As they say, never let a good crisis go to waste, and CEO succession planning is a delicate but necessary conversation that could not be timelier in a pandemic. Whilst a little US centric, here is an exert from Harvard Business School Professor Boris Groysberg:
What steps should Boards take?
Even in the best of times, succession planning can be a challenge. In the words of one director, “We find this really difficult, so [we] are ducking the issue. We know we have to address it but keep deferring.” Such excuses are even less tenable now. Covid-19 is forcing boards and management to work together more intensively to ensure the long-term health of the firm —and this new level of collaboration decidedly includes succession planning. In particular, the pandemic necessitates more extensive contingency planning than usual, and a reassessment of leadership needs within the rapidly evolving industry environment. We recommend the following steps:
• Start by laying groundwork for the short term. Boards need to know who can take the helm on an interim basis in the event that the CEO leaves the firm, or becomes ill, or otherwise unable to fulfill their duties. Directors need to prepare a list of candidates — ahead of time! — to call if a vacancy arises. The board should collaborate with human resources to ask the CEO for a list of back-up candidates and also identify directors who could step up.
• Don’t cut corners on the longer-term plan. When planning for the longer term, boards should devise and maintain the process of leadership development, succession planning, and CEO selection. Although the process might need to be accelerated, it is important for the board to work through the appropriate steps and to evaluate the new reality: What does the CEO role require moving forward? What is the appropriate profile?
• Revisit existing plans and priorities. Boards that already have a longer-term plan in place cannot be complacent. A plan from a few months ago might not be relevant any longer. Given how dramatically the pandemic has affected some industries, directors should be prepared to reconsider the profile of their next CEO. For example, companies in the leisure and retail industries that were focused on growth just a few months ago are now facing the need for a turnaround. The right candidate to lead the charge might need deeper operational experience or other capabilities that were less of a priority in the past. We are also hearing that more and more boards are looking for a digitally savvy CEO and are willing to skip a generation of executives to get one (called “CEO leapfrogging”).
• Consider all critical roles. It takes more than one person at the top to manage a crisis situation. When formulating a succession plan, look at the rest of the top team and the board. Are there back-up plans in place for all individuals in critical roles? This is a time for management and board directors to be aligned, cohesive, strong, and supporting each other both personally and professionally.
But don’t rush things
While we strongly urge boards to plan succession carefully, we are equally adamant that they should take the time they need to select wisely — especially given that directors are being pulled in many different directions right now. Rushing a decision and selecting the wrong candidate can lock the firm into an even more dire and challenging situation.
For some firms, postponing a CEO change to maintain business continuity can be a wise choice, especially if the board is considering an external candidate who will need more time to build relationships and for on-boarding…
Still, waiting it out might not be an option for some boards. Under investor pressure, Altria’s CEO, who was on temporary medical leave to recover from the coronavirus, has officially stepped down. The CEOs of ADT, Morgan Stanley, NBCUniversal, and Booking Holdingi have also tested positive for Covid-19, and the list continues to grow. Preparing for an emergency scenario with the CEO and other critical roles is more important than ever. Having an interim plan will give the board time to make a more permanent decision.
And once a new CEO is chosen, the board will need to do everything it can to help them as they faces the post-Covid reality. One way to do this is to retain retired executives who can provide valuable expertise, institutional knowledge, and support. Boards can consider transitioning the former CEO to an executive chairman role or even a co-CEO role in order to keep them involved in the company’s operations. Disney’s Bob Iger, who stepped down as CEO in February, has reportedly “reasserted control” as the company contends with park closures and extensive employee furloughs. Meanwhile, at Michaels Companies, former CEO Mark Cosby is remaining employed full-time with the company as a senior advisor, rather than as a board member as previously announced.
There is some excellent thinking here for today’s boards, and the game is changing fast during this pandemic.
The pressure is on for today’s CEOs to manage through this period effectively in terms of mental health, new ways of working and of course business continuity. From a board's perspective, there is no better time for patience and understanding, but also a reassessment of leadership capability and fit in this new world. Hence succession planning has never been more important.