Succeeding at CEO SuccessionNovember 29, 2022
The number of FTSE350 CEOs leaving their roles in 2022 has increased by over 160% compared to 2021 and CEO succession is firmly back on the board agenda. Over the last year there’s been a significant increase in the number of CEOs leaving UK PLCs. The combination of boards requiring a different type of leader for their post-pandemic business, alongside leaders deciding they wish to pursue alternative career options, means that succession planning has risen up the list of priorities for Chairs and CHROs. Shareholder, financial and operational pressures are no doubt leading to change in boardrooms, but so too is executive burnout and, for many, the decision that family and personal wellbeing is more important than holding on to a marquee job.
As new CEOs land into the hot seat, they are finding the pressure and complexity of the role continues to increase. At recent CEO and CHRO roundtable events that I’ve hosted with Merryck, many have agreed that the Group CEO role is now too broad; there are too many stakeholders and an individual can’t expect to have all the knowledge and experience to cope. Those who aspire to step up and be successful will have to be comfortable with not just complexity but also uncertainty and have the capacity to remain calm when faced with crisis (or permacrisis). Accurate long-term forecasts are impossible to achieve so CEOs need to bake uncertainty into plans and Boards need to appreciate this challenge. Successful leaders will understand the breadth of risks and unknowns they’ll be faced with whilst still presenting a positive and compelling strategy.
Current and future CEOs must also appreciate the need for diversity of thinking, convening and retaining a broad range of people around them. They’ll be more successful by focusing on formulating the right questions, listening and synthesising. By encouraging this diversity within boardrooms and executive teams the culture of an organisation is more likely to be open, collaborative and encouraging to those who want to learn, think and be genuinely curious. However, in many companies, hierarchies have led to senior managers placating and aligning with their bosses; this has caused many senior executives to lose the ability and instinct to think for themselves and to learn from those outside of their existing trusted sources.
So CEOs and CHROs need to challenge their organisation to develop leaders differently. Companies are more likely to create rounded and adaptable leaders by encouraging a learning ecosystem and giving high-potential leaders the opportunity to take on a diverse range of roles and projects. Also, with the increasing levels of change and ambiguity, previous career experience may be an ever-smaller part of what creates future success and instead it’s the ability to reflect, reinvent and apply experience in new ways with new thinking that can deliver success.
What does all this mean for succession planning? Whilst there are numerous models and data-points, leadership is not scientific, and people aren’t perfect, so it’s impossible to force people into boxes and you can’t expect to mould the ideal CEO candidate. What’s important is for Boards and CHROs to be more imaginative around succession, cast the net more widely in the organisation, invest more (and earlier) in leadership development, and think differently about future ExCo roles. This might mean skipping a generation of leaders to identify a more diverse pool, a group who may be clearer on their personal purpose and the role of business in society, those who are more attuned to the impact of technology and climate change and how they can adapt business models to create more long-term value. For any succession plan to work, it can’t simply be names in boxes but a meaningful plan focused on truly developing leaders within the organisation, some of whom will step up but others may not thrive.
With increased pressure of the CEO role and ongoing economic volatility, there will continue to be changes in ExCos. For CHROs and Heads of Talent it’s vital to provide the Board with a strong pipeline of talented, seasoned executives within the organisation who have the potential to step up. Now more than ever companies need CEOs and leaders who are comfortable with uncertainty, can cope with the demands of all stakeholders, are collegiate and authentic and who can make agile and impactful decisions.
Some questions for Boards and CHROs to consider:
- How can you prepare a wider range of CEO candidates earlier than you need them?
- Can you give CEO candidates exposure and experience to a broad range of company operations?
- Do CEO candidates have opportunities to take on external board roles and build wider knowledge networks?
- How can you encourage camaraderie among CEO candidates, avoid beauty parades and internal lobbying?
- What needs to be done to develop a deep collaborative spirit within the ExCo?
- Do you have a plan to continually develop a CEO after they’ve been appointed?
At Merryck we continue to accelerate the impact of leadership by partnering with Chairs, CEOs and CHROs on succession planning and executive team development. More information is available online and please contact me if you’re interested in learning more about our individual and team mentoring programmes.
By Tom Beedham, Operating Partner at Merryck