This article first appeared in the Institute of Directors Governance perspective series
The appointment of the CEO is probably the most critical decision that a board makes. Given the importance and impact of the role, most boards recognise that it’s essential to have a clear and credible CEO succession plan. They understand that if, for example, the CEO has to leave swiftly because they have a health issue, it can create a big hole in the leadership of the business and the decision-making capacity of their organisation, to the detriment of the business. Therefore, a succession plan must be in place for the CEO to cover all eventualities to protect the organisation and ensure minimal disruption in pursuit of its growth targets.
Succession plans for directors
But what about the other members of the board – the directors? They play vital roles on the board, add value to the decision-making process, and have a major impact on the overall success of the organisation. To source directors that will provide value, whilst also delivering business continuity, a succession plan must be in place for all board members, particularly the chair and committee chairs.
Succession planning on the board is not something to look at shortly before a director comes towards the planned end of their term or reaches retirement age. What happens if a board member leaves a board unexpectedly at short notice? It could take many months to source a replacement, which could have a significant impact on the effectiveness of the board. This is even more important where the director brings unique skills or experience, which is vital to the organisation’s growth, such as in mergers and acquisitions, or plays a critical role as the chair, either of the board or a committee.