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Successful succession planning

February 1, 2011
by David A. Green
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A case study in leadership transition

The core of “succession” is the word “success.” An effective board knows that changes in the CEO are inevitable through retirement, illness, death, or job change. Preparation for any of these events requires succession planning to maximize the probability of continued organizational success.

What is required for good CEO succession planning? The foundation is effective governance based on board-defined core values and application principles that guide both governing and operating decisions and actions. Consistent application of core values and principles is the key to organizational integrity.

The primary way core values and principles are openly and regularly expressed is through the organizational culture. The CEO, the primary determinate of the culture because of position and presence, must embody the organization's core values and principles. The culture includes staff behaviors that are rewarded and punished; how staff members treat each other, customers, and visitors; how decisions are made; organizational accomplishments that are celebrated; and other organizational practices. Through its selection of the CEO, the board has significant influence on this culture.

When CEO succession is desired, finding someone outside the organization who believes in its core values and principles and can maintain its desired culture is difficult. Information on candidates is secondhand and presents them in the best light. Therefore, the probability of succession with an external CEO is poor. This was demonstrated in the book Good to Great by Jim Collins, where 10 of the 11 companies identified as “great” selected their CEOs from within. Knowledge of both weaknesses and strengths of internal candidates makes internal succession more probable.


Evergreen Retirement Community, a Christian organization, experienced this succession planning concept from 2000 to 2005. The process evolved from a conflict within the board when a small group of members attempted to take Evergreen into a merger opposed by the board chair, the residents, and me. When the merger initiative was called off in August 1999, the board was considerably divided.

In early 2000, the losing group initiated a “succession planning” committee with the hidden agenda of forcing me into retirement because of my opposition to the merger. After the initiative failed and its initiators resigned, the committee moved ahead by retaining an organizational development consultant.

The consultant's first step was to identify the desired characteristics of a CEO by using sets of 67 cards, each with a positive CEO characteristic. The board, residents' council, and senior management team divided into groups of three, each with a set of cards. Each group unanimously divided the characteristics into three equal piles: very important, important, and less important. The results from all small groups provided a mathematically prioritized list of characteristics for the CEO. For Evergreen, a natural break occurred after 12, which the board divided into two categories-values-based and skills-based-with the former being higher priority.

The next steps were to (a) identify potential internal candidates, (b) determine how their individual abilities compared with the 12 desired characteristics, and (c) assist each to prepare a personal development plan to address gaps between his/her abilities and the desired characteristics. As preparation for these steps, the consultant led five half-day management/leadership training and testing sessions for the five members of the senior management team (including me). The team recognized that the training and testing would be appropriate for all staff with managerial or organization-wide responsibilities, so it included them as preparation for second-level succession planning.

At the conclusion of the sessions, each member of senior management who was interested in being considered for CEO was asked to release the results of his or her management/leadership testing to the board. The consultant reviewed the results with the team member and me so I could assist in creating a personal development plan.

The consultant also had me assist each candidate find an outside mentor with significant management and leadership experience. I recruited professional colleagues from an executive dialogue group who met periodically with a candidate for a couple of years. Two of the candidates were not licensed as nursing home administrators; I assisted them in starting this process. The third candidate did not have a graduate degree; I encouraged his enrollment in a weekend MPA program.

In 2001, the board provided funding for senior management team development, requesting periodic reports on how the funds were used and the impact on the team, but not specific outcomes. The team had no idea how to use the funds, so it explored many options. In the spring of 2002, a friend gave me a book, God Is My CEO by Larry Julian, a management consultant. I found it valuable and shared portions with the team, who requested copies to read together. After a few weeks, the team suggested I ask the author to assist with team development. He was fascinated by our unique request, so he accepted.