CEO Leadership Continuity Risk
Have you ever been worried about what will happen when your Board of Directors, your investors or your key employees discover that there are no succession plans for key individuals in your organization? The answer can have a huge impact not only on your company, but also on your career.
And even though you know it’s important, creating a comprehensive succession plan can feel daunting. It seems like it’s a huge ordeal. You have a business to run and don’t have time to devote to a project of this scope. Other key executives don’t understand the importance. Or maybe, your HR team doesn’t seem to be up to the task.
You’re not alone. It’s a problem many CEOs face. Yet, this is something you have to tackle. In other words, if you don’t already have good, well thought out succession plans in place, this is something you need to develop. The call to act is being driven because investment analysts, private equity firms and rating agencies are increasingly factoring succession issues into underwriting and ratings decisions. If you want access to capital either right now or in the future, this is something you have to do.
If having a succession plan is so important though, then why don’t more CEOs or Board of Directors approach key leadership assets with the same diligence as they do their financials? After all, they are directly correlated.
Without a good, well thought out succession plan, companies have experienced decreased confidence on the part of potential investors, dips in stock prices and increased costs associated with having to pay more than necessary for leadership talent. Need an example? Consider what happened to Apple’s stock price when it was announced that Steve Jobs was taking a leave of absence, yet there was no clear-cut successor in place.
Think about it. When it comes to financial reporting and assets, CEOs, CFOs and Board of Director’s embrace the objectivity and expertise of an external audit. Can a CEO really afford to apply a different standard to key leadership assets? After all, talent is directly correlated to finances and is one of the largest expenses on any company’s P & L. That’s why over the past several years, changes in SEC policy, resolutions by Unions and large Trust Funds have created focus and transparency regarding CEO succession have broadened to include the strategic business risks associated with executive continuity for key executive roles.
Investment analysts, private equity firms and rating agencies are increasingly factoring succession issues into underwriting and ratings decisions. Companies and their Boards who appear to have risks associated with the continuity of strategic executive roles are becoming more vulnerable as investors are raising the expectations that companies have effective succession planning processes in place.
I’ve been an organizational strategy consultant for over 25 years. Over that period of time, I’ve seen many companies fail to effectively manage the risk associated with leadership continuity. As a result, I’ve seen them lose credibility in their market, with investors, and at all levels of employees. They not only ended up losing key executives but it also cost them more to get access to capital, costing their companies millions of dollars.
Because investors and underwriters are looking at succession more stringently, it’s become increasingly top of mind for many Boards of Directors. Yet, it’s not something most companies have the ability, insight and time to implement on their own. Therefore, it’s a project that often gets pushed to the side.
I searched the market to find an audit process and tool set that I could introduce to some of my CEO and Director clients that would help make the process quicker and easier but didn’t find any. So I decided to develop my own. I’ve applied my experiences across industries for over 25 years to create a straightforward way for companies to pinpoint risk and take appropriate action.
I would be happy to share my perspective in more detail. Just call or send me an email.