The COVID-19 pandemic has taken many strategic plans with it, forcing us to reconfigure them in order to remain competitive. If on the Board's agenda was the CEO succession plan, as part of a well-planned retirement or perhaps as a response to new leadership due to a now unimplementable IPO, international developments, failure to fit in..., or even in the face of an unforeseen situation such as an unannounced departure, this crisis may have thrown out all the previous approaches that led to the argumentation and search for the candidate. But in this new scenario, what is the most appropriate thing to do if the aftermath may demand a different DNA? In fact, in times of major crises, the turnover rate tends to increase, as has already been demonstrated.
While there are no mathematical answers, the board can ask itself the key questions so that its decision can support the creation of the best scenario and, if a new successor is considered strategic, ensure that the transition is done well. So, let's start with the first thoughts: Is it still strategic to carry out the succession plan as it was prepared before the COVID? In a crisis of this scale, is it the right time to change leadership? Or is it better to avoid major changes during uncertain times?
But before answering, let us consider the advice of Dan Ciampa, former CEO, advisor and consultant to senior executives and author of five books including Transitions at the Top: What Organisations Must Do to Make Sure New Leaders Succeedwho proposes four questions aimed at choosing the right path.
Who can provide the best leadership during the crisis?
In principle, and despite the fact that the succession process may be in its final stages, the best option is probably for the outgoing CEO to stay on, provided, of course, that he or she has the confidence of the company and the Board. It seems logical to ask him or her to stay longer in order to provide the organisation with the greatest stability on all fronts. In times of great stress, employees may feel more secure with a manager they know and respect than with an executive who has everything to prove.
Many doubts arise with this option, the first of which is the ego of a CEO who may see this crisis as an opportunity to feel indispensable. If this is not the case and both parties are convinced that it is the best thing to do, it will be necessary to negotiate the limits of this new agreement and include a framework that takes into account the signs of stability that this decision should bring to the organisation, normally sales, EBITDA...
When would it be time for the external successor to join the company?
In the event that the search had been aimed at bringing in a successor who would work with the CEO during a transition period before taking over, and if a final candidate had been identified, the optimal decision would be to hire that person as soon as possible to join the company. In this context, joining earlier than planned allows the successor to gain credibility by being part of the steering committee while dealing with the crisis, while using this time to get to know the company and vice versa.
Ciampa has two caveats. The successor should use this period to prepare materially and emotionally for his or her start, and the CEO should ensure that the organisation is ready for the successor. If the new executive can start earlier, the CEO must ensure that the first few days are used to complete the task of preparation; otherwise, the transition will not be as smooth or efficient.
The other caveat is the risk that other senior managers (disappointed at not being chosen) will be prepared to leave as soon as they can, even during the crisis. Prior to the announcement, the CEO and the Board should agree a plan to ensure that key people remain 100 % committed, with appropriate reporting lines and economic measures in place. This situation requires finesse and tact as it can shake the company's credibility both internally and externally, and not only for listed companies, with the consequent impact on the desired recovery.
How is the crisis changing business?
The longer the crisis lasts, the more changes the company will face, which may mean that the profile that was needed before the pandemic may no longer be valid in the post-COVID phase.
Scenarios are changing at the speed of light. Compared to growth environments before the pandemic, we can now find stagnant and even challenged companies. Leadership in one situation and the other is radically different. Revising expectations in the event of having a candidate almost selected will be the minimum and certainly essential. A CEO in a context of good results and excess cash, where he/she is expected to consolidate the business, open new markets, drive leadership... is not the same as a CEO in a situation like the current one, where he/she may have to address a financial restructuring, focusing on operations, transforming and leading the company towards a new reality.
What can the council learn during the crisis?
If there are internal candidates to be the next CEO, the crisis presents a litmus test to assess their leadership ability. Watching them closely will reveal who is decisive in the face of uncertainty, who can make tough decisions and remain calm under intense pressure, who helps their colleagues and earns the loyalty of their team to go the extra mile, and who shows compassion and empathy for frontline employees. If external candidates are involved, the same issues should be tested in interviews and in obtaining their references.
In this contingency, advisors will learn both about individuals and about the very personality of the organisation that should shape the next leader's agenda. For example, how adaptive processes and systems are when stretched beyond pre-crisis boundaries, how resilient they are in the face of adversity, and whether boundaries between departments are reduced and cooperation replaces old disputes.
The selection of a new leader and the handover from a predecessor are delicate and difficult challenges even in good times. When changes take place during a crisis, the challenge is much greater. However, with good thought, the Board can find the right direction for the benefit of the company in both the short and the long term.
Carlos Recarte y Andrés Fontenla
Founding partners of Recarte & Fontenla