CEO Succession: A Plan for All Seasons

Some economists are predicting a deeper and longer recession than we have seen in a while. Yet economic indicators continue to be mixed. The only thing that is certain is that we are heading into a period of uncertainty.

Such murkiness can have major consequences for directors. For one, they need to be prepared for anything. Succession planning in the best of times can be difficult, but tough times and uncertainty make it even harder, but never more essential. CEOs often don’t want to consider succession planning. But, boards are obliged to begin what can sometimes be an uncomfortable conversation.

It’s rare to have a smooth succession even in the best of times, but economic uncertainty raises the stakes. The average tenure of a CEO is now less than five years. Given the potential volatility created by a sudden or ill-conceived change at the top, board members consistently rate succession planning as one of their most important responsibilities. A tough economic situation will only hasten the rate of turnover.

If the number-one obligation is to make sure you have the right CEO in place, then you need to make sure that you are recruiting people who are fully capable of stepping into the top spot. Boards need to consider bench strength and who on the board might be capable of stepping in as CEO, should it become necessary. There should be a plan for the short term, medium term, and long term.

Tough times test the best leaders. Those who prevail will be stronger when markets pick up again. Those who are unprepared will find that they have fewer options than they thought they did. Putting a succession safety net in place will make all the difference.