A version of this article was originally published in NACD Directorship magazine.
National Association of Corporate Directors survey data reveal that boards at both public and private companies rank competition for talent as the top factor that will impact their organizations over the next 12 months. Typically, most of a board’s talent focus will be on recruitment, but what about planning structured departures? None can be more important than the transition to a new CEO, but few boards have a playbook for the last 100 days of a CEO’s tenure.
Here are five interconnected elements boards should consider upfront in developing and executing an effective CEO transition playbook.
Plan the announcement. As a first step, the chair and board must define — in advance — the when, what, and how to communicate a CEO’s departure, ensuring that no rumors or premature messages reach internal or external audiences. Announcements should be aligned to the go-forward strategy of the business and, assuming the departure is voluntary, enable the outgoing CEO to co-own the message and tell their personal story. The board and incumbent CEO can jointly own the process in terms of content (which will vary in each case) and, crucially, the process of communication as well. It is important to define upfront the small circle that will craft a common narrative and, in turn, the mechanics of how they will make the announcements to the external market and colleagues. This ensures that the board sets the tone, pace, and process for the transition and that the company and its employees remain focused, and assures shareholders and other stakeholders of the company’s continued momentum.
Transition decision-making. The board, the incoming CEO, and the outgoing CEO need to explicitly discuss, define, and document the transition of decision-making. On a practical level, the CEO remains accountable for everything that happens in the company until their final day. At the same time, it does not make sense to have the outgoing CEO make longer-term strategic decisions that commit the firm beyond their tenure. Given this context, it is important to avoid a hiatus in momentum and decision-making. The last 100 days playbook will help ensure that’s the case. For example, the incoming CEO can increasingly take a leading role on issues related to future-focused initiatives including mid- and longer-term strategies and investments, with the outgoing CEO stepping back to focus attention on business as usual.
Champion the successor. The board should explicitly consider how and when the outgoing CEO will support and position the incoming CEO as the new leader, including as this relates to both of their roles in employee townhalls, investor calls, and chairing senior leadership meetings during the interregnum period when the new CEO has been named but not yet formally in place. Defining such approaches enables the incoming CEO to step into a greater role with support, allows key stakeholders to have greater exposure to the incoming CEO, and signals a degree of continuity. Ensuring this is covered upfront with all CEOs, even when a new individual takes up the role, will make their final 100 days all the more successful.
Consider the CEO’s exit. The board should also have a discussion with the outgoing CEO about the exit process, and, particularly in an era of increased corporate engagement on social and political issues, about any engagement with press and social media. Outspoken exiting CEOs may feel a personal need to share perspectives and provide commentary on certain topics or the company trajectory, but this may create challenging situations for the incoming CEO and existing leadership team to manage with stakeholders.
Determine the post-transition role with the firm. The board should consider the post-departure role of the outgoing CEO, including a role on the board. For example, a number of companies are using CEO succession as an opportunity to split the CEO and board chair roles, with the outgoing CEO assuming the position of board chair. Others are using a mutually agreed transition to ensure the outgoing CEO remains involved in a brand ambassadorial role. The permutations are material, and it is important for the board to define up front what their optimal scenario is to increase their chances of making this happen in practice.
With the effective management of the CEO’s transition, or the transition of other senior executives, so critical to an organization’s continued momentum, isn’t it about time that boards spent as much time on the outgoing CEO’s last 100 days as they do on the incoming CEO’s first?