A New Model for Picking the Next CEO: Why Progression, Not Succession, is What Companies Need Today

CHICAGO and NEW YORK, April 5, 2011 /PRNewswire/ -- "CEO succession planning must undergo a fundamental shift," says Stephen A. Miles, a vice chairman at Heidrick & Struggles and head of the firm's leadership advisory services. "The dated succession model of entitlement – based on the new CEO's being personally tapped by the outgoing chief – must give way to what we call a 'progression' process."

Georgia Tech management professor Nate Bennett, an expert on succession issues and frequent co-author of Mr. Miles, continues, "While succession focuses on who will step in if the CEO gets hit by a bus tomorrow, progression expands the efforts to the entire leadership team. Who not only can take charge tomorrow, but one, five, and twenty years down the road?"

"The succession language used for ages by monarchies and governments was adopted by business in the 20th century, and this model just doesn't work anymore," says Dr. Bennett. "We need a new vernacular for this era – one that acknowledges the complexity of leadership development and the forward-thinking needs of the modern corporation."

The authors created a new term for this next-generation succession process – "progression planning." In advising hundreds of CEOs and boards worldwide – from much of the Fortune 50 – Mr. Miles is helping companies implement a new way of thinking about their CEO succession plans and shifting their efforts toward a more rigorous, forward-looking process.

"Before 2008, the rising tide of the booming economy propped up a lot of mediocre leaders, but the current financial crisis has taken away the safety net," says Mr. Miles. "Companies simply can't afford less-than-stellar leadership today, nor can they afford to be caught without the right leadership plan if their CEO suddenly leaves. And the team that supports the CEO can be just as critical to success, or even survival."

Why traditional succession planning fails

"Succession is a rear-view-mirror activity," says Mr. Miles. "A typical problem is that when looking for a new chief executive, boards often dust off an old CEO profile – the specs used when hiring a new executive – from, say, 1981."

"The backward-looking succession planning approach relies too much on comparing candidates, for better or worse, to those who came before – or, with multiple candidates, comparing them to each other instead of to the forward-looking needs of the company," says Dr. Bennett. "It is critical that the entire board of directors is involved along with the incumbent CEO in developing the forward-looking skills and experience profile. There must be alignment and agreement so that during the selection decision everyone is looking through the same lens and no one can say that they don't agree with X because they did not have input into the criteria."

"In addition, most corporate CEO profile specifications used by the succession planning team are not only outdated, they are also generic," says Mr. Miles. "There is often very little to differentiate what is needed at this particular moment at this particular company.

"Also, going back to the importance of developing the whole leadership team, while the most advanced companies in the world have started to develop up-to-date CEO profiles, almost none of them have created profiles for the level underneath the top job.

"So at a time when leadership needs to be the most forward-looking, strategic, and expansive, the vast majority of companies are using outdated, off-the-shelf, and narrowly-focused materials as their foundational documents for the succession process. Their efforts start off on the wrong foot...and go downhill from there."

What is "progression planning"?

There are several important elements that differentiate progression from succession planning, according to Mr. Miles and Dr. Bennett. These include:

1. Conducting "progression analysis." "Companies need to conduct a 360-degree view of what's needed from a CEO going forward, taking into account everything from the competitive situation to the internal talent bench to the industry and regulatory environment – and, most importantly, the company's strategic plan, which becomes the primary input into the progression process," says Mr. Miles. "This analysis will help companies create a valuable skills-and-experience profile that will become the lens through which every candidate must be examined. CEO selection can't just be about who most closely resembles the CEO, or who's got an 'in' with the board."
2. Building the entire leadership pipeline. Dr. Bennett explains that progression involves progressing the whole team around the leader, not just the leader him- or herself: "While succession has been traditionally viewed as a single event, progression is a continuous process and calls for a plan over a series of years. It's about building the pipeline from the 25 year old junior executive up through the C-suite."
3. Expecting the unexpected. "Many companies put succession on the back burner because they have a false sense of security about their current CEO," says Mr. Miles. "I hear 'Why do we need a plan? Our CEO is 42 years old and isn't going anywhere.' This reveals a flawed thinking that is focused on a single transition at the top, and a blinkered expectation that it won't occur for a long time. Unfortunately, succession events can and do happen suddenly, such as what happened at McDonald's with their young CEO only a few years ago – after the sudden death of his predecessor as well – and what is happening currently with Berkshire Hathaway's losing its primary candidate to a scandal, or even now at Apple, with Steve Jobs' unexpected second medical leave. These events show that companies must be prepared for the unexpected and have a full team in place. Succession's static approach can catch a company off guard, while the dynamic approach of a progression plan can account for the unexpected transitions that will inevitably occur."

Who owns the progression process?

Another important difference in succession and progression planning is who's involved, says Mr. Miles. "What we've done with progression is rolled talent management and building the leadership pipeline into one overarching process."

"Boards and CEOs typically 'own' succession, but the cast of characters in the progression efforts includes everyone responsible for talent management in the company. The chief HR officers and business unit leaders play a vital role in progressing the company's leadership, from young executives on up the ladder, while the CEO, the full board, and the board's succession committee of course retain their own important role in directing the process."

"Ultimately, the point of progression is risk reduction: it's about shifting the stressors associated with CEO transition to an expansive process supported by a whole leadership organization. Rather than putting all of a company's expectations on one person, progression gives a company 'broader shoulders' to carry out its strategy both now and into the future."

For more information about the "progression process" or to speak with Stephen Miles or Nate Bennett, please contact Davia Temin or Suzanne Oaks of Temin and Company at 212-588-8788 or [email protected].

About Miles and Bennett

Stephen A. Miles is a vice chairman and the managing partner of leadership advisory in the Leadership Consulting Practice at the executive search firm Heidrick & Struggles. Nathan Bennett, Ph.D., is the Wahlen Professor of Management at Georgia Tech and a principal at Red Buoy Consulting.

About Heidrick & Struggles

Heidrick & Struggles International, Inc., (NASDAQ: HSII) is the leadership advisory firm providing senior-level executive search and leadership consulting services, including succession planning, executive assessment and development, talent retention management, transition consulting for newly appointed executives, and M&A human capital integration consulting. For almost 60 years, we have focused on quality service and built strong leadership teams through our relationships with clients and individuals worldwide. Today, Heidrick & Struggles' leadership experts operate from principal business centers in North America, Latin America, Europe and Asia Pacific. For more information about Heidrick & Struggles, please visit www.heidrick.com.

SOURCE Heidrick & Struggles