Roadmap for successful succession planning: this robust four-step process enables the board to fully address its leadership transition responsibilities and help set the new CEO on the right course.

• Author: Miles, Stephen A.
• Position: HEIDRICK & STRUGGLES GOVERNANCE LETTER

LEADERSHIP TRANSITION from one CEO to the next is a risky event. Historically, the risk was addressed through the anointing of a successor by the incumbent CEO. Once that successor was identified, a great deal of time was invested in making sure he or she was ready at the right time.

In the post-Sarbanes-Oxley business environment, however, CEO succession now requires the full consideration of the board. After all, this group is responsible for governance; it is the board's duty to develop, implement, and ensure that a thoughtful and thorough succession planning process is executed. The CEO's responsibility has become more of a service to the board by continually preparing one or two strong internal replacements. The CEO also has a duty to ensure the long-term effectiveness of an organization. The true test of a leader's success is the company's performance after departing. CEOs have a legacy to protect and, likely, a personal financial interest in the ongoing performance of the company. They should be eager to support a top-notch succession planning process.

Unfortunately, we know from our work in executive search that succession planning efforts often are woefully underdeveloped, unevenly executed, and sometimes simply ignored. Boards that perpetuate or permit a happenstance approach to succession planning have abdicated their responsibility to shareholders. A robust process that allows boards to manage this strategically and proactively must be in place.

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Our purpose here is to outline a straightforward process Heidrick & Struggles has developed from deep experience in talent assessment and executive search. This process provides a roadmap for directors in their efforts to implement what can truly be called a best practices approach to succession planning. Such an approach protects the interests of board members, employees, shareholders, and other constituents, and serves to give them confidence in the long-term prospects for the company.

What does a best practices succession planning process look like? The process involves four steps.

Step One: Analysis and Planning

The first step of the process involves efforts to develop a solid understanding of two things: (1) the most significant challenges the company and its industry are likely to face over the next four to six years, and (2) the executive competencies and experiences that are likely to enhance the ability to lead the company as it confronts those challenges.

Because a succession plan is a living document, the relevant...