Two top leaders talk succession: we asked them for lessons learned and key factors in making executive transitions successful.

• Author: Cheloha, Randall S.
• Position: SUCCESSION PLANNING

IT USED TO BE that a board member might encounter a CEO succession only once a decade or so. Today, that pace is accelerated by the aging of the executive ranks. In addition, the current corporate governance environment leads to high turnover at the top, as directors now recognize the significant business risks they face if they fail to identify and develop appropriate executive leadership talent. Indeed, acquiring and retaining the right leaders has become every bit as vital as having the right business strategy.

Effective succession planning requires board commitment and skill. But the conventional wisdom of succession planning tends to pale before the complicated realities of actually going through the process--and there's no substitute for experience. Jack Michaels and Richard Teerlink are among today's boardroom leaders who possess an intimate knowledge of the process and what it means for their organizations, so we sought their perspectives on CEO and executive succession.

In both cases, these executives know how high the stakes are: Jack Michaels is currently the CEO and chairman of Snap-On Inc. and sits on the board of Ipsco Inc., while Richard Teerlink is the former CEO and chairman of Harley-Davidson Inc. and sits on the boards of Snap-On and Johnson Controls Inc. Together, they represent many decades of corporate command; they share a commitment to succession planning done well. We asked each to consider the lessons of the successions in which they've taken part and to highlight some of the key factors they believe boards should address in succession planning. The accompanying checklist (see page 44), developed by Mercer Delta Consulting and Mercer Human Resource Consulting, is part of a blueprint for board success in succession planning, and builds on the real-world observations of CEOs such as Richard Teerlink and Jack Michaels.

Culture and values

"In the successions I've been involved in, the companies have had really strong cultures," observes Teerlink. "We've always found strong internal candidates in those organizations. Boards can go astray if they bring in candidates from the outside who do not understand the culture, and so it's equally important that the corporate culture be understood by the boards themselves. And I'm not sure all boards take the time to consider the organization's culture, since they are generally faced with serving the interests of the shareholders, and that means a focus on the financial numbers...