SPEAKERS: Tony Brausen, director, Adolfson & Peterson Construction; Steven G. Mahon, chair, Summit Brewing Company; Susan Schroeder, senior partner, Compensation Advisory Partners LLC; Andrew Wexler, CEO, Herschend
SCHROEDER: How often should boards discuss CEO succession planning?
MAHON: Every meeting. That doesn’t mean you need a deep dive every time, but CEO succession should always be top of mind. At least once a year, the board should take a comprehensive look: Is the CEO still the right leader? What’s the timeline? What will the next CEO need to look like? Businesses, boards and CEOs are all dynamic. The CEO who is right today may not be the right CEO three years from now. And don’t stop with the CEO. Succession planning should extend to the executive team as well. The day you hire a new CEO is the day you begin planning for the next one.
WEXLER: We do a deep dive every year, and our compensation committee drives the process. As CEO, there are times when I step out of the room so the board can have an honest discussion about my performance and whether I’m the right leader for where the company is heading. That’s appropriate. As a good leader, you have to understand that the board has an obligation to determine what’s in the best interests of the company, even if that means conducting a national search.
SCHROEDER: What does an effective CEO succession process look like?
BRAUSEN: Succession planning is continuous. We just promoted a new CEO, and we’re already working on the next succession plan. I chair the compensation committee, which is tasked with ensuring that an effective succession planning process is in place and overseeing the results for all executive leadership positions. It starts with identifying the candidates, then evaluating their readiness: ready now, one to two years, three to five years or longer. We begin with the position description because that defines the competencies required. Those competencies may change depending on where the company is headed. We score candidates against those competencies, determine and compare their readiness versus the other candidates, and review progress every year. The development plan is the critical piece.
MAHON: If the company needs to change direction, don’t automatically assume the internal candidate is the best choice. Someone who has spent years executing the current CEO’s strategy may find it difficult to lead a major strategic shift. Start by asking where the company needs to be five years from now and what kind of leader that future requires.
WEXLER: We looked at multiple strategic scenarios over two-, five- and 10-year horizons. Different candidates were stronger under different scenarios. That allowed us to tailor development plans to each executive while also identifying who would be ready immediately if an emergency occurred.
SCHROEDER: How should boards develop future CEO candidates?
BRAUSEN: We brought in an outside executive development firm that provided assessments, coaching and objective feedback. It helped identify development needs and measure progress against the competencies required for the CEO role.
WEXLER: I highly recommend using a third party. They assess not only technical capability but also cultural fit and psychological readiness. We created an experience map so candidates would be exposed to the kinds of situations we wanted a future CEO to have lived through before taking the role.
SCHROEDER: How should boards prepare for unexpected CEO departures?
BRAUSEN: Emergency succession planning is essential. The board should always know who would serve as interim CEO if something unexpected happens. If you’ve developed candidates well, an interim assignment can also become an opportunity to evaluate someone in the role before making a permanent decision.
SCHROEDER: Does succession planning change in a family business?
BRAUSEN: The objective doesn’t change. You still want the best CEO possible. If that person is a family member, wonderful. But if another candidate is better prepared and more qualified, the board needs to have that conversation.
WEXLER: The board and the family need a candid discussion about how important it is that the CEO be a family member. Our chair says, “Why would I limit myself to 30 people when I can look at 8 billion?” A family member may be the best candidate, but you shouldn’t assume that’s automatically true.
SCHRODER: How do you retain executives who aren’t selected as CEO?
WEXLER: When I became CEO, another internal candidate was passed over. I told her I needed her as my partner and created an environment where she had real ownership, authority and opportunities to grow. She stayed for eight more years. Compensation matters, but if that’s all you’re relying on, you’re at risk. People stay because they have meaningful opportunities to contribute and grow.
BRAUSEN: When I was promoted to treasurer over another executive, I immediately sat down with him and told him my goal was for him to become the next treasurer. We built a development plan together and four years later he earned that promotion. Later in my own career, I was passed over for a role, which had to do with a CEO succession issue as the current CEO had been diagnosed with a serious health condition. Management explained why, treated me fairly and invested in me, including offering a retention financial package. I stayed.
MAHON: One board made the mistake of naming three internal CEO candidates while simultaneously running an external search. They lost two outstanding executives. Think carefully about how many real internal candidates you have. Treating everyone as a finalist may feel inclusive, but it can make the process much harder and cost you talented leaders.