CEO TalkBack: Culture and CEO Succession: Opening the Can of Worms

By Natalie Michael, CPHR

Earlier this year, I co-authored with Brian Conlin a book called Your CEO Succession Playbook: How to Pass the Torch So Everyone Wins, for which we interviewed 32 CEOS who went through a successful CEO transition, either as the incoming or outgoing CEO. We wanted to know what differentiates companies who effectively navigate a CEO transition from those who don’t.

Frankly, we were tired of so many doomsday stories around transition failure, we wanted to know why some CEO transitions succeed. Perhaps unsurprisingly, careful attention to culture was a success factor.

Culture Conversations to Consider
Companies that passed the CEO torch effectively were mindful about how they wanted their culture to evolve under the reign of a new CEO. They also had proactive conversations about how the culture was helping or hindering them strategically, so that the new CEO could start to shape things in the desired direction.

However, equally true is that these types of CEO-oriented culture conversations about can be politically loaded. Sometimes, innocent insights can feel like a personal digs if the intent of culture conversations is not clear and this can elevate the political temperature of the whole process.

Here then are three conversations that you will want to navigate carefully, along with quotes from three CEOs who have been through this. These tips and real world examples will help you be a trusted advisor to the CEO and board on matters of culture and succession.

The “Let’s Get Started” Conversation
In an ideal world, conversations about CEO succession happen in the context of conversations about the business strategy and culture. The board and/or the CEO think about the qualifications for a future CEO by considering the company’s ongoing competitive differentiation, and how the culture needs to evolve to keep pace with changing demographics and market conditions. Armed with this information the Board and current CEO can proactively develop job criteria and facilitate developmental assignments for candidates.

In reality, things often don’t go quite so smoothly (or strategically). Case in point: one CEO we interviewed for the book was in the middle of a big market push when he was approached by the board chair about CEO succession, raising suspicions about the intent of the conversation. It went along these lines:

Q: Do you have a successful plan?

CEO: (No, why? Are you planning on firing me?)

Q: How confident are you about the future of the business model?

CEO: (How confident are you?)

Q: What aspects of the culture would you like to see phased out in the future??CEO: (What’s wrong with the culture?!)

Q: Do you on plan on quitting??CEO: (No, do you want me to?)

As you can see the intent of these questions didn’t necessarily align with the impact. To avoid these political innuendoes it can be helpful for the CEO to control the message and timing of initial CEO succession conversations. This way, they can be prepared for questions about the future of the business, and their career – that can be challenging to answer when raised out of the blue. When the CEO proactively raises the issue the “S-word” doesn’t feel like a can of worms being opened.

The “Why” Conversation
Another conversation that can be tricky is related to the rationale for why the company wants to have a CEO succession process in the first place. Is it to protect the company in case the CEO is hit by a bus? Is it part of a broader talent management strategy? Or is there a more compelling reason that fits with the company culture and mandate?

We advocate coming up with a compelling reason for having a robust CEO succession process that extends beyond the hit by a bus metaphor, something more culturally enticing.

For example, one CEO I work with told their board that he was ready to start grooming his successor because he truly believed in the company motto of servicing customers for life. As the CEO, he viewed his role as temporary and he wanted to ensure that a future CEO transition would not inhibit the company’s ability to grow market share and expand their offering to better serve customers. The Board loved it! It shifted the conversation from “when do you plan on leaving?” to “what will it take to serve customers for life, regardless of who is in the CEO seat?”

Keep in mind that the “why” that may inspire one audience may differ for another regarding CEO succession. The board may be more interested in risk management and ongoing business momentum, whereas the staff may want more of a career and talent development agenda.

The “Culture Shift” Conversation
One of the trickiest parts of CEO succession is clarifying what “culture fit” means. In our view there are two important questions to ask:

When a new CEO takes over, what are the elements of your current culture that you want to preserve?
What elements do you want to enhance or change?

We advocate going beyond culture as a reflection of the current CEO’s personality. This can elicit defensiveness and be interpreted as “we want the next CEO to be better than you because you lack something.” Instead, talk about culture as a bi-product of a core set of values and organizational practices.

Case in point: CEOs often ask us for advice about how they can develop a more innovative culture. Unfortunately, it’s not as simple as saying, “Hire an innovative CEO!” As you talk about CEO succession, don’t just think about it as an extension of the CEO. Instead, use it as an opportunity to break old patterns, rethink standard cultural assumptions, and consider how the culture needs to evolve.

Also, consider how you can start to evolve the cultural practices before a new CEO comes on board. Give high potential candidates the opportunity to shape the culture as part of their developmental assignments. There is no reason to wait!

So, in close, be mindful of the relationship between culture, politics, and CEO succession. Tread carefully, so your CEO succession process is a culture-building kickstarter versus a transition breakdown.

Natalie Michael, CPHR, is a partner with Waterfront Partners, an executive coaching firm focused on coaching C-suite leaders. She is the author of Your CEO Succession Playbook: How to Pass the Torch so Everyone Wins and The Duck and The Butterfly: Coaching Questions for Leaders at Work.

(PeopleTalk Winter 2017)

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