In succession planning, the critical part involves preparing people for change of leadership especially at the top. But even replacement of junior employees takes some planning.
Good planning depends, among others, on the new direction of the organization. Determining this is necessary since the business environment is in constant change.
But when a new chief executive officer (CEO) is being sought, it requires time for proper planning. A wrong decision is not easy to undo. But that time, the new CEO would have started work. The board is stuck with the new CEO until they have the opportunity to terminate his appointment. This is to the detriment of the organization and to those who depend on its continued success.
Eligible candidates need to have the required relevant experience, apart from possessing a variety of skills expected of an effective leader. A potential candidate would have a track record of having turned around business entities where he has previously served. This quality is critical if the employing company is in stagnation or is in bad financial position
and is in danger of shutting down.
There was the Southeast Asian case about an airline which was facing bankruptcy until a new CEO was appointed. Within a year or two, he was able to balance the books and to generate profits for the first time in so many years. But after the CEO ceased to lead the company, it went on a downward spiral. Again!
If a company has good succession planning, then people within the organization are capable of taking up higher responsibilities. And there is no necessity to look for someone from outside the organization.
The Qualities Expected of a CEO
According to Joel Trammell "quality CEOs must have three C’s: credibility, competence, and caring."
Trammell states that in order for a CEO to continue having credibility, he must tell the truth all the time. Credibility is almost impossible to regain once it is lost. And once credibility is lost, change of leadership is the only option.
For a CEO to be considered competence, Trammell states that he needs to demonstrate a good understanding of the company's business, willingness to learn and understand the responsibilities of the job.
Further to this, Trammell says that a CEO must have a caring attitude toward the organization and its people. If not, competence is not enough. He needs to have unwavering commitment to the organization's goals and vision.
Succession planning need to provide that internal people be given the opportunities to holder senior positions.
Selection of a new CEO
According to Trammell, the board needs to discuss what they want the new CEO to accomplish and come to some form of agreement. Then he goes on to argue that the size of similar organizations that the candidate had run previously is a factor to consider.
But other writers have different opinions. Some argue that if there are internal people who have the required qualities, there is no need to look for someone outside the organization. But Trammell argues that if the board require changes in the organization, they will need someone from outside who has the required qualities.
But whether a CEO is selected from candidates from inside or outside the organization, it is critical that no extraneous factors are accepted when determining which candidate will get selected.
There was this story, a true one, where the board allowed political factors to affect their decision in the selection of the CEO. Thereafter, the CEO was forced to make major decisions only to please the political masters.
In that case, the qualities required of a CEO were neglected. Succession planning went down the drain. You can expect that the organization will face turbulence until a more capable CEO is appointed.