The process of choosing and vetting prospective successors has transformed to a considerable level in the recent past. In the recent past, issues of departing CEOs blessing their chosen successors were common; they are now the exception, apart from instances where the CEO if the founder of the company. Succession has turned to be the most important responsibility to the board of directors of a company; where the CEO is just regarded as a single contributor in this process (the issue is sensitive, however).
Straightforwardly, it may seems stress-free to own a succession plan, and several firms in the era of 2002 Act of Sarbenes-Oxley, with its itemizing roles of board, could as well recognize their lack of one. The main task is to obtain a plan which can be adapted to the changing succession process nature as well as the changing CEO position burdens. Moreover, contrasted to all the other parts of the plan, biggest challenges appear to be the execution of the program (Sherman, 1999). Such issues take us to a crucial section where practices of succession preparation should be enhanced. During this process, both the CEO and the board are required to share similar thoughts regarding the actual internal succession applicants’ readiness as well as ensuring their full participation.
A succession plan is designed to ensure that necessary skills and talent will be available when needed and that abilities and essential knowledge will be maintained when employees in critical positions leave the firm. This is based on a number of studies carried out by many companies in the Unites States. However, many myths surround the issue of succession planning. Looking at the process in my organization, for instance, these are my findings;
The CEO perceives external applicant to be extra promising and exciting. Clearly this, apparently, is part of inconsistency in the process of succession development. Foreign replacements are in riskier in various ways as compared to internal replacement, nevertheless unpredictably, only very few promotions are internally awarded. It seems that board has a preference of the candidate they do not know compared to a candidate they well know about. Moreover, a few find it burdening to figure out a worker at the top position after having them work in a lower position for a long period. In the meantime, internal applicants frequently hear that they are only a few years from being fully prepared for new more challenging roles (Tichy et al., 2014).
This takes us to the self-constructed concept of “must get prepared now.” This “ready now” concept of executive should get stricken from business word list. If a company, sometime in the past, managed to establish a successor based on “ready now” concept, then one technique to employ to ascertain the readiness of a contestant is by checking on the contender’s competitiveness in the race with intention of succeeding, since the contender was not ready to wait anymore. Normally, executives of this kind result in performing excellently in other companies or positions, confirming that they were suitable nominees that were constantly ignored by the company.
The readiness of an executive requires being determined based on individual characteristics as compared to the characteristics of other individuals in the top executive positions in the company. One of our organization’s clients was externally searching for another CEO for a public company, but finally settling on a young internal applicant, who was new to the CEO role in a public enterprise and in his early 40s. The danger that the nominee would not seem to be up to the role or ready was weakened by the fact that the outgoing CEO was a previous CFO, and that the company had a great treasurer and controller in place already. Eventually, the specific leadership situation context goes to a significant degree in establishing the readiness of the replacement, and resultantly, the level of risk those who are making the assessment may want to accept.
Another observation I made is that CEO succession planning has been an event of a single-person. When board members get involved in planning succession, they usually center on the role of the CEO, while excluding other important positions. Never the less, the most suitable succession development, in reality, engages a constant leadership reassembly and assembly enigma containing a number of pieces (Deegan, 1986). Actually, these pieces are not of equal sizes and neither are they of the same shapes. As every piece is chosen, either the chiefs of sales and marketing, the CEO, COO or CFO, the forms of the other remaining parts end up becoming clearer. Moreover, external aspects that include company strategy and economic conditions among others influence the manner in which the whole problem will be handled.
Choosing the best nominee depends partly on the surrounding team and they are harmonized by their sets of skills. The most common trend observed in most companies is that the members of the board are not contented with an externally standardized perspective which is normally given by the reports by their director and the outgoing CEO. Presently board members demand a similar comprehensive evaluation of all the company executives, several degrees below the CEO to establish who is on the level and the depth of their talents. This highly aids in the succession development, as officials are brought much earlier to the light regarding the board.
Lastly, in my organization of study as well as many others, there is a belief that what used to work previously will still work effectively in the future. There exists a substantial danger of entrapping the process of succession by looking in the rear view mirror. This is rampant when a board is preparing to replace renowned or just a successful CEO. In this case, the things a firm may require in the following half-year onwards might be entirely diverse from what was required some few months ago. A person who perceives a firm and its diligence via a new perspective might be superlative prepared to seize and realize novel opportunities (Sherman, 1999).
Evidently, it is crucial that the organization board members classify expertise, the required characters, and the sets of skills for the CEO replacement by considering the current needs of the company. It is specifically appropriate in the existing market that will examine the succession strategies of every existing firm. The favored applicant of the past half a year might no longer be suitable now, provided an entirely varying business setting. The most critical and tricky part is communication, especially between the board and the internal applicants. Failing to be openly clear about the company’s search for a successor from either inside or outside or both inside and outside potential candidates can be significantly destructive internally (Deegan, 1986). Therefore, individuals need to get informed upfront about running of the process. Active communication and management of the entire plan are crucial, and when effectively done, it can make the internal successors feeling that they were the most suitable candidates for the position.
Companies which perform well regarding their succession planning, they first carry out an external market research or evaluation which seeks to identify the most suitable candidates in the industry. They also focus on finding the most contiguous and most outstanding competitors across the industry, and lastly, they contrast all identified candidates to the available or identified internal candidates, by employing similar, highly developed experience and skills criteria. Most frequently, the selection committee narrows the candidates list to a few external applicants, for instance three, to enhance the interview as well as the engagement practice. If the external applicants appear to be dramatically less qualified as compared to the internal applicants, firms considers a particular risk of transition and the external procedure of obtaining a CEO is aborted, and the company selection ends up being internal. To have a proper succession planning process, companies should begin with engaging the stakeholders fully, and then proceed on assessing the internal candidates, conducting a stress test and simulation and finally, going on the broad to implement the new successor (Sherman, 1999).
Download full paper on the process of succession planning or order a unique and high quality paper written by one of our professional writers at an affordable price. Order Unique Answer Now