The following is an excerpt from a conversation that took place at MLR Media’s Character of the Corporation conference.
SPEAKERS: Tracy McKibben, director and audit chair, USAA; Oderah Nwaeze, partner, Faegre Drinker; Susan Salka, director, McKesson
NWAEZE: When should a company start to think about a new CEO? And how might the company incorporate current employees into that process? Is that a plan that needs to be implemented on day one? Or is there some kind of more deliberate approach to that succession planning?
MCKIBBEN: I have very new CEOs now. They've been at it for three years. You hope you're not thinking about who their successor is the day after they take on the job; that would mean your process probably didn't work very well. But when you're thinking about who's going to replace them, it's because you're interested in protecting the company — protecting the interests of the shareholders, the employees and the community. You've got to plan for what would happen if your CEO gets hit by a bus the next day. That gets into more of the emergency succession planning. But if you've got a CEO that you believe in and the board believes in, on the day after he takes on that role you're not necessarily thinking about how you're going to replace him.
I do think it's incumbent upon every board to have a process for looking at leaders in your organization and making sure that the CEO succession pipeline is strong. How do you give those who you see as potential leaders the skills that are necessary for them to take on the CEO role? It should be a priority for the board to make sure that happens. Because it takes time. It's amazing how time flies, and you never know what's going to happen as a new CEO in your company. And if you're not building those leaders right away, then you find yourself not having the people internally who can step into those shoes. I think that's a failure on the organization. It's a failure on the board. It's a failure on the CEO if you don't make sure you have robust internal candidates. I still think you can look externally, but the CEO coming in needs to see that as one of his or her key tasks. And certainly, the board needs to insist that that be the case.
NWAEZE: Should the board let the CEO raise the succession process and have that conversation on their own time, or should there be a timetable? How have you seen it approached?
SALKA: Hopefully the process is already in place and underway and has been going on for years. Any good organization that's doing proper people development and planning will look at all their key leader positions, ideally all the way through the organization, and make sure that they've identified successors that are ready now, three years from now and five years from now. They should also be talking with their high-potential people regarding their goals and aspirations. When a CEO comes into a company, they should quickly get to know who might be ready five years from now or 10 years from now. If nothing else, they need to be giving them some love, because those are the folks that are probably already the shining stars that have led teams and done some really amazing things. They're going to want to get to know the new CEO and they're going to want to know that the new CEO values them and sees them as somebody with a lot of potential. I don't think it's a bad thing for the new CEO to jump right in and know their own successors. Understanding what drives your high potential leaders is a key ingredient of being successful at building and nurturing your culture. Your strategy is ongoing and will change. But you must always be confident that you have the right people. Are they being developed in a way to prepare them for the next challenge? It's hard to take high performers out of a role where they're being so successful and valuable to the organization. Maybe they're leading a part of the organization that, if you disrupted it, it could create risk. But if you don't ultimately give them other experiences to see how they react in complex situations — including more challenging and uncomfortable situations — you're not going to know how they'll perform as a CEO. Ideally, you want to see potential successors in a situation where they are faced with different complex challenges. If you've been a CEO, you know it's not always the happy path.