Former chair QBE Insurance, director AGL, State Library of NSW, Australian Philanthropic Services; chancellor, University of Sydney.
You said CEO involvement in succession planning can be a juggling act. Can you expand on that?
In a planned succession, you need balanced engagement of the CEO in the process. It’s the board’s role but it must take the CEO on the journey. I don’t support – as some non-executive directors do – cutting the CEO out completely. This could just get them offside.
Would you have the incumbent CEO review the job description?
Getting the CEO involved in the job description is helpful. They can add value to the process because they know the company better than any of the board members. Plus they know the internal candidates better than the board does. Their involvement must be framed as the incumbent consulting on – but not controlling – the process. At the end of the day, it’s the board’s decision and CEOs worth their salt know that.
How difficult is it to change a CEO who has, in the main, been a good performer?
You may have a CEO who has been outstanding in building a company, but you may need somebody with different skills because the world changed and the business model along with it. This can be a real challenge for the board. You may have deeply thought out emergency plans, but if you have a CEO who doesn’t see the need for change – and you don’t have board coherence on the timing for succession – it can be a real challenge.
Do you run the risk of losing some possible successors if they have to wait too long?
You will preferably have lost some of the successors. And when you’ve had a very strong CEO, you may have a number of second-incharge executives but not with the strength to be successors. Another risk is successors who aren’t quite ready when they are appointed. It is then up to the chairman to devote significant time to help them. They need to step up and spend the first six to 12 months settling in the new CEO. A critical success factor is the chairman’s engagement.