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How can your company handle unplanned succession?
In any large businesses, the risk of a CEO leaving unexpectedly is a major concern. How can companies best react to this event to minimise any fallout?
Finding an external leader could be a wise option in an unplanned CEO exit.
At the top of the company pyramid, CEOs often drive the strategy of the business and are arguably the single most important individuals in a company. While no one can run a large business on their own, a strong leader is vital for setting goals and formulating strategy, as well as making tough decisions about the company's future making the toughest decisions on behalf of workers.
However, there is a chance that a CEO may have to step down unexpectedly, which could cause a barrier to achieving a company's planned objectives. How can businesses respond to this potential threat?
33 per cent of CEO successions among the ASX 200 in 2015 were unplanned.
The costs of unplanned succession
According to a recent survey from PricewaterhouseCoopers (PwC), 33 per cent of CEO successions among the ASX 200 in 2015 were unplanned. This is 6 per cent higher than the global average and cost a total of $8 billion in lost shareholder revenue.
As Report Co-author Varya Davidson explained, the C-Suite must take this risk into account when looking at a long-term strategy, or risk losing value from shareholders and other external parties.
"Boards must be proactively involved in CEO succession planning and ensure that the markets are aware of their intentions and visibly show that they are not surprised into forced action," she said.
Where should you look for your next leader?
While internal hiring can be an appropriate choice in some situations, market pressure or a competitive environment may require companies to quickly seek an external candidate to fill the role when a successor may not be quite ready.
As a report from the Stanford Business School explained, companies need to cast a wide net when looking for their next CEO. This means considering the future needs of a business, not just their current requirements. Weighing up internal talent against the market is an important action to take within your C-Suite to find the individual who meets the right criteria.
As you move new people into higher positions in your company, it is important that the onboarding process for new executives is as smooth as possible. Corporate Performance Strategies explained that this requires a concrete plan that covers establishing the relationship, analysing the factors needed for a revised strategy and building a conclusive report regarding the new company vision.
If you need assistance finding your next leader, speak to our specialist team today. Ethos BeathChapman is an Australian-owned Executive Recruitment Consultancy specialising in the $120k - $400k candidate market.
By Scott Pegg