When a new CEO has been appointed that is only the first part of the succession process complete. The second stage is the all-important transition – the transfer of roles from the outgoing to the incoming CEO.
Poor handling of the transition by the board could see the planning and effort put into the succession process put at risk. It could contribute to the possible failure of the new CEO to effectively transition into the business and make it more difficult for them to deliver top performance. According to some estimates between a third to up to a half of all CEOs leave after 18 months, which is very costly for organisations, both in the short and long term. There is a higher probability of failure when the transition process is neglected.
A well thought through transition strategy, devised and implemented by the board, will help ensure the new CEO is effectively inducted and is enabled to add the maximum value at the earliest opportunity.
In an effective transition the organisation is well prepared for a new CEO. It ensures the new starter is in tune with both the power dynamics and the culture of the organisation. The CEO transition will deliver a path toward productive relationships between the CEO and key stakeholders—including, most crucially, board members.
The important question is – how can the broad deliver a smooth and effective transition?
With a planned CEO succession, such as a retirement, the outgoing CEO should help the incoming one adjust to and understand the business. This process needs to start ideally nine to 12 months before the planned transition date. The outgoing CEO should share knowledge with their successor about the business, board, important organisational relationships and the culture of the organisation. The new CEO also needs to be briefed by the departing CEO on the personalities of those on the board. This approach is particularly important if it’s an external CEO appointment but must still take place even if it’s an internal hire.
Where working alongside each other as part of the transition process the departing CEO, and their successor, must have clearly defined roles from the outset to avoid confusion. Agreement is required on the details of their relationship; so questions need to be answered, including on what issues they will collaborate on? Do they want the board and the senior team to view them as true partners? Which decisions will the incumbent run by the successor? And importantly, what milestones or phases will mark their progress, and will the transition of power and responsibility be incremental or all at once? The boundaries between outgoing and incoming CEO need to be clearly defined during the transition process to avoid the distraction, confusion and ambiguity that lack of role clarity can cause.
The successor must have real responsibilities from the start, with objectives closely tied to strategic and operational success, and a clear timetable for transitioning to the top job.
The outgoing CEO, working closely with the board, must help direct the transition process. They need to remain fully engaged with their current duties and have responsibility for short term performance. They should also devote significant time to ensuring their eventual replacements’ early success.
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