For over ten years, I have worked with CEO candidates and CEO-elects. Watching very sophisticated leaders navigate the CEO-succession process is a fascinating study in human nature. The process is rarely without its bumps and there is a huge amount of sensitivity for all involved—the Board, the outgoing CEO, and members of the executive team. While it is sometimes an unpredictable process, I have observed a number of steps a CEO candidate or CEO-elect can take to navigate the process effectively and with maturity.
Are You “All-In”?
This seems like a simple question that some of you will easily answer with, “Of course.” In reality, the succession process sometimes identifies (and sometimes exposes) a reluctant candidate. Over the past two years, I have worked with two such candidates. It is important that both over-enthusiasm and a lack of enthusiasm for the CEO role be fully explored. Being the CEO is a significant commitment and it must fit into your career plan and your life plan. It can get awkward when you may not want the role, or when others believe you are perfect for the role, while you remain unconvinced. (I had one client tell me: “I can do it, but I’d rather not.”)
You need to begin by making an honest assessment about what the role will demand of you. You can start by answering each of the following questions:
- Most CEOs stay in the role for five to seven years. Does that fit with your career and life-plan?
- Are you willing to travel to meet the requirements of the job?
- Do you want to lead (sometimes painful) change at your company?
- Have you discussed with your spouse/partner what this will mean for your lifestyle, and the fact that he might need to have a more public profile?
- You might need to relocate; is this OK with you and your partner/spouse? What are the implications for your children?
- If you are young (say, under 45), might you pass up this opportunity in the hope that there will be a later opportunity to be CEO?
- If you don’t get the job, are you willing to stay at the company and support the next CEO? (Most leaders who don’t get the job leave.)
All of these are personal questions that need to be addressed. There are no perfect answers, but if you are not all-in, it will become obvious through this process. Engaging wholeheartedly in some personal examination is a necessary first step.
How to Become a Great CEO Candidate
No candidate is fully ready to be the CEO. In fact, even with the best preparation, the only way to learn the CEO job is to do it. Yet, during the succession process, you should get a good sense of how you measure up to the job requirements. Most often, the board will conduct an assessment of internal candidates against a CEO job description or set of CEO job requirements. You can leave this process to others or do a candidate self-assessment of your strengths and development areas to determine where you might want to do some targeted development.
Here are some of the typical areas of development for CEO candidates:
- Financial Acumen. If you are not a CFO, you might need to listen to and participate in earnings calls. You might need to learn more about the Investor Relations function and participate in investor meetings, analyst calls, or industry conferences. If you do not have a finance background, you’ll need to find opportunities to demonstrate that you have a firm and confident handle on company financials. Attending a “finance for non-finance executives” business school program will provide you with a good grounding in financials.
- Strategy. In my experience, every CEO candidate/designate is required to articulate their vision and strategy for the company. This is a challenge because, first, you are often articulating a vision for the company that the incumbent might not necessarily want to hear. Second, most CEO candidates have not had direct responsibility for strategy, so there is often a learning curve in terms of (a) formulating your vision/strategy and (b) articulating your vision/strategy. This is often the most sensitive and difficult task of the CEO-succession process. Further, in general, the board wants to hear a candidate articulate a strategy that is different from the current strategy and that directly addresses growth and/or disruption in the company’s industry. (Please see the Strategy section of the Resource Library to get a head start on your work in this area.)
- The Board. The CEO manages the board. In the succession process, board members are keen to get to know the candidates and vice versa, so the board needs to have significant exposure to all the candidates. There is some challenge in this because a candidate can’t be seen to politic with the board or engage in any kind of self-promotion effort. There is also some sensitivity with the incumbent CEO, who views relationships with board members as his/her responsibility. Most often, a candidate needs to have a frank conversation with the incumbent CEO and explain that meetings with board members are simply part of a familiarization process. You and the incumbent CEO will need to agree that there will be opportunities in the near future for you to present to and engage with the board.
- Exiting CEO. The succession process requires that a candidate have a lot of empathy for and sensitivity toward the exiting CEO. The exiting CEO will often have mixed feelings about leaving the biggest job they have likely ever held. Their personal identity and position in society are often closely tied to this role they play. Further, naming a date when they plan to exit makes them more of a “lame duck” CEO.
Should you be selected as the next CEO, there is much work to do to reach agreements with the exiting CEO. It will also be important to set boundaries with the CEO about what he/she can and cannot do during the transition period. The exiting CEO has fiduciary responsibility for the company until their final day at the company. This has implications for the transfer timing of some, but not all, decision-making and communication.
The organization will suffer significant disorientation should you fail to negotiate a good transition plan. Often times, key leaders in the organization will want to be deferential to the exiting CEO while negotiating their relationship with you and jostling to find their position in a new company order. Quite often, the exiting CEO will try to “take care of” other team members (especially any candidates who might have wanted the job). You’ll have to fully understand and navigate agreements/commitments made to company leaders by the exiting CEO. This brings me to the next topic: your peers.
- Picking Your Team and Managing Peers. If selected as CEO, you will be managing your peers. Some of them will not want to work for you. This is normal. In any CEO transition, a significant number of current executive team members will leave when the exiting CEO leaves. Having this kind of turnover is not as bad as it seems (though the board often won’t view it that way). You will have to pick your team. The board and the exiting CEO don’t get to do that—though they will often try! Sometimes this is a delicate negotiation. This will be especially challenging with any candidates who think they should have been appointed CEO. You’ll have to consider who you want to have on your team. You may use the CEO transition to give leaders who won’t make your team the opportunity to leave. The board will, at some point, ask you about your plans to manage your peers. You will have to demonstrate significant thoughtfulness and sensitivity about your team selections. Best to get a head-start in thinking about who you want on your team and how you might have your top team in place by day one.
- Building Followership. This is a standard challenge for all CEO candidates. If you are the company president, this might be less of a challenge. Most candidates have to win followers in parts of the organization where they are unknown. This can be tricky. Sometimes you can do this as a candidate and sometimes you can’t. At a minimum, the people in your part of the organization should be enthusiastic supporters of your assuming an expanded leadership role. The board may ask you about your plan to build followership—especially if you plan to implement change.
- Learning Plan. This is a standard challenge for all CEO candidates. Rarely will a candidate know all aspects of the business. As mentioned earlier, a candidate with a non-finance background might need to learn company financials so that they can communicate them effectively. A CFO might need to spend more time in the business to understand specific operating challenges. Sometimes this is quite straightforward. For example, I have had clients engage in specific geographic markets or with specific technologies/products with the goal of learning (or better understanding) a part of the business. Assuming responsibility for a cross-enterprise project can provide a rich learning experience. The learning plan should ideally contain some real tests of understanding and competence—for example, a non-finance candidate leading a Q&A section of an earnings call or a non-technical candidate being given direct responsibility for leading a highly technical cross-enterprise project. From time to time, a board will want to directly observe a candidate demonstrating their learning.
Finally, in my opinion, successful candidates demonstrate that they have an appetite and capacity to learn. When this is paired with deep curiosity or hunger to figure out what will make the business succeed, you have a winning candidate formula.
It is a real honor to be a CEO candidate. You should consider it an endorsement of your competence and your value to the organization. It will require a lot of resilience to navigate a sometimes-unpredictable and often-sensitive succession process. You will need to take care of yourself and demonstrate patience with both the process and the people leading the process. A good program for self-care is critical.
Should you be selected, it will be the start of a new, exciting journey. Should you not be selected, it will be the start of a new, exciting journey. Either way, this process will require your full effort, your complete attention, and a commitment to giving it your best shot—whatever the outcome.