A forced, ill-informed or panicky decision could mean the business ends up in reluctant or unqualified hands. With Ford rumoured to be starting succession planning for CEO Alan Mulally, due to retire by 2014, and research showing two-thirds of companies do not have a CEO succession plan in place, are HRDs taking enough of an active role in king-making?
Choosing a CEO is one of the most important levers for a board in overseeing strategy, risk, ethics and sustaining the share price. The stakes are high in making a sound choice. Sadly, collateral and reputational damage tends to occur before a board recognises and rectifies a mistake. Evidence suggests many boards are ill- prepared to make the best choices.
Relatively few have a practical CEO succession plan. Rarely do chairmen or non-executives have the qualifications necessary for top-level recruitment, such as psychology or formal selection training. While 'old boy networks' are generally discredited, they can get replaced by over-dependency on head-hunters, whose job stops on appointment rather than after one, three or five years.
Too often it is hard to discern strategic criteria shaping the choice. Rather, boards pick an individual and then the strategy follows - inherently destabilising.
Where does the top 'people professional' figure in all this? That varies wildly too.
Corporate Research Forum (CRF)'s Planning for Succession in Changing Times shows that HR leaders make a difference to CEO succession when they have the business nous, political skills and gravitas to ensure boards are well prepared; provide expertise in managing selection, assessment and head-hunters; and ensure a robust pipeline of successors and a mature approach to career management - especially the art of honest conversations with rival candidates. All that, and they need the respect of both CEO and chairman in tough decisions.
CEO succession stories in even the biggest corporations show that the board-HR leader relationship is not what it should be. Large financial institutions have been particularly inept - eg AIG, HSBC, RBS, HBOS and others - where HR has been ignored, ineffective or compromised.
If you want sound succession, make sure the HR leader is fit for purpose and capable of input to this most important of decisions.