A case study on CEO succession

Thursday 17th March, 2016

If we consider the Prime-Ministership to be the ‘CEO of Australia’, I think it would be safe - and fair - to say that there has been a spectacular failure in succession planning. Can you imagine an organisation trying to survive five CEO changes in five years?

Political shenanigans aside, succession planning, especially for business critical roles, is absolutely crucial. Shareholder value, business continuity, organisational morale and market confidence are just a few of the things that can be rocked by poor CEO succession planning.

What does a really good CEO succession look like? Here is a case study from Evolve’s folio:

The challenge
The CEO of an ASX30 company confidentially communicated to the Chairman of the Board his desire to step down in six to nine months.

The CEO had been highly regarded by the Board as well as the market. During his tenure, he had successfully navigated the company through the post global financial crisis period, restructured the business and built a strong pool of internal talent. The CEO’s departure had been considered a ‘high risk business event’.

The solution
The Chairman and the Board had been following best practice governance and leadership risk management. A key component of their succession planning process was ensuring they were continuously considering candidates, internal as well as external, for business critical roles, including the CEO position.placeholderThe Board engaged Evolve Intelligence to apply our Succession Risk Management solution. Our reporting to the CEO Selection Sub-Committee accurately benchmarked the (four) internal candidates, against the global market; producing a final group of three potential external successors.

We collaborated with the Board to make certain that all seven candidates were objectively assessed against a specific ‘CEO Success Profile’; the process ensuring the prospective CEO’s skills, attributes and experiences were aligned to the company strategy and culture.

The outcome
Following a thorough evaluation process, an external candidate was appointed with unanimous Board support. The appointment, when formally announced to the market, was met with a positive response and a corresponding lift in share price.

The incoming CEO was able to benefit from a well-planned and executed handover period, including the opportunity to meet key staff, customers, partners and suppliers prior to commencement. Some three years after the appointment of the new CEO, the business is achieving its growth projections with a resultant doubling of shareholder value.

Whilst the appointment of a new CEO might, for some companies, suggest they no longer require a focus on succession, this company continues to partner with Evolve. We are working together to mitigate Human Capital-related risks, such as integration risk or the departure of key reports to the CEO.

The CEO has now outlasted three Prime Ministers.

To learn more about how Evolve Intelligence is advising leading companies on succession planning please visit our site or contact us.