Watch CBSN Live

Ignore CEO succession at your peril

(MoneyWatch) Leaderships transitions are never easy in the corporate world, especially for those at the very top of the organization. Indeed, as the management shuffle at companies like Hewlett-Packard (HPQ) and Yahoo (YHOO) show, many companies need help when it comes to executive succession.

According to a new report from consulting firm RHR International that draws on interviews with CEOs and boardmembers, half of all chief executives say their transition was "chaotic," even when it was expected to be smooth. That was true of CEOs who were hired both from inside and outside the company.

One key factor in ensuring a smooth transition is alignment and clarity of expectations. "Three months into their tenure, 47 percent of CEOs were aligned with the board and only 41 percent were clear with board's expectations of their performance," RHR said. The good news is that with "time and effort," the situation improved, with 88 percent of CEOs report increased alignment. But such clarity continued to lag in expectations for performance.

RHR offers some suggestions for  how companies can improve their succession practices. CEOs made the following recommendations:

  • Engage more directly and more regularly with the board
  • Make "tough calls" about key people changes sooner than later
  • Ask for "a more planful" process in place prior to the role change.

Boardmembers, many of whom have been through multiple CEO transitions, suggested that corporate chieftains spend more time "getting to know the board" and developing a "support network" that may include a CEO mentor, a trusted advisor, and perhaps an executive coach. Getting their team in place sooner than later is essential. They also advised CEOs to meet and mingle with employees. Critical to this process is developing a key message, as well as asking questions and learning from what you hear.

None of these findings are surprising in and of themselves, but what the report implies (and here it jibes with other research) is that senior level executive transitions are more ad hoc than well-planned. When it comes to preparing a company for leadership changes, managers are often left to wing it rather than plan for it.

The cost of doing this can be high. The organization loses momentum strategically, and employees are left without clear direction from the top. As a result, projects stall, deadlines are missed, and customers go ignored. Additionally, when transitions are poorly managed, some executives inevitably wash out, never getting the opportunity to lead their organizations.

Perhaps A.A. Milne, creator of "Winnie the Pooh," said it best: "Organizing is what you do before you do something, so that when you do it, it is not all mixed up." 

Photo courtesy of Flickr user Victor1558

View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.