Succession is a five-year decision made in five weeks

Most boards know the date their chief executive will leave years in advance, and still run the process as an emergency.

Chief executive succession is the only decision a board makes that is absolutely guaranteed to arrive. Every other item on the agenda is contingent. This one is arithmetic — the incumbent will leave, by choice, by health, by performance or by age, and in most cases the board has a rough idea of when.

And yet the process usually starts far too late, compresses into a handful of weeks, and produces a decision that the board would not recognise as its normal standard of work if it were buying a business rather than choosing the person who will run one.

Why boards defer it

Not incompetence. Three quite human reasons.

Naming a successor starts a clock, and everyone in the room knows it. The chief executive hears “we are planning for after you”, the successor hears “your turn is coming”, and the chair, who has to work with both of them next Tuesday, decides the conversation can wait a quarter. It waits several quarters.

There is also the awkwardness that the person best placed to judge internal candidates is the one being replaced, and asking a chief executive to assess their own replacement is asking a great deal of anybody. And there is simple crowding out: the committee has a remuneration cycle, a director search, an evaluation to commission. Succession has no deadline, so it never wins.

The three things to have in place first

Long before any conversation about names, a nominating committee should have three things. Each one is cheap. Each one is almost always missing.

1. A written specification of the next chief executive — not the current one. The question is not “who could replace the CEO?” but “what does the strategy we have just approved require of whoever leads it for the next five years?” These give different answers, and the second one is the right question. If the plan is international expansion and the incumbent is a domestic operator, the specification should say so, in writing, while everyone is calm.
2. Two internal candidates being developed on purpose. Not identified — developed. Real P&L accountability, exposure to the board rather than one presentation a year, a stretch assignment that could plausibly fail, and someone honest telling them where they fall short of the specification. If your internal bench is “strong” but has never presented bad news to the board unaccompanied, you do not have a bench.
3. An emergency successor, named today. This is a different question from the planned one, and it must be answered separately. If the chief executive were unavailable tomorrow morning, who signs, who speaks to the market, who runs the company for ninety days? Decide it, write it down, review it annually. Most boards think they have this and have not tested it against an actual calendar.

Internal or external

The temptation is to decide this first, because it feels like the big question. It is not. Run the specification first, then test both markets properly, and let the answer come out of the comparison rather than out of a prior conviction.

What matters more is what happens to the internal candidates who do not get it. A badly run process costs you the successor and both runners-up within a year, which converts a succession into a restructuring. Talk to them early about how the process will work, tell them the truth about where they stand while there is still time to act on it, and decide in advance what you will offer them the day the announcement goes out.

The incumbent’s role

Involved, consulted, and not deciding. A chief executive’s view of the internal candidates is valuable data — nobody else has watched them under pressure for five years — and is also the view most likely to favour the person who most resembles the incumbent. Take it as evidence, weight it accordingly, and make sure the committee has its own independent view of every candidate.

It also helps enormously to agree what the outgoing chief executive does afterwards, early and in writing. Ambiguity about a continuing role is the single most reliable way to undermine a successor in their first year.

Working back from the date

Twenty-four months out, agree the specification against the strategy. Eighteen months, honest assessment of each internal candidate against it, and the development plan that follows. Twelve months, test the external market — properly, not as a formality. Six months, decide. Three months, announce and hand over. Anything shorter is not a process, it is a reaction with a process-shaped press release attached.

None of this requires the incumbent to be leaving. That is exactly the point. The only time to run a succession process calmly is when nobody needs one.