News and Views
March 31, 2020
Posted in: WATSON Views
As COVID-19 shakes the world, we can stop talking about the CEO being hit by the proverbial bus (or, more positively, winning the proverbial lottery) – we have a very real scenario to wrestle with. While organizations shift to respond and adapt to a quickly changing world, they also face the growing risk of a sudden loss of leadership at the top. For all organizations, a strong leader brings comfort and stability during these uncertain times – to staff, customers, shareholders, and stakeholders. Right now, most can’t afford the additional challenge of a gap, or a scramble to move forward, should the CEO be suddenly unable to serve.
It sometimes takes an extreme example to highlight the importance of emergency succession planning. In practice, events that trigger emergency succession plans are often realities of everyday life – a CEO might resign with short notice to take on another role, they may be terminated (there have been many recent examples of terminations for ethical reasons), they may become sick or injured and be unable to work for a period of time or face an urgent family issue. Regardless of the trigger, boards who have prepared for emergency succession take comfort in having a roadmap to guide them through an uncertain time; they are able to quickly mobilize and make clear-headed decisions.
In times of crisis, it is natural to respond reactively, and to focus on what is right in front of us. But now is not the time to rely on a name on a piece of paper, or to push the work of developing a succession plan off into the future. Put a plan in place now, so that you are ready. It doesn’t have to be perfect – you can revisit it later when you have more breathing room. If your organization does not currently have a robust emergency succession plan for the CEO, here are some things to think about to get you started:
|What is the immediate response?||
In some situations, you won’t have the luxury of time. Certain things will have to be immediately and automatically transferred (for example, statutory authority, signing authority, etc.).
THINK ABOUT: What needs to be handed off immediately, if anything? Who is best positioned to take this on? How will this be documented and communicated (now and later)?
|Who will take on the CEO role on an emergency basis?||As soon as possible, the board should meet and appoint an emergency CEO successor. This may be the same as the interim CEO or it may be someone else (in many cases, this might be a board chair or COO). This person is generally appointed for a short period of time (e.g., two weeks) until an interim CEO is selected. Or, if the current CEO’s absence is short-term (due to illness, investigation, or similar), they might serve until the CEO is able to return.
THINK ABOUT: Who will be the emergency CEO successor? Is there a backup? How long will they be in the role until an interim CEO is selected? How will this be communicated to the executive team, staff, and stakeholders?
|Who will be the interim CEO?||An interim CEO often takes on the role for a longer time period, while a more structured search/selection process takes place. Some boards have a list of several possible interim CEO candidates as part of their emergency succession plan and have insight into their key strengths and gaps. Other emergency succession plans might not name names, but instead might describe the process to select the interim CEO and roles in the process. While the current CEO plays an important role in designing and inputting into the emergency succession plan, the final decision of who will take on the role on an interim basis rests firmly with the board.
THINK ABOUT: Who are potential candidates for the interim CEO role and what is our process to make a decision? What principles will guide us in selecting our interim CEO? What is expected of the interim CEO? What are they authorized to do and what should wait (for example, changes to the senior team, development or execution of strategy)? What support, learning, or coaching do they need? How long will they be in the role?
|How will we find our long-term CEO?||With an interim CEO in place, the board can start to look for the organization’s next leader, while concurrently supporting the interim CEO. If there is a long-term succession plan in place, this is the place to start. Many organizations also engage the support of a search firm to lead them through this process, identify and evaluate internal and external candidates, and support the board’s decision-making process.
THINK ABOUT: What will our process be to find our next leader? Will we consider internal and external candidates? What support do we need to find, evaluate, and select the right leader?
A thoughtful emergency succession plan is more than a set of names. It is linked to the organization’s strategy and risk profile and considers:
THINK ABOUT: When faced with uncertainty and change, what information will we need to ease the transition? What pre-work can we do now to be prepared and ready to act?
As we are learning, the world can change very quickly. Business needs, operations, and an organization’s external context can shift significantly in a short period of time. The emergency succession plan should be reviewed at least once a year (in detail by the human resources committee and at a higher level by the board) to ensure it still makes sense given the organization’s context.
With hope, you won’t need to use your emergency succession plan. But if you do, you’ll be happy to have structure and process to guide you through an uncertain time and get you to a good result – regardless of the trigger.