February 23, 2023
Posted in: WATSON Views
“Such systemic failure has nothing to do with competence, knowledge, or experience, but instead ties to how the CEO transition was orchestrated and whether major steps were missed.”
– TLNT 2018
Your CEO has an outsized impact on your organization’s success, now and far beyond their tenure. Yet the data tells us that we’re not setting them up for success.
Look at the numbers above – they are just a sample of the statistics that appear with alarming frequency in studies and articles. But there are ways in which organizations can achieve a smooth transition to a CEO who can carry the organization forward and advance strategy and purpose.
When things go wrong, sometimes the effort simply hasn’t been there – we’ve all read the studies that tell us how few boards are paying attention to succession, even when they themselves believe they ought to do so. And sometimes, there has been an investment of time and energy that just hasn’t delivered.
It’s time for a rethink and a refresh. Here are 10 questions to help you explore where your succession work can improve, informed by fresh thinking about how and when succession truly includes success.
The CEO has powerful insight and unique opportunities to help develop people, and they also know their own plans and aspirations. It is always important to include them in succession planning. And yet, too many boards take a back seat to the CEO, relying on them to (a) set the timing, (b) frame what is required and (c) decide who is an internal candidate. This can lead to timing that is driven by the CEO’s needs, not the organization’s; a view of the CEO role that is anchored in the past and not the future; embedded unconscious bias and limited insight into internal candidates.
To get this right:
- Be clear that while the CEO’s plans are an input, the board owns the timing decision
- Even when there is no transition in sight, have a board conversation at least once a year about the board’s view of the optimal timing
- Put the board in the driver’s seat to identify what the role will require and to assess candidates; draw on the CEO’s insight, but don’t abdicate ownership
A CEO Success Profile is an important piece of the puzzle. It starts with understanding purpose, strategy, and the challenges ahead, and then using that as a platform to understand the skills, competencies, and characteristics of a future CEO. Without it, boards sometimes anchor their thinking in today’s CEO; or they overfocus on what’s highly visible in terms of past leadership roles and experiences, and don’t do deep thinking about the bigger picture of who the right next CEO will be. That limits the selection of the next CEO, and how internal candidates are identified and developed in the meantime.
To get this right:
- Put the Human Resources Committee to work in developing a CEO Success Profile through a thoughtful process
- There’s no need to put a fine point on it when CEO succession is not on the horizon, but maintaining a live draft as part of your playbook keeps you ready
- Use it to ground conversations about internal candidates, their potential, and their development, providing a shared and more objective basis for discussion
We’ve all got views on what great leadership is. As noted above, a board needs to understand what great leadership will look like for the organization today, and in the future. Specificity to your organization’s unique context is important, but we should not ignore the rich body of data on CEO performance and success. Make sure that at some stage, you are checking against the body of research to consider what you may have missed.
To get this right:
- Seek trusted research and compare the CEO and organizational context and results against this information
- Lead from what is unique and important in your context, and use the research as a back-check to challenge your thinking; don’t just adopt the research and risk a vanilla succession plan that doesn’t speak to your needs
Classic CEO succession focuses narrowly on who will ascend to the CEO role. In this model, there are winners and also-rans, with some leaders who are singled out for their potential (more on that later) and invested in heavily. Consider the downsides: great leaders who feel they lost the only race that really counts; executive teams with haves and have-nots; a small number of leaders getting access to growth opportunities while others feel stuck.
There is another way. At WATSON, we talk about a Leadership Planning perspective. If we focus on building the best possible team at the top, if we assess and develop each one of those leaders, they will perform and engage – not just in a future role, but today. We increase the number of options for future successors. We reduce the risk of unconscious bias or inequity. We improve the likelihood of retaining leaders who don’t get the nod. Yes, there is a little more investment required, but the payback in increased performance and reduced risk is substantial. And it sets a tone for the whole organization, sending a message that this is a place where everyone can grow, and where a variety of leadership contributions are valued.
To get this right:
- Provide assessment and development planning to all members of the executive team – and consider casting a wider net to identify potential outside that group
- Use the data not just to look at individuals, but at the power of the whole team; no CEO succeeds alone, and a strong and diverse leadership cadre gives you more resilience and options
- Until you are in a live search and selection process, avoid anointing or declaring candidates; that doesn’t mean ignoring who is ready now and who can become ready, but there is power in not creating an in-club amongst the senior leaders
Too often, a board’s appraisal of candidates is based on the CEO’s perspective, a subjective view of “potential” and maybe the board’s limited experience of a leader and their presence in the board room. High-stakes decisions need good data; that means meaningful and objective insight, not just aligned to the current role, but the demands of a future CEO role (via the CEO Success Profile). You will never get perfect predictive data, but most boards can and do ask for a bit more; it’s a worthwhile investment.
To get this right:
- Ground the conversation in the CEO Success Profile, so it’s not just a vague conversation about potential; consider what real evidence there is of a candidate’s alignment to the profile
- Undertake a thoughtful assessment process, led by a professional and using a combination of deep-dive interviews and validated assessment instruments; this is how you get valid and reliable insight, along with the analysis of an expert who can put the picture together and give you a real view of strengths, risks, gaps, and opportunities
- Be cautious of vague terms like “potential”; agree on a shared definition based on real indicators (and be aware of the minefield of unconscious bias here in particular)
Executive development plans often prioritize courses and certificates. Those have their place; senior leaders may absolutely benefit from formal learning, be it from a great peer cohort, or from the sense that the organization is investing in their professional credentials. But at the executive level, the development needed to truly close gaps often takes different forms, such as key experiences, board exposure, targeted coaching, or deep personal insight and change. Courses can be appealing because they feel like a concrete and tangible step. But they won’t close many of the real gaps at this level.
To get this right:
- Invest in expert coaching when it counts; make sure the coach has what it takes to operate at this level and arm them with assessments and insight to focus their work
- Give people the experiences they need; it may mean shifting structure and roles, moving executives to different parts of the organization, giving them unique projects or opportunities to work with the board, putting them in front of different audiences (internal and external), or encouraging them to serve on a board
The analogy of a chessboard has become a bit of a succession cliché because it’s a helpful image. You won’t be able to plan for every possible scenario, but it is important to look beyond individual pieces and moves, and to consider the full chessboard. Will some successors be ready before the incumbent CEO transitions? And what if they take their talents elsewhere? Will the chair reach a term limit right at the same timing of a CEO’s departure? Is there a risk of many executives retiring at the same time? Are there executives who would leave if a certain peer was appointed to CEO? Does making a move for one executive unintentionally block another?
To get this right:
- Look deeply at each executive or succession candidate, and then remember to also step back and consider the full chessboard, and how it will evolve over time
- Don’t ignore the board when you are mapping the landscape; sometimes a changes in board membership or leadership around the same time as CEO change is healthy renewal, and sometimes it is a dangerous risk or source of instability
Too often, when succession is on the horizon, the end goal is a signed job offer. But the data shows that for new CEOs to succeed, intentional support through their first 12-18 months makes a significant difference. Onboarding must extend beyond their first 90 days. This includes helping CEOs accelerate their understanding of the business (including its leaders), providing the supports they need as they formulate direction and strategy, aligning with them on mutual board-CEO expectations, and building a platform for candid dialogue and feedback. If the CEO transition is a long way away, you won’t plan these details now; it’s about recognizing the work required here and anticipating it in your conversations and your succession playbook.
To get this right:
- Make sure your succession playbook doesn’t stop at selection; consider a CEO Transition Committee instead of a Search Committee, and build onboarding and 12-18 months of support into the timeline
- If your CEO-board relationship currently runs on historical knowledge and trust, start documenting roles, expectations, and accountabilities, so there is clarity for the future, and you don’t get tripped up with a future CEO because of different assumptions
- Have a cadence for feedback and evaluation for the CEO, now and in the future; this should include formal CEO evaluations as well as regular chair to CEO touchpoints for ongoing candid and mutual feedback
At WATSON we often say, “process is your friend.” And it’s true – good process helps in a myriad of ways, including trust, fairness, and better decision-making. Yet this work is also deeply human, and attention needs to be paid at every juncture to the human factor. We often think of high-performing leaders as strong and stoic. But when transition goes wrong, it’s frequently because executives are humans with feelings: the former CEO who is shunted out the door in a way that upsets their loyal colleagues, the internal succession candidate who thinks that the fact there is a search process means they are not considered good enough, the brand new CEO who is sitting outside the boardroom while the board has extended in camera conversations, wondering if their job is at risk.
Paying attention to the people side pays off – and it’s also the right, caring thing to do.
To get this right:
- Start with the CEO; invest for the long-term to build a trusting relationship with openness and candour so that you can talk about the tough stuff, including the right timing for transition
- Take the vantagepoint of the CEO or executives to consider how different discussions or actions may land in their eyes, what they may read into things, when they might need an update or reassurance, etc.
- When it comes to CEO succession, make sure you are aligned with the CEO on any communication to executives; what the message is and who will convey it
- Ensure that feedback is given constructively and professionally; follow up to make sure it landed as intended
- Use investments in development to signal to leaders that they are valued, personally and professionally
Many boards tell us that they have an emergency plan in case the CEO is suddenly unable to serve, permanently or temporarily – which happens more than we think. Yet when the time comes they still feel unprepared. Often it turns out that what was called a “plan” was really a name, and maybe not even a solid name. The more you can truly be ready, the faster you can act, and the more clarity and stability you can give everyone, inside and outside the organization, at a difficult time.
To get this right:
- Understand what the criteria are for your emergency successor and identify people on that basis; have a thoughtful discussion, because you will often find it’s not the heir apparent
- Revisit the emergency successor at least annually, confirm that the person would be willing to serve
- Consider having a couple of options mapped out, not just to provide backup but to adapt to different emergency/interim scenarios (no notice/short notice; temporary/longer/unknown timeframe; stable context/crisis context; etc.)
- Do some of the groundwork to get ready, even if you don’t try to cover off every detail; for example, being clear on who makes the call and how quickly they can confirm an interim or emergency CEO; how to ensure that key advisors are close at hand (labour lawyer, crisis communications expert, etc.), framing what limitations and freedoms the interim CEO may have, etc.
The table that follows maps out a trajectory for CEO succession – a view of what happens from when you start building the playbook, through to the transition and beyond. Consider where your board is today to identify the work to start now.
When Transition is in Sight
During an Active Transition
After the Transition
Develop the Bench
|Confirm foundations||Confirm roles, responsibilities, and principles
Ensure emergency plan is in place
|Review and update roles regularly, build practices
Update emergency plan
|Clarify roles and practices||Reinforce specific roles in transition||Follow through for onboarding and support|
|Understand future needs||Develop CEO Success Profile||Update annually and confirm alignment||Success profile is available and up to date||Confirm the profile for search and selection||Begin to think forward again|
|Understand existing talent||Map talent, conduct initial assessment, and plan for executive development||Deepen understanding of talent and focus on developmental experiences||Engage and retain key talent while developing them||Ensure internal candidates are cared for in the process, to optimize growth/retention||Find growth paths for internal candidates who did not succeed|
|Explore external talent||Identify likely external talent pools and plan to build networks||Monitor potential external talent more actively||Consider external pools and individuals|
|Prepare for a decision||Ensure roles in the search and decision are clear||Lay the groundwork for stakeholder acceptance|
|Manage selection||Conduct effective search and selection||Communicate with all stakeholders|
|Navigate transition||Draft a CEO transition plan containing a framework and considerations||Review and refresh the transition plan regularly||Outline the transition framework and considerations||Develop transition plan considering people, onboarding, key relationships, communications, etc.||Navigate the transition|
|Accelerate for success||
Set the CEO up for success
Remember, WATSON is here to help. Email firstname.lastname@example.org to talk about how we can help you board get its CEO succession up to scratch.
Posted in: WATSON Views
Last year, WATSON brought together board directors in Vancouver and Toronto for a coast-to-coast conversation. In multiple sessions, our governance experts and other thought leaders discussed many aspects of ESG, including the challenges for boards in starting, championing, embedding, and measuring ESG initiatives across sectors. And if we walked away with one thing from these conversations, it’s this: just start.
In both Toronto and Vancouver, we heard that integrating and embedding E, S and G in the company’s purpose, strategy and risk management is the most optimal means of governing E, S and G. To embed ESG effectively, a board must first discuss and align on the particular relevance and meaning of E and S to the company: Where are the organization’s greatest opportunities to decrease its climate footprint or elevate its impact to the community it serves? Does the business or delivery model need to shift to serve new markets or better respond to emerging issues? What is our current impact? Context is everything and tees up integration effectively.
But sometimes boards need to walk before they can run. If integrating and embedding ESG looks to be too daunting for any reason, take a step back and look around. Taking stock with management of what an organization is already doing is a great place to start.
It is important to avoid overburdening the organization with separate structures and processes but if starting with a committee dedicated to E and S helps to get the ESG board discussion started, then do it. It is also important to avoid the temptation of trying to do everything at once. Instead, focus on a manageable set of issues and goals and build up from there over time.
As always, WATSON is here to help. Reach us at email@example.com to talk about how we can help your board in the ‘G’ of ESG.
January 17, 2023
Posted in: WATSON Views
It’s that time of year again. Endless emails outlining the many things boards should focus on this year: 5 things for directors to consider…, 3 practices for 2023…, 10 topics facing boards this year… As directors and board advisors we are highly attuned to the ever-growing list of mission critical issues boards need to focus on and the challenges this growing list poses to the execution of the board’s responsibilities. With increased business complexity, demanding board stewardship requirements, and the need for more board oversight, the director role is becoming more demanding, and more complex.
So, as we enter 2023, we have ONE thing to share. From our observation advising and partnering with hundreds of boards, it’s not about what the board does, but about how it does its work.
Over the last year, we’ve heard about, and seen a culture of distinctly Canadian collegiality in boardrooms that limits constructive dialogue. It’s not simply that we’re too nice or too polite, it’s that in this highly complex context, individual directors are not actively sharing reservations, concerns, and alternative views, and boards are not having the quality of conversation they need to make important decisions. This isn’t intentional and doesn’t come from a bad place. It is, in part, attributed to a Canadian culture that avoids conflict and pursues consensus–perhaps too quickly–at the expense of intellectual curiosity and debate. In some cases, lack of debate may be an indicator that more work is needed to foster genuine inclusion at the board table.
We believe there are opportunities for boards to embrace more openness and healthy tension to elevate the level of constructive dialogue and the board’s value-add. For critical discussions, we see the value of intentional dissent that embraces opposing points of view and enables directors to disagree and build on each other’s points. Intentional dissent is a productive way to introduce friction into the decision-making process. It’s an important step to root out blind spots, kick the tires of recommendations, and bring different perspectives on issues and options to get to the best decision. To be fully satisfied with their decision, boards should not only be satisfied with the decision itself, but the process to get there.
Regardless of the issue on the agenda–from cyber, talent, and DEI to supply chain, energy transition, and recession–the quality of the board’s contribution depends on the quality of the conversation. And given the challenges facing organizations and boards this year, strategic conversations require that boards embolden all directors to weigh in on context, options, and paths forward. Here are some ways the best boards, chairs, and directors we know combat Canadian collegiality:
We often hear that the best directors ask hard questions in a “soft” way. They put tough issues and different perspectives on the table in a way that others can hear. Their tone and style complement and enhance their contributions. They are polite and collegial, and skilled at sharing different perspectives, or challenging the status quo. They are skilled at depersonalizing feedback and instead focusing on ideas and options. This level of EQ often requires time and experience, superb role models, and high-quality feedback to truly master. It also requires courage. At the board level, it requires someone to call attention to the problem to start to see a shift in behaviour. Getting used to more intentional dissent and encouraging different views can be a slow and uncomfortable progression and one that should be monitored and acknowledged.
All boards make decisions today that will shape the future of their organizations. For boards that practise good governance, enhancing the quality of dialogue and decision-making in the boardroom is an opportunity to go beyond the mechanics and lists of oversight areas and add real value in shaping their organization’s future. This one thing will not be easy, but it will have significant impact on the board’s effectiveness in the year ahead.
Wishing you a safe and spirited 2023.
September 30, 2022
Posted in: WATSON Views
September 30 is the National Day for Truth and Reconciliation, a day to commemorate the legacy of the residential school system and honour the children who suffered within it.
At WATSON, we have chosen to let our employees recognize this day in their own way. On September 30, our staff are invited to use the day to deepen their understanding and learning on matters related to reconciliation or Indigenous culture.
Here are just some of the ways we’re planning to spend the day:
- Wearing orange
- Reading 21 Things You May Not Know About the Indian Act by Bob Joseph
- Exploring Science World’s Sacred Journey exhibit
- Listening to Stolen: Surviving St. Michaels – a podcast that brings a difficult history to life.
- Visiting the Audain Art Museum’s incredible collection of Northwest Coast First Nations masks
- Viewing the Gord Downie and Chanie Wenjack Fund panel discussion: Indigenous Perspectives on the Pope’s Apology
- Watching Mary Teegee’s For Love on Netflix
- Visiting the Indian Residential School History and Dialogue Centre at UBC
- Learning about traditional Indigenous foods
- Attending the Indigenous Legacy Gathering in Nathan Phillips Square
Our intention is a day where the WATSON team feels supported in its continued learning about reconciliation, equity, and inclusion; where we continue to strengthen and learn together as a firm; and where we invest in ourselves to have impact for our clients and for society.
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