Sergio Marchionne Shows Why Boards And CEOs Need To Plan For Succession Now

Like many, I was very saddened over the summer to read about the sudden death of Sergio Marchionne, the illustrious and outstanding CEO of Fiat Chrysler who stepped down from his position only days before he passed. Marchionne orchestrated a turnaround at not one car company, but two, and then combined them to create a $133+ billion multinational with sales in 140 countries.

Since Marchionne’s death on July 25th there has been endless debate as to how sick he was, and for how long. There are questions about whether anyone had enough information to truly understand the gravity of his health problems. This is not the first time a CEO has been seriously ill and/or passed away somewhat suddenly, and it won’t be the last. In recent years, Steve Jobs, SurveyMonkey’s Dave Goldberg and CSX Corporation’s Hunter Harrison’s deaths all come to mind.

The question of how much personal health information needs to be shared with a board, investors and the public is sensitive and highly charged. No matter where you stand on this debate, there is one thing that is certain: no amount of precedence, best practice and even regulation will abate the divergent ways in which people choose to handle and discuss their illnesses and health problems. No matter their dedication and professionalism (Marchionne was about as committed as they come), one’s health is still viewed as quite private.

Given the highly intimate nature of one’s well-being and the idiosyncratic ways in which individuals deal with this aspect of their life, from a professional and corporate point of view there is but one surefire way to address the problem: succession planning. Succession planning is an important risk mitigation approach for regulating the disruption caused by unforeseen and unplanned departures of CEOs, other key executives and even board directors.

It would surprise many that, according to the 2016-2017 National Association of Corporate Director’s governance survey, a mere “39% of boards have developed a pipeline of internal candidates and 25% have changed the roles of internal candidates to assess leadership potential.”

What about the rest of the companies? Are they in denial or is it simply easier to believe in the infallibility of their leadership? Whatever the reason, it is imprudent to ignore the fact that any one of us can walk out the door and get hit by the proverbial bus. As Ram Charan elaborates in his Harvard Business Review’ article “Ending the CEO Succession Crisis:

A CEO or board that has been in place for six or seven years and has not yet provided a pool of qualified candidates, and a robust process for selecting the next leader, is a failure.”

Of course, succession planning is important not only because of unforeseen illness and death but also because CEOs leave voluntarily or involuntarily due to performance or bad behavior. Whatever the reason, planning for the inevitable, even if it is presumed to be a long way off, is not optional. Boards have a fiduciary responsibility to focus on this regularly and diligently. Just as importantly, beyond the CEO succession planning process, boards should engage in some examination of board directors’ succession plans as well as plans for lower down within the organization.

Succession planning is not a one-shot deal. It must be ongoing and part of the board’s agenda. CEO succession planning begins with board consensus on an overall plan surrounding this issue. Then there should be a partnership with the CEO so that the latter can initiate the process and help the board understand the internal talent. The board should have regular and direct contact with all contenders while being sensitive to the fact that stepping out of his/her role may be an uncomfortable thought for most CEOs.

In a 2016 article in Automobile Magazine Marchionne stated, “my successor is in the house.” He continued, “There is a list of people but no favorite. None of them is a traditional car guy.” And true to his excellent leadership abilities, Marchionne had developed at least three possible contenders for his role, and four days before his death Mike Manley, head of Jeep and Ram brands was named Chief Executive Officer. In this way, Fiat Chrysler gets stability and predictability and the legacy of Sergio Marchionne will continue. As for Manley himself, he has a huge and complex responsibility and time will tell how he does in the driver’s seat, but he has an excellent track record and has been on the radar screen as a possible Marchionne replacement for years. The importance of this time for grooming cannot be underestimated.