In CEO Succession, Stakeholders Matter


April 8, 2008

by Marshall Goldsmith

As a chief executive officer, you may believe a certain potential successor would be perfect for your job. You may do a great job of coaching and mentoring to get this person ready, but no matter what you believe and what you do, if the board of directors decides not to hire the person you chose, it won’t really matter.

It is critical that your choice of successor establish positive board relationships before the succession decision is made. Given the fact that many potential successors are not directors and have infrequent interactions with the board, this can be trickier than you might imagine.

One of my potential CEO clients got angry during a meeting with the board, tried to prove a director wrong, and succeeded in alienating several important members. This type of damage is hard to repair. A year later, when I interviewed board members about this candidate, a couple of them brought up this singular event. Even though the candidate’s behavior had been stellar for the intervening year, the event stuck in their minds and was seen as symbolic of the negative behavior of this potential CEO.

In your capacity as a coach to your potential successor, it’s important that you, the CEO, thoroughly prepare your candidate for board meetings. It can be useful to have detailed discussions on the preferences, views, and quirks of each director in advance. Use your years of experience with these people to help your successor know what they are looking for in a leader. You can also coach directors on how they can help your candidate interact with them.

On the Outs With His Peer Group
In some cases, a potential successor may have fine relationships with the board but can be sabotaged by his peers. In one of my failed coaching experiences, I tried to explain to a group how my job was to help a candidate achieve positive, lasting change in behavior – not only to improve his effectiveness in his current position but to help him prepare for potential CEO promotion. It was clear the peer group basically hated this person and had no desire to help him get promoted. In fact, a few made it clear they would be much happier if they could help him get fired.

This person was eventually removed from serious consideration for the CEO’s role. It became clear to the existing CEO and the board that this person had been written off by many important peers and was never going to be given a fair opportunity by them, no matter what he did or how hard he tried. Since, in this case, the peers would have been incredibly difficult to replace, a different executive had to be chosen.

Big Customers Count
My final example of a stakeholder veto comes from a CEO of a leading client of the company looking for a new chief. In this case, the CEO of the customer’s organization felt that – years before – he had been insulted by the potential successor, who was at the time in a sales role. The customer CEO had never forgiven this candidate and still considered him a total jerk. He also happened to be friends with a couple of members of the board. Although this candidate may well have been qualified for the job and had the support of his own CEO and peers, he was not even considered for the position. Big customers count.

Before spending your time developing your successor, make a critical stakeholder assessment. Ask an important question, “Will this candidate be given a fair chance, not only by me, but also by the key stakeholders who are critical to his or her future success?”

If this answer is no, and if you cannot change key stakeholder perceptions, look for another candidate. When critical stakeholders have written off candidates, their succession possibilities may be over no matter what you or they do to change behavior.