It is crucial for chief executives to plan for their departure wisely – and plan early. Although it sounds difficult to look to the future while still focusing on the present, a smooth transition is a key to company success. A well-executed transition can highlight the skill and savvy of a management team, but a poorly-executed transition will be beyond detrimental to company reputation. CEO succession can have an impact on the company's strategic momentum, morale, reputation, and stock price.
Stephen Miles writes for BusinessWeek about the pitfalls of CEO succession planning, something that most companies fail to do efficiently and effectively. Miles sees five main reasons that this process gets placed on the back burner when in reality it should be front and center.
- 1. CEO Succession Is a Rare Event – because of the rarity of this event, no one is practiced in the process and protocol
- 2. The Process Never Ends – the board always thinks they can look at this issue tomorrow, and in addressing CEO succession the board may be afraid to offend the current CEO
- 3. Focus on the Past – it is easy to look at past leaders to see what worked and what didn't work, but past successes (and leadership traits) may not be what will bring success to the company in the future
- 4. The CYA Era – boards create a succession plan to say that they have one, but fail to iron out the details or get a full consensus
- 5. It Becomes the CEO's Job – the board asks the CEO to take choose their successor and that leads to the possibility of bias; the board is better suited to make a choice about the direction of the company
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