Company Performance is directly linked to CEO Succession Planning

?? CEO succession has been commonly viewed as an important mechanism for organizational learning and adaptation - Talent is a huge part of it, but it’s more than that. A change in CEO can affect fundamentally alter the knowledge, skills and interaction process at the top of the company, and these alterations can in turn significantly influence post-succession firm performance. Today, "relay CEO succession" - ?which the incoming CEO has been groomed as an heir apparent before the turnover - seems to be an outdated process, and on average, companies start working on succession planning about two years before the current CEO’s planned departure. One important consideration for timing is how an extended succession planning process may be perceived by the incumbent CEO and the company’s stakeholders, according to a a new research published by 德勤 & Touche LLP - using data from interviews with current CEOs as well as those who are (or were) considered for CEO roles.

In the literature and research papers, there are 3 types of CEO succession :

?? Relay Succession

?? Nonrelay inside Succession

?? Outside Succession

A research published in 2018 in the JSTOR , found that firms with relay successions achieve higher post-turnover accounting performance, higher long-term stock returns, and lower volatility. Further, the positive effect of relay succession on performance is stronger for firms with higher human capital requirements.

Researchers noticed that there is stronger, positive, relationship between relay succession and post-succession firm performance when pre-succession firm performance is low than

Also a strong, positive relationship between relay succession and post-succession firm performance when post-succession strategic instability is high but but not when it's low.

Deloitte researchers found 3 main factors to consider during the CEO succession process:

1?? External factors such as Geopolitical forces, Macroeconomic climate

Researchers found that the shifting geopolitical and economic context of today’s operating environment means prioritizing different qualities, such as openness to innovation, humility, and agility.

2?? Company needs such as Current long-term strategy,Industry-specific concerns

3?? Candidate qualities such as Appropriate leadership style, Internal vs. external matters

Another study published by 英国赫瑞瓦特大学 in 2017, revealed that the age of the CEO when they are announced, and the year of announcement, are consistently positive and significant at the 1% level of significance, implying that the older a CEO is, the higher the stock returns.

?? Finally, researchers advise CEO candidates to start working intensively with coaches and mentors who specialize in CEO roles. Sometimes serving on another company’s board can provide future candidates with a valuable perspective on the ties between governance and succession planning.

As we saw in these research, it's important to remember that CEO selection involves many parties with varying sway in the decision-making process the process of 3 types of CEO succession is therefore no longer valid...

Thank you ??? 德勤 & Touche LLP?researchers team for these insightful findings:? Carey Oven Robert B. Lamm Maureen (Errity) Bujno Audrey Hitchings Krista Parsons Caroline Schoenecker Yan Anthea Zhang Nandini Rajagopalan

Dave Ulrich ?George Kemish LLM MCMI MIC ??

#futureofwork ?#peopleanalytics ?#CEO #successionplanning