I often wonder if CEO hiring is one of the most important tasks, then why is it that companies get it wrong so often? One reason, of course, is that most companies lack proper in-house succession planning; and very often, don’t spend enough time, energy and resources in planning for the same. Another could be that average CEO tenures are coming down globally — one would be extremely lucky to survive 24-36 months of lacklustre performance. The fact that the business environment is generally getting tougher, coupled with lower tolerance levels of boards, along with wider availability of jobs (all of it being a vicious cycle in my view), means that CEOs
are getting replaced faster. And hence, this may not generally be leaving enough time and stability needed for companies and their boards to prepare for succession.
In the case of the banks I started out with, where the incumbents have been in place for a very long period, it is unfortunate that they haven’t been as meticulous in their succession planning. In a few other banks, it was due to circumstances beyond their control – be it regulatory guidance, potential successors losing out to external competition, or simply running out of patience.
One has to be extremely lucky to have a readymade solution available in-house. But then, only a few are born CEOs, and most candidates have to be groomed for the job. I always advise that the planning process should start at least 24-36 months before the due date, with a list of potential successors identified internally, and being put through a rigorous assessment and development process. Also, the successor should be identified and communicated to 12-18 months in advance, which allows sufficient time for the person to settle in, and fine-tune the skills needed. After all, there is nothing better than being paid to learn!
If it is clear the successor clearly doesn’t exist in-house, my advice would be to engage a specialist firm to identify one two years in advance, and on-board the person at least 18 months before D-day. The key is to communicate properly within the organisation to potential aspirants, as well as drawing a clear charter for the person to come and learn. As the CEO role is a major step-up, expectations can be laid out with complete clarity. I often find organisations missing more than a trick by not being clear in their communication, thereby giving wrong signals, which makes the process a mess.
Agamjeet Dang is Managing Partner, Executive Access (India)
Inputs from Arpita Garg, Partner at J Sagar Associates