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Are companies’ CEO succession plans prepared for a pandemic?

Are companies’ CEO succession plans prepared for a pandemic?

The Covid crisis has revealed the importance of having a well-thought out succession plan for executives

A multinational client CEO has been planning to resign for three years in a row, but every time the topic came up, the board persuaded him to continue for another period, saying a succession plan would be finalised before he could hang up his boots.

This year was finally meant to be his year of freedom from the company, but the pandemic hit. And now the board just doesn’t feel a new person can succeed him during this turmoil.

C-level succession planning has long been inconsistent among corporations worldwide and even in large local companies, it is often vague and reactive.

In some cases, the talent planning and development for top roles are well in place, but what is missing might be the chief executive succession plan. In your organisation, how current and actionable are your emergency succession plans?

The coronavirus crisis has shaken up a lot of certainties about how effective executive succession planning really is. Are your plans in jeopardy because of the pandemic?

Here are a few questions you can ask yourself to find out:

Is your plan really a plan?
We find that many of our corporate clients realise the harsh reality of dud succession plans at this time. A survey of over 50 per cent of S&P 500 companies found that only about 20 of them had a real, written and formal plan.

This is defined as who does what, and precisely how the plan will be implemented. (Note: writing a name and tucking it into an “Open in Emergency” envelope is not a plan).

Is the plan both deep and flexible?
Best practice today is to demand that the current CEO, top team, and the board craft a crisis plan that can be implemented immediately, smoothly and with flexibility.

Organisations should have at least two or three names in the list and not just one. This will ensure leadership in case both #1 and #2 are hit by the same bus.

If the current CEO has an unfortunate accident and the current strategy is working, you may have a best-case successor. But what if the CEO leaves in a scandal; a pandemic-created crisis; or if an activist investor demanded the change?

You’ll want another name in the envelope who can both lead and shake things up. Consider also a three-month emergency successor who might step up from the board until a longer-term inside successor can take the reins.

Use scenario planning and risk-heat maps to craft a matrix of responses.

Will we need a ‘temp’ CEO?
In the UK, Prime Minister Boris Johnson was temporarily waylaid by Covid-19, which shook up the British political system that has no provision for a short-term fill-in PM.

What if your company faces this situation? The chief executive may be out of action during a recovery from illness or injury. How much regular duty can he or she handle during convalescence (if any), and for how long?

When we face a virus that is highly infectious and debilitating, such a temporary ‘understudy’ CEO plan is a must.

Should our succession plans be different now and how?
Even assuming you had all the above plan elements in place at the start of 2020, the world has changed and so has our view of our leaders and their skills. While the pandemic may have mainly accelerated the changes that were visible a year or two before, it certainly feels different for the uninitiated right now.

Leaders now need more resilience, agility and ability to lead by example. Like peacetime generals in wartime, potential successors may have emerged as not being up to the radical demands during the past few months.

Many rising executives who came of age since the economic crisis of 2008 have never faced a trauma such as this. Is your board building a review of crisis responses and results into its talent evaluation?

Some of our client boards are making a second leadership assessment of their leaders currently. They are also searching for outside talent. We have heard of two boards asking for external candidates who’ve been through prior crises and headed a recovery.

Moving forward, the pandemic crisis is expected to shake up long-term succession planning in other ways. We predict many CEO hires will be from external industries. Some boards may tend to play it safe by sticking with hires from closely allied fields. Also, as is common in a crisis, boards are sticking with their current talent line up for now, meaning less immediate top executive turnover.

But though change slows during a crisis, it springs back in a year or two.

CEOs who aren’t up to the demands of 2020 will be vulnerable in 2021. Investors and regulators have prodded boards to disclose more on their succession plans over the past few years.

Expect them to be very demanding on this topic during the next proxy season.

Dr M Muneer is the managing director of CustomerLab Solutions and co-founder of Medici Institute, and Ralph Ward is a global board advisor 

© 2020 MOTIVATE MEDIA GROUP. ALL RIGHTS RESERVED.

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