Leadership Succession Planning

October 6th, 2020

Leadership Succession Planning

Whilst the demand for strong CFOs is constant, it is CEO succession planning that has been keeping us most busy in the Financial Services practice during the last few months. Whether that’s a planned transition of a founder ahead of a full exit at the next turn, or a reactive change as a result of the market we find ourselves in, any change to the CEO of a business is likely to have a significant impact on business performance.

In this article I will highlight a key part of the succession planning process that is often overlooked and yet crucial in defining the target profile of the future CEO. In medical terms, this is the equivalent of understanding the patient before undergoing the transplant. How can you accurately define the complementary profile of a target CEO, if you don’t first understand the existing team, their motivations and behaviours? Investing the time upfront will better enable the investor and search firm to align their views on the cultural and behavioural traits, and avoid appointing David Moyes to succeed Alex Ferguson.

This inherent risk is amplified when the CEO transitioning out of the business has been in situ for a long period of time (e.g. 10 or 20 years+). Therefore, it is all the more important for the leadership team, the board and company shareholders to understand in detail what change might occur on the back of (a) the incumbent CEO leaving and (b) the new CEO coming in, so that this process can be successfully managed with minimal risk to business performance.

This is where Drax and drxDATA blend human intuition and experience with science. Our leadership practice uses a range of psychometric and behavioural assessment tools that help to frame: (i) an individual and a team’s underlying motivational and value preferences, (ii) personality and (iii) situational judgement within specific business environments. When run on an incumbent team (including the departing CEO), they combine to form a picture of an individual and the team’s behavioural strengths and weaknesses (see Figure 1). Typically layered on to this are in-person interviews with the team (led by Drax’s Head of Leadership, Tom Cross), alongside a full professional experience analysis using our LSPM modelling, which breaks down experience into situational, domain and functional components.

We blend together the following: anecdotal (1-2-1 interviews); factual (LSPM, professional experience); and behavioural (PACE and other psychometric tools) analysis, to inform our clients as to the right ingredients to look for in prospective candidates (see Figure 2). This will either match or complement the current and future working environment, culture and value creation strategy. This process also allows for learning and development to take place with both individuals and the group to facilitate increased awareness and understanding in how to work more effectively together to achieve the strategic aims of the company. Once we have built up a detailed picture on the existing landscape, we are able to fully define the target candidate profile that complements the existing team, the culture and is aligned to the value creation strategy.

If you would like to discuss this in greater detail, please get in touch.

Mathew Cuthbertson

Managing Director, Financial Services

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