What boards should ask before approving a succession plan
Most boards have a succession plan. Fewer have one that would hold if the chief executive left tomorrow. Five questions separate the two.
Succession plans are approved once a year, often in a few minutes, as a slide with names in boxes. The test of a plan is whether it would work on a Monday morning after an unexpected departure. These are the questions we would put to the nomination committee.
1. If the chief executive left tomorrow, who acts on Monday?
Who takes charge immediately, with what authority, for how long, and who speaks to employees, clients and investors; eventual succession comes after. An emergency protocol is a separate document from a succession plan, and many boards have yet to write one.
2. Does the profile come from the strategy, or from the incumbent?
A profile written around the current chief executive describes the past. The profile should follow from the strategy the board has approved for the next five years, and it should be revisited when that strategy changes.
3. What evidence do we have on the internal successors?
If the only evidence is the chief executive's opinion, the board is relying on one view from someone with an interest in the outcome. Structured assessment against the profile, references and the board's own exposure to the candidates give it a defensible basis.
4. What would the market offer, and when did we last look?
Only an external benchmark tells the board whether its candidates are strong or simply the only ones it has seen.
5. Who owns the plan, and what has changed since the last review?
A plan that comes back each year with the same names in the same boxes has probably been left untouched. Development actions, moves and gaps should be visible from one review to the next.
Signs of a plan that exists only on paper
- The same names, the same readiness ratings, year after year.
- An emergency protocol that is missing, or that names a person and leaves their authority undefined.
- Ready now candidates whose leadership experience is confined to their own function.
- Diversity, independence and the board's own skills left out of the same conversation.
Succession is the decision a board can least afford to take in a hurry. The preparation is what turns it from an exposure into an asset.