Last week Citigroup CEO Vikram Pandit sent an early-morning memo to employees: “After five extraordinary years, I have decided to step down … Only you can understand the effort and hard work that was put in to get our company where it is today.” As we now have learned, Pandit made the decision the night before, after a closed-door meeting with his board chairman. Longtime company executive Michael Corbat assumed the CEO position — though it’s uncertain whether his appointment is permanent.
Pandit’s resignation is the equivalent of a corporate earthquake — almost no advance warning and impossible to immediately gauge the full extent of the damage.
About 40 percent of CEOs are fired or “retired” within their first 18 months, according to The Right Leader: Selecting Executives Who Fit by Nat Stoddard and Claire Wyckoff; 64 percent never make it to their fourth anniversary. With changing markets, globalization, shareholder impatience and intense media scrutiny, CEO turnover will only increase. Other research suggests that some 40 percent of companies have no succession plans in place, much less ones that account for unplanned turnover.
So what do you do in the event of an unplanned shakeup or loss of a CEO? If no existing succession plan spells this out, senior HR executives or talent managers need to:
1. Calm and reassure. Work with the board to immediately develop a process for replacing the CEO and communicating the details of this process to stakeholders. Give employees and board members whatever facts they need to function normally and know that the rest of the organization is doing the same.
2. Find out what succession planning has been done, by the board or outgoing CEO, that HR may not know of. In some cases and unbeknownst to others, a board may already have drafted an emergency plan.
3. Work with the board and executives to review reporting structures and make sure everyone knows who is responsible to whom throughout the organization.
4. Encourage decision makers to resist an “impulse purchase” to find a new leader. The company can rely on its trusted talent and even designate an interim CEO to ensure business continuity.
5. Be systematic in identifying the next CEO. Have a well-defined assessment process — using proven, objective tools — that evaluates potential new leaders for skills and expertise but also behaviors and style.
6. Understand that politics are involved, but don’t let politics impair the ability of the board or selection committee to make a sound decision.
7. Document and learn from this crisis; make it a key part of future succession planning and talent development.
The Long View
When the dust settles and a new CEO is in charge, comprehensive succession planning can begin in earnest:
Start now. Succession planning is an ongoing process, not an event or agenda item at the annual board meeting. Understand the core elements — from strategic planning and talent assessment to development planning and continuous talent monitoring and improvement.
Get everyone on board. Think of succession planning as a key component of the organization’s talent strategy, which is a key component of regular strategic planning. The board of directors or trustees should take a lead role in these efforts, as should the current CEO.
Develop a blueprint for succession planning. Among the many essential elements should be an emergency plan for CEO succession. This plan should outline criteria and responsibilities for an interim CEO or other top leadership, and assess the pool of candidates to assume vacated responsibilities. The document may even state which specific person will assume the interim CEO position if needed — something the board must keep under wraps lest it be assumed that this person is the de facto future CEO.
Make the growth of leaders an imperative. New leaders don’t always come from within the organization, but it’s nice when they do. Companies should look at who may be in line to assume the CEO and other C-suite positions, but also for those leaders whose talents may be called upon in emergencies.
The goal is to have a roadmap for ensuring leadership continuity and organizational stability. A succession plan creates a degree of certainty that the organization is ready for the future — even if that future unexpectedly comes in an early-morning memo tomorrow.
Richard Metheny is vice president of human resources/chief people officer and leader of the solutions for exceptional leadership practice at the executive search firm Witt/Kieffer. He can be reached at email@example.com.