Back in the day, sitting CEOs held sway over the succession process and largely hand-picked their successor. Of course, this is no longer the case. The board runs the show now. Still, the incumbent CEO plays a critical role in the planning process, which is too often underacknowledged. In fact, the best succession scenarios are the ones where boards and sitting CEOs come together constructively to plan, measure performance, set projections for the future, and mentor candidates. No one knows better than the person who has taken the journey themselves how daunting the step-up to CEO can be. Who better to initiate the process of planning for the right successor than the one who knows the role most intimately.
We regularly advise our clients that planning for the next successor should begin on day one of a new CEO’s tenure, even though that can sound a bit extreme or even counterintuitive. How can one possibly prove their mettle when they are being asked to cast attention to their replacement? But the fact is, assuming the responsibilities of chief executive include succession as well. And the reality is that one of the truest measures of excellence and conscientiousness in leadership is paving the way for the future while creating high performance in the present, balancing the short, longer, and longest terms in constant and adaptive strategizing rhythms. Those who embrace this also know that their personal reputation as a high-performance CEO is only as important as the overall state of the enterprise they leave upon their departure—this is really the full measure of a CEO’s legacy. To meet those ends, succession planning should be in constant, organic flow, as seamlessly orchestrated as possible, from one leader to the next, across the changes in the leadership mandate over time. While the ultimate decisions on succession will rest with the board, time and time again, it is the sitting CEOs who play such an important role enabling the transition, sustaining its progress and fluidity, and equipping the best next leaders and teams for success.
As we see it, there are five essential ways sitting CEOs can best influence the succession process:
1. Be an initiator: Activate succession planning with your chair and your board well before you anticipate leaving.
Too often, succession talk is hushed early on, as if it is a taboo topic or somehow a judgment of current performance rather than the good governance it actually is. Break the silence. Be the leader who knows that not only do all good things come to an end, but the best changes and transitions require careful, forthright planning and continual evaluation. Work with the board to imagine the future and the leadership needed to get there. Take an active role in early drafting of the next CEO profile and keep them well informed as to foreseeable changes or any alterations that affect the leadership mandate over time. As Intuit’s former CEO Brad Smith recalled, looking back on his own succession planning process, “Ultimately, we talked about succession 44 times in my 11 years before the board had to make the decision, and that ensured there were no surprises such as ‘You think you groomed a successor. We don’t agree.’”
2. From the get-go, develop and recruit talent with the future in mind.
CEOs should be constantly looking ahead and paying attention as they begin working with and planning the strategic future with their executive teams. Early on, they should work with management to play an active part in pipeline talent development and to notice where their top talent is excelling and where they are lagging. People development is a vital component of the leader’s job, and it sets the stage for a more successful succession down the road. As CEO, one must always be thinking about whose skill sets match future strategies, which people have the potential to learn and grow, and how to rotate them into the right jobs for them to meet those marks. Importantly, this should include concentration on the key elements of internal development, such as self-mastery and identity work (more on this below).
Most important, CEOs want to start early, taking a hard look at would-be successors and carefully allotting the time needed to develop the talent required, several years ahead of succession. When companies stall on this and only begin thinking about the next CEO one or two years before the transition, they often end up passing over people who could have been serious contenders if they were invested in earlier.
Consider, for example, when Michael Miebach of Mastercard came to his CEO, Ajay Banga, in 2015 asking to lead the Asian offices after successfully heading those in the Middle East and Africa. Banga let it be known right away that he found the idea short-sighted. “How does your going to Asia and spending another five years knocking the ball out of the park make you more attractive to me?” he asked. In Banga’s opinion, Miebach needed new experiences to develop new, important expertise, to stretch himself. Instead, Miebach became Chief Product Officer and relocated to New York—a move that would prove critical to his own “training” for CEO—the position he now holds. Banga’s attention to getting this right early on was critical. Mastercard continues to advance its thinking on developing future-ready CEO succession candidates. This includes regular review of the leadership specification and starting earlier when focusing on self-development and practice, and leadership identity that helps individuals move beyond existing patterns and approaches.
Beyond working with internals, quite often the CEO and the board might look externally to recruit another potential candidate to add to the succession slate. This can often become particularly relevant if the company is facing new challenges that insiders are less equipped to handle. Here, too, it is quite important to think well ahead and to recruit early enough for the outsider to become an insider and really know their organization to ensure a smooth succession.
Overall, the incumbent’s role in preparing the next pool of potential successor talent is a vital part of early succession planning. And if the CEO has engaged the board and the CHRO thoroughly, the board will have clarity on both what attributes are needed and who the best internal candidates are.
3. Provide ongoing development opportunities for successors to realize their fullest potential and expand their leadership capacity.
Once there is a short list of internal candidates, it is critically important that their development and growth continue to best prepare them for the role they may soon assume. As with the Mastercard example, this can mean challenging a candidate’s plans, or perhaps management. To these ends, the CEO should partner closely with their CHRO, who will help monitor the candidates’ development plans.
In addition to job rotations and competency assessments, it is especially important now that vertical development be part of the overall preparation package—that mindset and capacity expansion and identity development are part of the overarching goals. No one will understand the importance of this more than sitting CEOs today, who have assumed such expanded leadership roles, reaching more stakeholders and assuming greater societal impact and responsibility than in the past. Making certain that the next generation of leaders comes into the role with a better understanding of these expanded expectations for their leadership will be one of the crucial responsibilities of the current generation of CEOs (who have visibly lived through and adapted to so many changes).
4. Recognize when it’s time to step back.
This can be hard. After being so involved in the initial stages of the succession process, there will come a time when the incumbent needs to retreat to the wings. Many, if not most, CEOs will form a clear idea of who they think will be the best successor and will certainly let those preferences be known. But the final decision is nonetheless not theirs, and it is far better to demonstrate an acceptance of that. As the time for the transition gets closer and the process turns toward the board’s selection of finalists and, potentially, an external search, the incumbent’s direct participation in the process should ebb.
5. Prepare for the transition and depart with grace and intention.
The leadership legacy is not about the person—it’s about how they led and where they took the next generation of the business. Therefore, great CEOs pay ample attention to the transition of their successor and strengthen what they have built over their tenures. The goal is to hand off the job with grace and confidence in the state of the enterprise.
Importantly, part of setting up the new successor for success is creating the space for their ascent to the top. This, in turn, entails a shift on the part of the incumbent where their identity is gradually separating from that of the organization and its future plans. After the announcement of the new successor, and as the actual transition nears, the incumbent will try to adapt their leadership identity to reflect and make room for the impending change in command. Of course, these are difficult adjustments to make, especially for long-serving leaders whose daily work has been so immersed in the organization’s purpose and growth. It is to be expected that evolving out of this will take time and work, and many sitting CEOs find it helpful to work with coaches to help facilitate the shift.
Beyond creating this leadership space for the rising successor to begin to step into, leaving the business in good shape for them and optimizing the conditions for a promising start are also paramount. This means making key decisions about what to actively do and what to leave during the final stages of your tenure. This is especially important so that the incoming CEO can have their 100 days of breathing space to get acclimated and sort their priorities, rather than having them face immediate decisions that could have been avoided.
In their final stretch, incumbent CEOs usually want to attend to further shaping and solidifying the aspects of the business most important to them, to assure their health and ongoing impact. Overall, sitting CEOs are called upon to prepare and ease the organization into the leadership shift, as well as to pay close attention to external relationships so that there is no loss of trust. Ensuring a smooth transition from the inside out often becomes the culminating mark of CEO excellence.
Letting go of the reins is not easy. Any CEO will acknowledge that the cost of a successful transition is having to give up control. They inevitably face the reality of handing over important decisions to someone who can run the organization well but may have a different style and different priorities.
In this phase, chief executives begin to finally confront the question of what to do once they retire. For people who have devoted every thought and ounce of energy to the job for many years, this can be both a difficult and exciting consideration. As the ever-wise Fred Rogers liked to say, “Often when you think you’re at the end of something, you’re at the beginning of something else.” As CEOs begin to readjust their leadership identities, they can cast an eye toward promising new projects.
More often, we are working with departing and newly retired CEOs who are welcoming the prospect of being “lifelong leaders” by searching for the next best opportunity to put their vast experience and ambition to use. Who better to keep providing the leadership experience we so desperately need than these tried-and-true captains of industry?
In short, departing CEOs who both take pains to leave their posts in the best shape possible and endeavor to invest in their ongoing influence may well be our best hope for revitalizing great leadership and redeeming people’s faith in the promises of impactful leadership at large.