Chapter 1: Underestimating strategic alignment efforts when defining success factors

Trap 1: Procrastinating

Boards tend to procrastinate when it comes to making important CEO succession decisions. Via the Global Leadership Monitor, we asked board directors and CHROs who were involved in a CEO transition in the last three years to indicate when the CEO succession process started. In reflecting on their most recent CEO change, 42% said that their CEO succession process began one to two years prior to the actual CEO change, and 49% admitted that the process began less than one year before. This is an issue. Our experts recommend that, for the best results, succession discussion should begin at least four years before a CEO change is likely to happen.

When an organization is performing well, boards may hesitate to broach CEO succession, instead allowing the incumbent CEO to dictate when the process begins, or wait until the last minute to take action. This tendency to procrastinate, or cave into the importance-immediacy paradox (tabling long-term strategic discussions to attend to urgent short-term issues), is natural in environments with a steady state of distraction, complexity, and uncertainty.

With macro forces causing volatility and uncertainty, many boards are grappling with strained attention and problem-solving capacity, either turning to other issues or allowing themselves buffer time before addressing the CEO office. To prepare for these unpredictable market forces and bolster leadership health, boards cannot afford to mistime appointing the next CEO. They must consider how to proactively, intentionally, and continuously bring up the topic of CEO succession for discussion.

Trap 2: Anchoring

Boards tend to begin defining successful attributes by debating the current CEO’s strengths and weaknesses, instead of understanding market and leadership trends. This premature conversation causes boards to unwittingly yield to anchoring bias, becoming overly focused on identifying individuals who either mirror the current CEO or sharply contrast them. This anchoring effect can be especially pronounced in a couple of scenarios—when a successful CEO retires, boards tend to want an identical replacement; when a CEO has been asked to step down, boards gravitate toward leaders with polar opposite profiles.

Trap 3: Conflating stakeholder agreement with alignment

Boards and nominating committees will often reach an agreement on the key forces that are most affecting the organization, identifying a ‘wish list’ of ideal capabilities and experiences that the next CEO needs to succeed. However, rarely will one candidate meet every single criterion on this list. How boards prioritize across that wish list is critical—and is often not given sufficient attention.

As the process continues and the board shifts from engaging with concepts to engaging with candidates (each with their strengths and weaknesses), that initial agreement can quickly unravel. Divergent views on priorities make it clear that boards lack true alignment. An early conflation of agreement and alignment can have cascading consequences across the succession process, manifesting in ineffective candidate evaluations (because the decision-makers are not using the same language or parameters for measuring candidates) and poor candidate experiences (because the interviewers do not present a cohesive role articulation).

Methodology

Data sourced from Russell Reynolds Associates’ H1 2023 Global Leadership Monitor, which surveyed 500 CEOs, board directors, and CHROs on the state of CEO succession and stakeholder perspectives, and interviews with 14 of our Board and CEO Advisory Partners consultants.