Uncertainty when the CEO Is leaving

The decision to retire is a monumental, life-changing point for many CEOs.  Some sit on the fence for a few years or have a set target date, while others stay in the role and may or may not be effective.  One chair recently said, “Our CEO has a set date of April 15, 2018.”  Another chair had a different story:  “We don’t know when she will leave yet.  It might be in the next 2–5 years, or longer.”   The latter response, a clear indication of uncertainty, sets off my risk alert bell.

Board of directors provide oversight for overall enterprise risk management.  A plan for steering the ship is needed before the CEO announces the “big date.”  Not preparing a plan or communication strategy leaves the organization at potential risk for lack of strategic direction and employee morale.

Flight risk for the executive team is also a concern.  Executives want to feel safe in knowing the plan and how they fit into it.  Greater uncertainty surrounding the CEO’s exit date correlates to an organization at risk.

Practical and Proactive Steps to Managing the Risk of Lost Leadership

  1. Inquire when the CEO may be thinking of a transition.  Knowing the range of dates your CEO is even anticipating an exit transition gives you a window to strategically plan to manage the process of CEO selection.  “We don’t know, and she won’t tell us” is not acceptable.
  2. If you have no idea of your CEO’s exit strategy and timing, ask for a notice.  For example, request two years’ notice of intention to leave before the anticipated date.  The CEO has the option of requesting an extension.  Notification supports implementing a viable and systematic succession planning process, increasing knowledge sharing, and organization success.
  3. Assume the end of the term contract date for CEO employment is a potential transition time from the CEO’s perspective.   If the contract is a three-year term, ask the CEO 12–18 months in advance of the term expiration about his or her intentions.  Keep checking in as the expiration date comes closer.
  4. If both parties mutually agree, then re-up the contract.  An evergreen clause provides an automatic contract renewal, yet also having the conversation, too, adds tremendous value and mitigates potential risk.
  5. Assume the CEO may decide to leave before the end of the term contract. Attractive CEO jobs are increasing in abundance.  If the CEO sees an opportunity elsewhere, do not consider the contract term as the transition date; they may exit the organization sooner than the board expects.
  6. Proactively manage the process for developing internal candidates through your CEO.  A binding agreement on the roles and responsibilities for developing internal candidates needs to be explicit.  The board needs to set clear expectations on the process, outcomes, results, progress, and timing.  Use an external facilitator to outline the steps for internal candidate development.  Use certified coaches as part of the supporting structure for CEO development.
  7. Plan for the departure of key, high-performing executives within 18 months of CEO retirement.  Key executives tend to leave when there is a lack of clarity in communication.  All employees want to know the plan and who will be their boss.  An exodus of top-performing executives is plausible but can be mitigated with two-way communication.
  8. The chair should communicate with direct reports to the CEO to inform them of the CEO succession process.  If the chair meets with them and ONLY discusses an external search without acknowledging their value, the flight risk is higher.  Use common sense and acknowledge your appreciation of their contributions.
  9. Internal candidates need a CEO development plan for three to ten years in the future.  Such a plan often does not happen until 12 to 18 months before the CEO transition date or, in many cases, never happens.  Give internal candidates a long runway to develop.
  10. Get help!  A CEO transition is a lot to manage, and you want to make the best decision.  Take advantage of industry subject matter and certified succession planning experts and organizational coaches for maximum success in building a plan with a timeline that supports your organization.

The board increases its organizational knowledge through a CEO transition with a systemic plan, humanistic orientation, and effective communication strategy.  An upside of such a process is a more collaborative board with increased communication quality and a strong, positive, ongoing board-CEO relationship.   Lastly, a potential enterprise risk is mitigated.

Deedee Myers

Deedee Myers

Deedee Myers is founder and CEO of DDJ Myers, Ltd. and co-founder of the Advancing Leadership Institute. For the past 20 years, she has been passionate about establishing and developing ... Web: www.ddjmyers.com Details