CEO SUCCESSION PLANNING TEMPLATE, Study notes of Business

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CEO SUCCESSION

PLANNING TEMPLATE

by Boardroom Metrics, Inc

Updated February, 2020

CEO SUCCESSION PLANNING TEMPLATE

This CEO succession planning template is designed to help Boards of Directors define the most important criteria for identifying and developing the next CEO. Formalizing these criteria and implementing a plan for developing future successors are the critical elements of effective succession planning. They ensure that organizations are proactively prepared when CEO succession circumstances arise. The Succession Planning Template and Process The template starts on page ( 6 ). There are eight sections: Step 1 – Your name and title The Board needs to decide who will complete the template and provide input to the succession plan. At minimum the following people should be included: a) the current CEO b) the Board Chair c) members of the committee responsible for CEO succession Additionally, we have seen the entire Board, past Board members and the entire Management team participate in the process of defining the criteria for the next CEO. Although the process of gathering more input is more complicated, we see that it results in higher quality. Step 2 - Overview of the operating environment next 5 years The skills and expertise of the next CEO should match the challenges and direction of the future organization. The purpose of this section is to help Boards form a clear perspective (as best as possible) on what the future challenges and direction of the organization will look like. Step 3 – Define the Characteristics of the Next CEO The purpose of this section is to help the Board develop a clear set of criteria that define the ideal characteristics of the next CEO. These characteristics should be consistent with the challenges and direction identified above. As the Board develops the succession plan, it will use these criteria to: a. Identify and rank potential successors both internally and externally b. Identify and fill development gaps of potential successors

Common Board Succession Planning Mistakes This template and the steps that go with it are designed to help Boards avoid making these common mistakes.

1. Going with the most obvious candidate. The most obvious candidate is usually someone who has been around the organization for a few years, performs well and is liked/respected by the Board and organization. It is someone who is informally recognized as the successor. However, the characteristics that lead to someone being successful and respected in their reporting role may not be what’s required in the leading role. Defaulting to this candidate without comparing them to others is a mistake. 2. Overlooking internal candidates. The default position for some Boards is that the best successor comes from outside the organization. This is an easy mistake to make when the criteria for the next leader aren’t well defined. Defaulting to outsiders comes with great risk. It can impair internal morale and put someone in charge who lacks the organizational knowledge and experience to be successful. 3. Overlooking external candidates. The default position for other Boards is that the successor must come from inside the organization. Again, it’s an easy mistake to make when the criteria for successor leadership aren’t well defined. Defaulting to insiders also carries great risk. It can cement the status quo and leave the organization short of new, objective expertise required to succeed in a changing environment. 4. Not formalizing the CEO succession plan. This is probably the most common mistake. We see many Boards who feel they have handled CEO succession because there’s an informal consensus about who the replacement CEO would be – typically in the event of unplanned (hit-by-a-bus) succession. There are all sorts of problems with this. First, when the consensus is informal, there are almost always Directors who aren’t aware of it (this happens all the time). Second, there are almost always Directors who don’t agree with the choice. Third, the inferred successor themselves may not be aware of the Board’s informal plans. Not being aware can lead to lack of preparedness. Fourth, if the inferred successor is aware but someone else is chosen when informal planning becomes formal, then there can be lots of disappointment.

Finally, it is a mistake to think that the informal successor in unplanned succession is the best person for long term succession. There are lots of variables that make the two roles different (someone to fill-in vs leading the business forward). Informal succession planning is not succession planning.

5. Not following up and staying current with the CEO succession plan. In some ways, this is a good problem to have. At least there’s a plan. The challenge for Boards who make this mistake is to revisit the plan on a regular enough basis (once per year is minimum) that they ensure the plan is being executed. Losing interest in the plan, not following up and letting it lapse results in poor preparedness when succession planning is needed most. Succession planning is like any planning – it won’t just happen. The Board must stay on top of it and measure progress. 6. Not planning for succession beyond the CEO. CEO’s generally maintain primary responsibility for senior leadership staffing. However, that does not preclude the Board from ensuring there is also a succession plan in place for the leadership team. This succession planning is driven by the CEO. It helps ensure that future leaders are identified and ready when changes occur at the leadership team level. Boardroom Metrics has adapted the CEO succession planning template and developed a process that assists CEO’s with leadership team succession. More information is available by contacting us.

Functional Expertise

3. Define the ideal functional expertise of the next CEO (choose all that apply). o Finance/Accounting o HR o Marketing o Business Development/Sales o Legal/Compliance o Manufacturing o Engineering o Operations o Distribution o Other____________________ Leadership Skills and Expertise
4. Define the ideal leadership skills/expertise of the next CEO. o Strategic planning o Analytics o Performance management o Decision Making o Problem Solving o Team building o Collaboration o Communication o Facilitation o Crisis Management o Negotiation o Other Industry Experience
5. Define the ideal industry background of the next CEO (provide type or specify exact). o Internal organization_________________________ o Competitive organization______________________ o Complimentary Organization___________________ o International organization_____________________ o Trade organization___________________________ o Advocacy organization________________________ o Other______________________________________ o None

Career Path

6. Define the ideal career path experience of the next CEO. o CEO o COO o VP o Director o Senior Manager o Manager o Other________________ Personality Traits
7. Define the most important personality traits of the next CEO (pick 3). o Adaptable o Analytical o Trusting o Determined o Patient o Empathetic o Decisive o Committed o Energetic o Creative o Objective o Consistent o Other_________________________ Step 4 : Additional Thoughts and Considerations on Succession Planning Please identify any missing elements or other considerations you feel are important in succession planning for the CEO.

c. Internal Future Candidates (ready in 3 – 5 years) Name Readiness Ranking (/10) Additional Development Required Step 7 : External Candidates for Succession Planning a. External Candidates Currently Ready Name Readiness Ranking (/10) Additional Development Required b. External Near Term Candidates (ready in 1 – 3 years) Name Readiness Ranking (/10) Additional Development Required

Step 8 : Succession Candidate Development Plan Candidate Development Activity Measured Outcome Who is Responsible Timing Completed By ABOUT BOARDROOM METRICS Boardroom Metrics was founded over twenty years ago. We focus on Boards and Corporate Governance effectiveness. Our specialties:

1. External Board Evaluations. We use customized surveys, interviews and other assessment tools to evaluate how effectively public, private and not-for-profit Boards of Directors understand and execute their Board role.
2. External CEO Evaluations. We use customized surveys, interviews and other assessment tools to evaluate the CEO’s performance versus the Board’s expectations, business objectives and personal development goals. CEO Evaluation templates are available for download here.
3. Board, CEO and Leadership Team Succession Planning. We provide tools and consulting to help Boards develop criteria and processes for planned and unplanned succession.