Chapter 4: Failing to consider the ripple effects of the CEO selection decision

In a dynamic leadership landscape, leaders need to anticipate how decisions in one area affect adjacent issues, and work to mitigate potential consequences. During CEO succession, the board needs to engage in second-order thinking—pausing to question initial decisions and deliberate on how proposed solutions will impact the future.

In appointing the next CEO, boards may not adequately anticipate the domino effects of CEO succession, shy away from transforming the C-suite, and fail to effectively invest in the new leadership team.

Trap: Falling into a stability fallacy

The succession process is an intense and high-stakes process, one that often leads boards to fall into the stability fallacy, fearing that any additional changes to the leadership team will cause unnecessary uncertainty and instability. Too often, boards leave C-suite composition and growth to the incoming CEO to solve for themselves. While the rationale here is reasonable—wanting to take into account the relationship between the independent board leader and the new CEO, and give the new chief executive the right to make their own decisions on the team around them—it’s important for boards to recognize that the new CEO, especially if they are external, has a steep hill to climb.

Often, boards immediately jump to identifying new roles or capabilities needed to complement the new CEO. Equally important, but typically overlooked, is discerning how existing roles or capabilities need to shift to complement the new CEO and C-suite team. Regardless of the CEO appointment outcome, C-suite leaders are already contemplating how their existing roles may change.

Some C-suite leaders may have been involved in the succession process as candidates, which will amplify their consideration of career options and growth, while others will be thinking about how the new CEO will impact them. Even if there are no new additions to the C-suite team, there is value in reshuffling remits to allow leaders to explore new leadership opportunities, such as being responsible for initiatives outside of their primary area of expertise, gaining international exposure, or leading a transformation or systemic change.

Boards must actively engage with the C-suite team’s evolution to create engagement, development, and commitment. Through the CEO succession process, the board and the CHRO should have gained clarity on the performance, potential, and aspirations of key C-suite leaders. It’s imperative that boards leverage this wealth of information, along with its guidance on the future trajectory of the organization, and proactively engage with the new CEO on leadership talent decisions.

How can boards overcome this CEO succession decision-making complexity?

Welcome C-suite shifts and adjust responsibilities based on retention, aspiration, and skills of the existing top team.
Appointing a successful CEO is not just about the position itself—an accomplished CEO succession also means establishing a stable, complementary C-suite team. Boards can support the new CEO’s leadership by proactively identifying which individuals may need new remits in anticipation of the next CEO succession cycle, evaluating the health of the new C-suite team against the 5Cs of C-suite performance, and adjusting development plans to ensure deeper commitment and enhance team stability.

Experiencing psychological complexities throughout the CEO succession process is natural. By being aware of these elements throughout the decision-making processes, boards can consciously:

Invest in strategic alignment efforts when defining success factors
Expand optionality when determining the talent universe
Conduct true leadership evaluations when assessing candidates
Anticipate how the CEO succession process will impact the organization’s future leadership

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Explore more chapters

Chapter 1: Underestimating strategic alignment efforts when defining success factors

Learn more about the psychological traps impacting strategic alignment and how to overcome them

Chapter 2: Forgetting to create sufficient optionality when determining the talent universe

Learn more about the psychological traps impacting optionality and how to overcome them

Chapter 3: Distorting the leadership evaluation when assessing candidates

Learn more about the psychological traps impacting leadership evaluation and how to overcome them

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.

Authors

Joy Tan and Tom Handcock of RRA’s Center for Leadership Insight conducted the research and authored this report.

Learn more about the authors and The Center for Leadership Insight

Justus O’Brien is a senior member of Russell Reynolds Associates’ Board and CEO Advisory Partners in the Americas. He is based in New York.
Dean Stamoulis is a senior member of Russell Reynolds Associates’ Board and CEO Advisory Partners in the Americas. He is based in Atlanta.

Acknowledgements

The authors would like to thank contributors from Russell Reynolds Associates’ Board and CEO Advisory Partners who participated for their time and their valuable perspective: