This unusual exercise is one of the most important tasks of the Board: it impacts the market value of your company. Yet, this foreseeable need is often treated too late and on an unprepared way. However, the process is well known. Let us share our experience:
First of all, do not hesitate to take reasonable time (several months, and often more than a year) to define your criteria, and how the new position will defer in some way from the incumbent CEO’s. This time is also used to assess the internal candidates, if needed. After those trials, when the need of an external search has been raised, more than six months are needed, if you take into account the process of selection, the notice period and the time for an effective transition.
Make sure of an effective preparation, engaging all stakeholders (the Board, the outgoing CEO, the shareholders, members of the top management team) with an explicit communication plan. Put attention to define the respective roles in the selection process, having in memory that the incoming CEO will use it to understand the opportunities and challenges of the company and his/her position.
Even if the two thirds of CEOs are selected from inside the company, the Board often has to consider both internal and external search, taking into consideration the availability of viable internal candidates, the risk of departure for each of them, and other strategic issues (e.g. the degree of change needed …).
Finding candidates fitting the company’s leadership requirements is often using the combination of two approaches: in-house assessments and others conducted by and external third party. Different assessments can be used. Face to face interviews probing how candidates tackled specific challenges in the past can be combined to 360° feedback, reference-taking, psychological tests, etc.;
When the new CEO is selected and hired, ensure an effective integration by building strong relationships with upside and outside stakeholders (Board, financial markets, etc.), by establishing governance mechanisms such as building the top executive team, or by facilitating the strategic and cultural changes in link with the other company’s managers.
THIRDMAN remains at your disposal for an in-depth analysis of your needs, whether they are short-term ones or based on the willingness to prepare the future of your company.
As any human gathering, the Boards require harmony, melting personal strategic views with corporate collective interest, taking into account the historical culture, but also the change needs, the whole in the interest of shareholders and broader stakeholders. Boards of directors need to renew their members in respect of internal harmony and synergy. THIRDMAN is a valuable partner in helping you to determine the actual strengths and weaknesses of your board, meeting your governance needs. A few years after the Sarbanes-Oxley Act, the bar has been raised for the Boards, from a position of advisory for the CEO to a supervisory role of the CEO.