Avoiding CEO succession mistakes

How to steer clear of hiring the wrong CEO? Bambos Eracleous, Partner for Sports, Media & Gaming, offers some tips on finding the best leadership candidate.

Succession can be a tricky business. Look at the fun HBO had with plotlines around the exploits of fictional media conglomerate owners the Roy family in TV show “Succession”, over four series of twists, turns, manoeuvrings and infighting.   

But succession issues in real life can be equally dramatic and may easily be botched. A prime example of “an epic succession mess”, to borrow CNBC’s phrase, is Bob Iger’s comeback as CEO at Disney, ousting his hand-picked successor Bob Chapek. A return that led to a surge in the Disney share price, but presumably won’t see the greenlighting of a family-friendly animated feature with a catchy song titled “Bob Bob Bobbing Along”.   

Here are five steps organisations can take to heighten the chances of successful succession:

1. Think Interim CEO. As a specialist in interim management appointments, you’ll forgive me if I start here. But in the case of a sudden CEO departure and/or the absence of a clear internal successor, there are many advantages in adopting an interim solution, especially when you bear in mind that it can take months to hire a permanent CEO. An interim CEO with the appropriate expertise can give an underperforming business the stability and shot in the arm it needs. The objective, outsider’s view they bring to the role may be incredibly valuable and invigorating – fresh approaches generally add impetus – and for the hiring organisation it can present an opportunity to see how a different leadership style works without being locked into the experiment. A versatile, experienced and well-connected candidate can also help with the search for their successor. When all has gone well, it may be that the organisations sounds them out about making the position permanent.
2. Evaluate leaders’ capabilities. We live in an age of great analytical tools, but a lot of boards still make vital succession decisions based on instinct and gut-feeling. That’s really not good enough. Our unique LeaderFit™ leadership assessment methodology, combines personality data, behavioural patterns, and leadership experts’ judgment to predict individual performance in targeted senior roles. We create a total picture of an individual’s leadership performance and potential for growth. When hiring a CEO, the assessment process must be rigorous and uniformly applied to all candidates to ensure the best outcome. Candidates should not only be measured against each other but also in relation to the executive team, organisational culture and specific business objectives and challenges.
3. Look further than under your nose. There is much in favour of promoting from within. Internal candidates are steeped in your culture and understand the relationship quirks that help in getting things done. Internal appointments may also show your approach to leadership development in a good light. But if your succession focus is only in-house, there is a big risk of selling your organisation short. It is important to benchmark against the external market – how does your internal pipeline measure up versus other leaders in your industry? Do they have what it takes?
4. Don’t allow function to become dysfunctional. Many a CFO has gone on to become a great CEO. The same holds true for CMOs, COOs and indeed leaders from various other functions. However, illustrious achievements in a functional leadership capacity are no guarantee of success as a CEO. Boards must weigh up more than achievements in a previous role. Can the candidate strategize and act like a CEO? Or are they limited because they see problems and opportunities from a much narrower perspective?  
5. The past isn’t everything. The ideal candidate will have a CV packed with relevant experience and impressive achievements. Right? Yes…but there is more to consider than that. The past, as the famous saying goes, is a foreign country. Situations and competitive landscapes change. When considering CEO candidates (external, internal, or a mixture of the two) boards should look forwards as well as backwards. Is the candidate agile in their thinking? Can they anticipate change and pivot fast? Do they have the right skillset and mentality to deliver effective transformation? Can they steal a march on the competition? Such questions must be thoroughly explored.  

Appointing the wrong CEO can be a costly and damaging mistake. Thankfully, a systematic approach to succession can substantially minimise the risk.