“Board members are often successful, ambitious people. But they aren’t often good HR people, and so don’t know how to conduct a staffing process.” So says Patrick Wright, Thomas C. Vandiver bicentennial chair in the Darla Moore School of Business at the University of South Carolina and founder and director of the Center for Executive Succession (CES). This is where HR can and should step in, he says, if they’re serious about avoiding the costly mistake of appointing the wrong man or woman to the most senior job in the company.
The inaugural chair of the CES is Marcia Avedon, senior VP of HR, communications and corporate affairs at Ingersoll Rand, a diversified industrial manufacturer headquartered in Dublin and North Carolina. Avedon and Wright have worked closely together researching executive succession. HR magazine caught up with them to find out more about executive succession best practice, and how to avoid the pitfalls.
Marcia Avedon: What made one executive successful in the past may not necessarily make the next successful in the future. Things are changing so quickly; we can’t look at succession as a static activity. This also means that the development plans for a candidate must be moveable as things change. HR needs to work with the CEO and the board to keep that drumbeat going and not let people get too comfortable in the executive succession process, as it’s difficult to predict what you need and when. In the business of executive succession timing is everything.
Patrick Wright: There’s also another risk when it comes to timing. That you’re trying to develop a successor who’s ready to step into the role as soon as the CEO is ready to move on; but it’s hard to know when the CEO will do that. The candidate usually knows they’re being considered as CEO material, and can get frustrated waiting for their chance once they’ve reached capability.
Businesses want a ‘ready-now successor’ who can step into the role as soon as they’re needed. But if they have a ‘not-ready-to-go CEO’ then there’s the risk they’ll get a ‘ready-gone successor’, who moves to another company rather than wait around indefinitely.
MA: If you don’t know when the job will come up you need options. Lots of boards don’t even have an emergency plan of what to do if the CEO becomes ill or passes away. To me an emergency plan is like basic hygiene – we have that envelope in the drawer so if the worst happens we know what to do right away. At Ingersoll we also think it’s important to identify potential candidates early, so we can make sure they get the experience they need to prepare them for the role. We very deliberately bring them into board meetings, give them a chance to present to the board, and also get the board to visit them in their teams so they can see how they work firsthand.
PW: One of the biggest challenges in companies is giving candidates this visibility outside of the typical dinner with the board or in a presentation at a board meeting. Also, board members are very busy so getting them to spend time on site to get to know a candidate isn’t always a positive proposition to them. But if they are to get a deep-dive view of what this individual might be like as the future CEO then they need to see them in their natural habitat.
MA: This can also help to make the process less biased.
PW: Unconscious bias definitely plays a part in the later stages of the process. There was an instance where I was evaluating the CEO succession process of two companies and, in both cases, they went from having two men and one woman in the running to the woman dropping off the list in the final stages. It could be a coincidence but there’s also the possibility that, as the decision draws nearer, biases manifest themselves more.
Our research has shown that increasing diversity on the board is not a priority for board members – almost one in five are doing nothing to address it at all. To get to a stage where the board is objective, we need to create more of a structured network where boards are holding up a job specification and evaluating everyone against that in the same objective way. I’ve seen times when board members are impressed with someone’s skills but the individual’s job history doesn’t match the role. Letting personal bias in can lead to the wrong decisions being made.
MA: Where this becomes more complicated is when the current CEO also has a strong opinion on who their successor should be. The CHRO [chief HR officer] sees more of the candidates than most of the other people on the board. So it’s down to them to stick their neck out and give their perspective if they don’t think all considerations are being looked at.
PW: There are two points to be made here. One is that there is responsibility on the CHRO to confirm the candidates’ strengths and weaknesses as there may be suspicion around the CEO showing favouritism. And the second is pushing for objectivity. Bias is part of human nature but it can come into play more when boards reach a decision too early in the process. When we look at failed succession it’s often the case that the board coalesced around a candidate, and when negative information came to light a few months down the line it was discounted because they’d already made up their minds.
MA: HR needs to give the board an array of data points to prevent them making knee-jerk reactions of: ‘I like this person so let’s choose them’. But getting objective data on performance is never easy.
PW: Data is absolutely the answer. Without performance data the board is unlikely to have a robust picture of the candidate. It’s surprising to see how little objective data or assessments boards are using to identify candidates.
MA: For whatever reason though, businesses are more comfortable putting external candidates through a formal assessment process and in-depth interview than they are with an internal candidate. There’s the assumption with internal candidates that they already know them so they don’t need to do this.
PW: That’s a common C-suite mistake. An internal candidate may have performed brilliantly in their previous role but may not have the ability to scale up to a larger role. But then the risk with external hires is that you don’t know them – they could be a narcissist and it would be difficult to get information on this. Whether internal or external, there are different risks.
MA: It’s the age-old internal or external debate. Many generally think it’s safer to hire internally as it’s better the devil you know. Also there are ways to give internal candidates responsibilities similar to those they’d have in the role they’ll be promoted into, without throwing them in at the deep end.
PW: Ultimately the ownership of this task falls to the board. The CEO does have a say and the CHRO is in a unique position where they can facilitate and influence the process. But the board has to make the end decision.
MA: But one thing I’d say is that the CHRO should start early and review often. Even if the CEO is new in the role it’s important to start thinking about the next successor, as things can change very quickly.