From COO to CEO: Ensuring a Smooth Succession

January 17

An Accenture study found that approximately one in nine COOs moved into the CEO’s shoes within a year of their departure and that half of COOs see themselves as the “heir apparent. Yet remarkably few companies have a comprehensive succession plan in place to make that transition successful. With this in mind, we look to further the understanding of the role of the COO for boards who seek their next “second in command,” and how to go about ensuring a smooth transition.


In 2011, at a CEO Connection event, one CEO remarked that, “Boards say the #1 thing they’re bad at is CEO succession.” That is a telling statement, and a sobering one, since overseeing CEO succession is one of the most important and consequential functions of a company’s board of directors. Many times the COO is the candidate naturally expected to inherit the corner office and is the COO is most often considered to be the CEO-in-training. Yet, due to a lack of focused, strategic planning from the CEO, the board, or both, the COO may be sorely under-prepared when the time comes for him to slip into the big chair. A central element of the succession challenge is that there are aspects of the CEO position that simply cannot be experienced as an understudy. It only comes from experience gained in the role.

 

A Proper Perspective on Training

What are some of the hurdles to effectively grooming the COO as heir designate? Very often a company’s board takes a myopic view of “leadership development,” feeling that the term signifies the rotation of candidates through “multiple functions or cultural assignments.” The board members may see this as Human Resources’ purview more than theirs. However, merely having a CEO-in-training switch roles, or handle new assignments, does not equate to true leadership development. Firstly, there is great benefit to keeping a CEO candidate in the same position over a period of time. He can incrementally gain needed experience not only for that particular role, but also in understanding and dealing with the consequences of his decisions in that capacity. Secondly, a CEO candidate must be trained to have a strategic, not merely an executional outlook. How then, can the current CEO, and the board of directors, take an active role in developing their COO’s optimal decision-making skills, and strategic, long-range thinking?

 

Principles of Development

[pullquote align=”right” cite=”” link=”” color=”” class=”” size=””]Multiple internal candidates should be simultaneously groomed as “relay successors,” even if one in particular is favoured to be the heir; and external possibilities should not be discounted offhand.[/pullquote]
One important principle of grooming the CEO-to-be is doing so as part of a collaborative process between the current CEO and the board. All too often boards allow the CEO to be the primary and dominant influencer on the choice and the grooming of the heir. And all too often the CEO’s judgment is off-base. However, CEO succession is not a one-man show. Really, the CEO and the board members should maintain an open dialogue about whom the main candidates are, what strengths and weaknesses they have, and how they are being developed. This open dialogue would naturally lead into the COO’s increasing involvement in assisting the CEO to carry out his duties. The current CEO would want to include his heir apparent, to the extent appropriate and desirable, in his interactions with the board, his strategic planning sessions, his presentations, and other aspects of his role. Even though there’s no such thing as a CEO candidate who’s “ready now,” by developing the COO’s abilities under the CEO’s close supervision and guidance, he will have a running start when the time comes for him to assume the crown. Of course, even the most loyal internal candidates may simply not have the requisite qualities needed to succeed at the highest level. Perhaps external candidates are much more promising. Then again, board members should never focus solely on external hires when there are talented and highly developed candidates in their own ranks. So a broad perspective and a certain level of redundancy are necessary components in successful CEO succession planning. Multiple internal candidates should be simultaneously groomed as “relay successors,” even if one in particular is favoured to be the heir; and external possibilities should not be discounted offhand.

 

The Importance of Smooth Transition

A smooth CEO succession can have major ramifications for the company. Even the best-performing companies may experience a shake-up from change at the top. When Steve Jobs resigned as Apple’s CEO in August 2011, for instance, Apple’s shares dropped 7% in after-hours trade. Without a doubt, CEO succession planning is a key facet of long-term strategic planning, and essential to a company’s continued well-being.

 


In the next article we will look at what steps a COO should take to position themselves for a CEO position. 

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About the Author

Shay Dalton

Shay Dalton

Managing Director

sdalton@lincoln.ie+ 353 ( 1 ) 661 0444

Shay Dalton is the Managing Director of Lincoln Recruitment Group. Shay is a qualified ACCA Accountant with over 20 years’ experience specialising in the placement of senior positions across a broad spectrum of Accountancy and Finance positions within the industrial and financial services sectors. Having been involved in the establishment of some of the most respected financial recruitment brands in the Irish market, Shay subsequently set up Lincoln Recruitment Specialists in 2008. He also hold’s an MSc in Organisational Management and is a member of BPS, qualified to conduct and interpret psychometric testing as well an EQi testing.

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