three strong candidates.

This included the former CEO of an industrial conglomerate, an up-and-coming executive working in an adjacent industry, and the CEO of an industrial equipment manufacturer with a background in agricultural machinery manufacturing. Each of the candidates worked in similar industries and had unique experience suited to the board’s ideal leader. One had specific experience with managing large projects and diverse product portfolios. Two managed companies with billions in revenue and had specific experience with managing large projects and diverse product portfolios.

All were strong candidates, and finally one was chosen.

The resolution

First, the internal candidates. Though it was decided that they were not ready for the first round of succession, there was definitely huge potential in the team. As a result, the entire executive leadership team was entered into a year-long coaching program. The program was designed to help them develop the skills they would need as CEO candidates in the future and to help them work better as a cohesive leadership unit.

The company also expanded their management team based on the finding of the internal assessments, promoting two worthy candidates to executive positions in order to create a strong future line of succession.

As for the selected CEO candidate, they immediately began slowly onboarding to the role over the course of half a year. They used this time to acquaint themself with the company’s global operations, traveling the world to meet regional and divisional heads around the world.

Since their appointment, they’ve already begun to make positive changes through refining KPIs and reporting structures and finding new opportunities for improvement.

1. Keeping steady through upheaval
2. The search for a globally literate successor
3. Narrowing down a close race
4. A hard act to follow

The wider situation

The company was at a turning point. The incumbent CEO was approaching the end of their tenure and the board decided they were ready to focus on CEO succession.

They found themselves with four viable internal candidates to consider—but no clear succession plan in place. They partnered with the RRA team to implement a structured plan to develop the four viable internal candidates before making a CEO appointment.

The succession process

To identify the best candidate, the traits and potential of the candidates were weighed against a leader profile that was created to focus on where the company needed to go, not just where it was today.

RRA used the leader profile to help create a focused, bespoke internal development program for the four internal candidates. This development program would help to boost candidate skills where they either lacked experience or needed additional training. Courses concentrated on, among other things, CEO-specific leadership and decisioning skills, enhancing communication and stakeholder management, and building better leadership teams.

Throughout the process, RRA used 360-degree feedback, ongoing appraisal, psychometric examinations, feedback from HR executives and the board, as well as insight from the incumbent CEO (who played a relatively involved role) to monitor candidate progress and create a clear portrayal of their strengths, weaknesses, and capabilities for the board to review.

Partway through the process, two of the four candidates dropped out. With only the strongest two candidates remaining, it became a head-to-head decision for the board to make. Development continued. Despite this, the final candidates stayed equally matched. With six months remaining, external candidates were brought in to benchmark against. The internal options remained clearly the strongest—and, after a seminal presentation by both candidates where they put forth their vision for the company’s future, a recommendation was made by RRA and an appointment was decided.

The resolution

The internal candidate was chosen for a number of reasons. They had potential to embody the company’s idea of the ideal CEO, they had broader management experience, and the board saw they had grown extensively during 18 months of coaching.

They soon began onboarding for the role and became involved in an RRA-designed ongoing development program.

With the merits of a CEO succession plan having been made clear, and while it is hopefully far in the future, the company soon began making plans for its next CEO succession process—with a focus on building a diverse pool of candidates.

1. Keeping steady through upheaval
2. The search for a globally literate successor
3. Narrowing down a close race
4. A hard act to follow

The wider situation

With COVID-19 in full force and being a business that relied heavily on in-person consumer traffic, the company found itself under even more pressure.

They had a super-successful CEO who was preparing to retire, and no clear candidates apparent to the board and market to take up the mantle. Fortunately, the incumbent had given enough time to conduct a proper succession process—one that would allow for the thorough development and preparation of potential candidates.

Due to the incredibly high stakes, the company decided to fully commit to taking on an advisor to support its CEO succession effort, and to carefully ensure that the company was best set up for even further success after their beloved CEO departed. They wanted the news of a CEO transition to bolster the company share price, not diminish it.

The succession process

The process started with a tough question: If leadership for the company wasn’t going to be the star incumbent CEO, what did the ideal future CEO look like? RRA and the board determined early on that they must not create an exact replica of the standing CEO. They proceeded to create a new ideal archetype of leadership that would guide the company into the future—with a capacity to adapt at the center of it.

With that said, there was obviously something to learn from the standout performance and popularity of the incumbent CEO. With the CEO’s support, RRA and the board were able to codify elements of what made them so special and factor that into development.

There were a handful of internal candidates that were favored for the CEO position, and it became clear that there were differing factions of support among leadership. As RRA initiated the evaluation and development of the candidates, their objective presence helped to quell issues of bias and evoke trust in the process.

Externally, RRA conducted a review of the market and produced a “dream list” of high-profile candidates that could fit the bill. Ultimately, it was determined that the internal candidates better suited the ideal CEO archetype and were a better choice.

The resolution

Ultimately, with RRA’s consultation, the board selected the candidate that became most aligned with the ideal CEO archetype over 18 months of development. The public declaration of the appointment became one of the most widely celebrated market- and media-celebrated CEO transition announcements in the country. It set a new benchmark and standard for how boards would be expected to conduct such processes in the future.

RRA has been contracted to stay on indefinitely as an advisor to assist with ongoing CEO succession planning. This shift—from a one-off succession support process to perennial succession planning and advisory—is ideal for the company, as they will continue to have a strong line of internal candidates and potential successors long into the foreseeable future.

1. Keeping steady through upheaval
2. The search for a globally literate successor
3. Narrowing down a close race
4. A hard act to follow