Resources: Blog Post
CEO succession: Is the real problem board effectiveness?
It would it be reasonable to expect that a key role for a company’s board is to conscientiously execute a defined succession strategy for developing top talent.
But that may not necessarily be the reality. Even more alarming is the fact that one in three CEO successions fail, according to McKinsey & Company.
Having recently listened to David Gibbons and Paul Gryglewicz at SCN’s June session on CEO succession planning, I decided to take a deeper look into what appears to be a common inadequacy at many corporations.
Almost one-half of companies with revenue greater than $500 million have no meaningful CEO succession plan in place, according to the National Association of Corporate Directors. And only 20 per cent of HR executives are satisfied with their top-management succession processes, according to a Corporate Leadership Council (CLC) survey of 276 large companies last year.
Many expert articles can walk you through an effective and rigorous succession strategy to identify top talent and best-fit CEO candidates. However, I found less information or guidance on how a board can positively implement and operationalize effective talent management strategies.
Inevitably, I began to wonder if the perceived lack of CEO succession planning pinpoints a far greater problem: the strategic effectiveness of the CEO-board relationship. Could there be a systemic problem for some public companies in the dysfunctionality of the board itself?
I found a must-read article in the April 2013 Harvard Business Review: “What CEOs Really Think of their Boards” where CEOs reported “directors too often put self-interest and self-preservation ahead of shareholder interests.”
In this same article, William Donaldson, former SEC chairman and Aetna CEO, is quoted as asking, “What’s really going on in that boardroom?”
A critical component of the Sarbanes-Oxley requirements is boards need to regularly evaluate their overall performance. However, boards also need to assess individual board members.
So where and how are the analytics on the effectiveness and performance of the board and directors captured, and who should conduct them? And how robust and effective is the board’s self-evaluation process?
Kassy Corothers’ article “A focus on board performance” in the February 2015 edition of Corporate Governance highlights the need for boards to rethink and take a more proactive and flexible approach to revisiting and renewing board policies, along with an explicit focus on director performance.
There is also a revised 2013 paper from the Canadian Coalition for Good Governance (CCGG) that has developed and updated guidelines on “Building High-Performance Boards,” with advice on how boards can structure themselves and their policies to promote good governance practices. Interestingly, the focus is on governance and not necessarily on execution or measurable deliverables by the directors.
The reality is boards can make the biggest difference for success or disaster for any corporation. If boards fail to carry out best practice strategies for identifying the best-fit directors for their own team, how can any succession planning be meaningful and effective for the CEO role or top leadership succession planning?
Perhaps there is a greater opportunity in accelerating the capability of a number of boards to execute and operate effectively before questioning the effectiveness of CEO succession planning.
What do you think?
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Trish Maguire is a commentator for SCNetwork on leadership in action and founding principal of Synergyx Solutions in Nobleton, Ont., which focuses on high-potential leadership development coaching. Trish has held senior leadership roles in HR and OD in education, manufacturing and entrepreneurial firms. She can be reached at firstname.lastname@example.org.
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