About 11% of S&P 500 companies appointed a new chief executive officer in 2022, a return to normal after a slight dip in 2021, according to data from Spencer Stuart. While new leadership can be invigorating for companies, strategic CHROs know that the appointment of a new CEO is also the time to start thinking of their successor.
Although CEO succession planning is one of the most important tasks of corporate boards, 37% of directors surveyed by the National Association of Corporate Directors in late 2022 said that their board did not allocate enough time to the topic over the previous 12 months. In that same survey, two-thirds of directors identified CEO succession planning as a “very important” or “important” area of improvement for their board over the next year.
A good CHRO will know what a best-in-class succession process looks like, says Noah Shamosh, a partner at Spencer Stuart. “The board will see them as a quality-control agent for the process.”
Succession planning can be a sensitive topic, says Stephen Patscot, another partner at Spencer Stuart. And boards delay the process for many reasons. For example, a third of directors surveyed by PwC said that the biggest obstacle preventing them from starting earlier is that their current CEO is performing as expected. But succession planning should start early and be a continuous process, regardless of the CEO’s performance. The role of the CHRO, says Patscot, is to facilitate the process and make it a routine part of the organization’s talent planning.
For insights on how a CHRO can provide real value to the board during succession planning, I spoke with Patscot, who worked in HR at General Electric for over two decades and now leads Spencer Stuart’s North American HR practice; Coco Brown, the founder and CEO of the Athena Alliance, an executive education company, and a board member at ArcherPoint; Shamosh, a consultant at Spencer Stuart and a member of the firm’s leadership advisory services, and Michael Useem, a professor of management at Wharton.
Here’s their advice:
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