Multimillionaire Matchmaker

An insider look at CEO Succession Planning

CEO Succession
One

of the most important decisions to be taken by the Board Requires evaluation of skills, experience and behavioral attributes (ethics, cultural fit, work style, risk tolerance, competitiveness) Search within (Grooming) and outside the organization (interviews)

Industry Facts
44%

of companies do not have a formal CEO Succession plan 39% of Directors not satisfied with their companys succession plan 53% believed that their board should dedicate more time for the succession planning

Risks
Resignation Death Termination

of CEO for poor performance

Energy Corp
Multibillion

Dollar energy company CEO Anthony Goodman decides to resign No formal succession plan- Names in the box

4 Models of Succession Planning

External

Candidate
Disadvantages More expensive Risk of Organizational Fit

Advantages Lack of internal talent Proven experience in CEO Role

Tends to have more freedom in making changes

Work styles may not translate well

4 Models of Succession Planning

President/COO
Advantages Company can observe performance first hand Gives the executive the necessary experience Can accommodate external candidates Disadvantages Responsibility overlaps can create conflicts Lifetime COO

Complexity

Scope of the role can be customized

Risk of failure and starting from scratch

4 Models of Succession Planning

Horse

Race
Disadvantages Distracting - Brings unwanted media attention Creates a politicized atmosphere Talent drain

Advantages Allows thorough testing Gives the board time to build consensus

4 Models of Succession Planning

Inside-Outside
Advantages Allows thorough testing Allows simultaneous evaluation of internal and external candidate Levels the playing field Removes biases

Model
Disadvantages Requires careful planning External search might go on for long creating erosion of trust

Role of Board
Ongoing

Activity Continued development and evaluation of internal talent Do not rely excessively on CEO Independent advisor to avoid biases

Role of CEO
Should

be a willing participant in succession planning Talent development Mentoring & Coaching Tendency to take control of situations

Skills & Experience profile

Creating

a forward looking profile Takes in to account the future needs of the company Profiles must be rooted in the companys strategy Identify 5-6 critical elements and prioritize Trade-offs

Energy Corp
5

experiential attributes
Leadership experience Sector experience Multinational experience Financial sophistication Demonstrated success managing through and economic cycle

Energy Corp
Behavioral/Leadership

attributes

Teambuilding skills Strategic sense Focus on value creation Ability to manage complexity Integrity Communication skills

Assessment of Candidates
Landon
For Background in Finance/audit Deep experience in both front end and back end Multinational experience Experience in operations

Fields- CFO
Against No deep operating experience Leadership style Reactive rather than proactive Commitment

Assessment of Candidates
Carlson

Division
For

Jacobsen- Head of Marketing

Against
Arrogant Creates a turbulent work atmosphere Didnt tolerate dissent Integrity

Highly intelligent Single minded focus Created the marketing division from scratch

Assessment of Candidates
Curtis
For Thorough experience in all aspects of companys operations Out-of-the-box thinker Multinational experience Collaborative leader Improved companys top and bottom line

Borland- Senior executive in production

Against One level below the Clevel Readiness Decision making ability Confidence

Assessment of Candidates
Mitch

Johansen- CEO of alternative energy

For Extensive experience Cerebral leader Multinational experience Against No extensive internal track record Have received only less scrutiny Cultural fit?

Experience in operations

Rotation of Candidates
Landon

Fields- Head of the largest production business Carlson Jacobsen- Head of the second largest production business Curtis Borland- Head of HR Mitch Johansen- Same position

Assessment Style
Each

candidate evaluated thrice in 18 months Feedback provided every 6 months Each candidate measured against skillsand-experience profile and not against one another Interviewed 200 insiders

Final selection
Fields

didnt make the progress expected Jacobsen showed that he could change Borland dropped out to join another company Mitch Johansen declined the offer