CEO Succession – ‘Finding a new CEO’

CEO Succession: ‘Finding a new CEO who’s ready to deal with tomorrow’s challenges.’

Perhaps no single decision has a more substantial impact on the future of a company than the selection of a new Chief Executive. Choosing a CEO is possibly the most significant decision a board can make. While certain circumstances may deem the appointment of an external successor to be more appropriate, appointing an internal known quantity can often be the most solid platform from which to move a company forward. In either instance, appointing the individual, internal or external, most likely to shine brightest must be the priority. So how can a board go about identifying a new CEO who’s ready to deal with tomorrow’s challenges?

Below Pat O’Donnell, Co-founder and Managing Partner of retained executive search consultants, Principal Connections – part of global top 20 executive search group, Agilium Worldwide, reveals some of the core facets commonly found to be at the heart of a successful succession planning process.

Strategic Allignment

Managing the CEO succession process is a board’s ultimate responsibility. The board should therefore engage in a strategic alignment process and agree on future CEO benchmark profiles. It will be important that such profiles reflect the future strategic priorities set out in the business strategy. And in turn, these objectives should link to the person specification of the next CEO. This process supports the development of a clear evaluation mechanism to consider internal as well as external candidates.

CEO Assessment

Candidates should be measured using independent methods of assessing CEO potential and the agreed upon CEO success profiles. The objective must be to form an unbiased, multi-dimensional view which should include quantitative assessment of candidate experiences, competencies, skills and personality traits to inform succession thinking.

Board Review

CEO succession should be at least a bi-annual topic on the board agenda. The process may commence even as early as the second board meeting following the commencement of a new CEO. As the process matures, the succession theme should filter through all levels of the company in order to identify next generation CEO potentials at multiple levels. The board must stay close to the development practices of the company so it is assured that the future leadership talent requirements of the organisation are met.

Next Generation CEOs

Companies should develop next generation CEO successors through a blend of mentoring, coaching, education, rotations, secondments, key initiatives and specific developmental assignments. Once a board has gone beyond finding not just near ready CEO contenders, but generations of successors with the potential to serve as future CEOs one day, it must help that potential to prosper. Usually this will take the form of individually customised development programs aligned to both individuals’ requirements and what the organisation will require in a future leader. When potential successors become CEO contenders, the attention should shift to ascertaining areas to increase growth and to bridging development gaps.

CEO Bench Strength

The internal bench strength of the C-suite must be regularly reviewed by the board. This should involve meaningful exposure to board members in formal as well as informal settings. Board members can therefore form their own informed impressions of CEO potential. Once individuals are considered to be future CEO material, the board will then need to peel back the layers and commence stress testing core competencies while also looking more closely at personality derailers. At this stage, the board may decide that it must recruit external leaders to increase the calibre of its bench.

Review Talent Frameworks

It is crucial to regularly review talent management and development frameworks against the longer-term business strategy. This will enable the organisation to modify talent development activities in accordance with shifts in business strategy. Since there may be several possible futures to plan for, leadership profiles reflecting such differences should also be planned for.

CEO Transition

Once a successor CEO has been selected, it will be crucial that a comprehensive transition plan is developed to ensure that the incoming CEO gets off to a good start. At this time, it may also be necessary for the board to agree the post transition role of the outgoing CEO. A sound transition process can take six to twelve months depending on the circumstance. It will typically consist of a number of important phases tailored to the circumstances of the transition required.

Succession Benefits 

Developing an ecosystem that can identify and incubate future CEO talent demands a consistent commitment. It requires patience, but more importantly, it requires belief in the process for companies and their board members to go the journey. However, this is an investment that will pay high dividends through delivering leaders who can successfully navigate the nuances of tomorrow’s business landscape.

Not alone does this type of approach mitigate the risk of a board being caught off-guard, it encourages a culture of personal development aligned to career growth and extends to entice external interest. It is also noteworthy that just about nothing is more closely aligned with safeguarding shareholder value than the assurance that the right leaders will be in place to deliver tomorrow’s success. For this reason, shareholder advocates view solid succession planning as a reflection of the quality of the board itself.

ABOUT THE AUTHOR

Pat O’Donnell is Co-Founder and Managing Partner of Principal Connections, the Irish member firm of global top 20 executive search group, Agilium Worldwide. Mr O’Donnell is known as a leading authority and trusted advisor to domestic and international organisations in all phases of development and change and is also noted for his exceptional understanding of board room dynamics. A graduate of the National University of Ireland Galway, Mr O’Donnell holds a Master’s Degree in Commercial Law from University College Dublin’s School of Law.

The above article first appeared on Business & Finance in November 2019.

To learn more about Principal Connections please visit www.principalconnecions.ie or e-mail pat@principalconnections.ie       

Follow Principal Connections on LinkedIn and Twitter 

The above information does not purport to be professional advice. Readers are advised to seek independent professional advice before acting on anything contained in these materials.

Diversity Executive Search Ireland
Executive & Board Resourcing Code 2019

Irish Executive Resourcing Firm, Principal Connections, supports updated Executive & Board Resourcing Code of Conduct

Read the Executive & Board Resourcing Code

As organisations strive to achieve better performance through more diverse balance across senior decision-making roles, recruitment and appointments becomes a pivotal process. Since 2016, Ibec and the 30% Club have promoted a voluntary code for executive search firms to support more balanced selection, in their role as key stakeholders in changing the landscape on gender balance across senior management and on boards in Ireland.

In 2019, the Code was updated and broadened to reflect all search professionals (external and in-house), and any senior resourcing activity. It is based on four key principles incorporating Strategy & Goals, Talent Pipeline, Process and Monitoring & Reporting. The Code also recognises the importance of search firms and client organisations working together in partnership on delivering change. It is anticipated that the Code will become a referral point for the Balance for Better Business outputs, to be announced soon by the Government Review Group

APPLICATION OF THE EXECUTIVE RESOURCING CODE 

Executive search firms and search professionals, as signatories to the Code, commit to following the Code’s provisions in their board and senior executive search processes, irrespective of sector or company; and to ensuring that the principles and key behaviours are embedded in their day to day practices. A list of signatories is published, and signatories are also encouraged to publicise their compliance through their website and through public reporting of measures of success.

SIGNATORIES OF THE
EXECUTIVE RESOURCING CODE

Executive search firms and search professionals, as signatories to the Code, commit to following the Code’s provisions in their board and senior executive search processes, irrespective of sector or company; and to ensuring that the principles and key behaviours are embedded in their day to day practices. A list of signatories is published, and signatories are also encouraged to publicise their compliance through their website and through public reporting of measures of success.

EXECUTIVE RESOURCING PARTNERSHIP

Individual organisations are actively encouraged to support the principles set out in the Code and to work in collaboration with the executive search partner, whether in-house or external, in ensuring the Code is upheld; and that ultimately greater balance is achieved across senior decision-making functions with particular emphasis at board and C-suite executive levels. In particular, it is anticipated that Nomination Committees will encourage the adoption of the principles and the suggested behaviours in both Board and internal selection processes, supported by the CEO and the HRD.

IBEC & THE 30% CLUB COMMITTED

Ibec and the 30% Club have committed to promoting the Code and its signatories with our members, encouraging them to engage in future with recruitment and executive search firms who are as committed to diversity as they are. By working together, we hope that we can make further advances to address the challenge of gender balance in decision-making roles and ultimately for better business outcomes.

ABOUT IBEC
Ibec is Ireland’s largest lobby group representing Irish business both domestically and internationally.

ABOUT THE 30% CLUB
The 30% Club campaigns for greater representation of women on the boards of FTSE100 boards with a target of a minimum of 30%.

ABOUT PRINCIPAL CONNECTIONS
Principal Connections has forever been committed to helping client organisations increase the effectiveness of their boards and senior executive teams in the selection and appointment of diverse talent. Working in partnership with Chairs, Nomination Committees, CEO’s and HRD’s we take the appropriate steps to ensure focus, action and success throughout the execution of the executive resourcing process.

Follow us on LinkedIn and Twitter to keep up to date with all our latest news.

Executive Search Dublin
Balance for Better Business Report May 2019

No company traded on the Euronext Dublin markets should have an all-male board by the end of this year. This is just one of the targets set by a new Government-commissioned report on gender balance in Irish businesses according to Dublin executive search firm, Principal Connections. The report also says one-third of directors at the 20 biggest Irish companies on the stock market should be female by the end of 2023.

“Women are the most under-utilised economic asset in the world and the countries and businesses that recognise this are the ones that will do best in the world of tomorrow.” Balance for Better Business Report May 2019


EXAMINING THE GENDER BALANCE OF IRISH BOARDS  

Currently only 16.4% of directors of all Irish publicly listed companies are female, while 15 listed companies still have all-male boards, a statistic which there is broad agreement has to change. Established by the Government in July 2018, the ‘Balance for Better Business’ Review Group was tasked with examining the gender mix within the governance and senior management of companies in Ireland. The independent body, co-chaired by Bríd Horan (Chair, Nephin Energy and formerly Deputy CEO ESB) and Gary Kennedy (Chair, Greencore and Green Reit), was asked to make recommendations on how women can be involved in decision-making at the highest levels of Irish business.

There are currently 408 directorships within the 51 public limited companies trading on the Euronext. Of these, 67 are female directors, representing 16.4%.

BOARD GENDER TARGETS SET FOR IRISH BUSINESSES

This the first report examining the gender composition of Irish publicly listed companies calls on businesses in Ireland to quickly address the low levels of female representation on their boards of directors. Interim targets have also been set for each year so that companies can measure their progress against annual benchmarks.

This the first report examining the gender composition of Irish publicly listed companies calls on businesses in Ireland to quickly address the low levels of female representation on their boards of directors. Interim targets have also been set for each year so that companies can measure their progress against annual benchmarks.

Targets for Women on Boards of Listed Companies


IRISH BOARDS MUST TAKE VOLUNTARY ACTION

The report is clear in that Balance for Better Business favours a voluntary approach in which companies themselves take action to introduce the necessary reforms, thereby avoiding the need for legislation to impose gender quotas. The body says it is pleased to note that progress has already been made since the initiative was launched, with the overall percentage of women on Irish publicly listed boards increasing in the last year from 14% to 16.4%.

But it suggests the momentum needs to accelerate and to be sustained for balance to be achieved, because in recent years Ireland has slipped further behind other EU member states. It also explains there is a strong business case for better gender balance, including wider access to the entire pool of talent, greater diversity of thinking and increased responsiveness to consumer requirements. The Review Group advises that it is developing a programme of engagement with major companies and key business influencers to raise awareness of the need for change. It says it is ready to work with them to identify how we can tackle barriers preventing change.

NEW FIGURES FROM THE CENTRAL STATISTICS OFFICE

Last week, new figures from the Central Statistics Office showed just 1 in 9 chief executives (12%) of large enterprises with 250 or more employees in Ireland in 2019 are women. They also revealed that women make up 28% of senior executive roles compared with 72% for men. The data also showed that the vast majority of chairpersons at companies were men – 93% – with women making up the remaining 7%, while 80% of directors on company’s boards are men and 20% are women.

Companies With More Than 25% Female Directors

WELCOMING THE BALANCE FOR BETTER BUSINESS REPORT

The Institute of Directors in Ireland said its recent diversity research found a growing support for gender targets on boards, with support across the board from both male and female directors. In a statement Maura Quinn, CEO of IoD Ireland, said that while progress may not be a straight line, the targets outlined in this report provide a clear focus for boards, their directors and stakeholders, as well as a means of evaluating its progress on an annual basis. “Board diversity is not just ‘a nice to have’, it’s about what is best for business,” Ms Quinn said. “Board diversity allows for the best possible talent to be available, which in turn will help a business become even more commercially effective. It is imperative that we now heed this call to ensure there is real traction on this issue in the future,” she added.

Companies With No Female Directors

Meanwhile, Ibec CEO Danny McCoy, a member of the review group for the report, said today’s publication will lead to a welcome step change for boards in corporate Ireland.  “This is a hugely significant development for business leaders in Ireland and will be embraced as part of the continuing evolution and strengthening of the Irish business model,” Mr McCoy said. “The measures announced today are a critical element that form part of the holistic approach required to bring about gender balancing across Irish business and society,” he added.

Helen Wycherley, President of Network Ireland – which supports the professional and personal development of women – said that companies can gain so much from having more female representation on their boards. “We know that boards are traditionally male-dominated places so we need to ensure that boards focus on achieving balance – and not just gender but also age and backgrounds,” Ms Wycherley said.

The Network Ireland President said that many women do not even think about going on boards and the benefits are many. “They can be a source of income, they will increase confidence and develop connections, they can allow you to give back and absolutely can allow you to make a difference in an area you are passionate about,” she added.

Bank of Ireland, which last year set out a target that all management and leadership appointments will represent a 50:50 gender ratio by the end of 2021, also welcomed the report. “We are committed to creating a diverse and inclusive place to work where our people can be themselves and perform to their full potential,” said Francesca McDonagh, the bank’s CEO.


ABOUT BALANCE FOR BETTER BUSINESS

Balance for Better Business is an independent business-led Review Group established by the Government to improve gender balance in senior leadership in Ireland.

ABOUT PRINCIPAL CONNECTIONS

Principal Connections
is Ireland’s Top Diversity and Inclusion Executive Search Firm. At Principal Connections, we believe that we have an important role to play in helping our clients build diverse leadership teams.

Clients engage us to address the growing importance of diversity in their employee population. Companies that incorporate inclusion strategies in their business have stronger financial performance and provide greater shareholder value. Principal Connections has a strong track record in diversity search assignments and embraces the global reality of diversity and inclusion.

Follow us on LinkedIn and Twitter to keep up to date with all our latest news.

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Principal Connections is Ireland’s leading Executive Search Firm and the Irish Office of Agilium Worldwide LLC.

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