CEO succession planning is one of a board’s most important responsibilities. However, many companies are unprepared for communicating executive transitions. A recent survey of senior-level corporate executives published by Alix Partners shows that about 50 percent of respondents felt their companies were unprepared for CEO succession, either because the company hadn’t identified possible successors or hadn’t sufficiently trained candidates for the top job.
Communications strategy is an integral part of CEO succession preparedness. Executive transitions can unfold quickly, demanding decisive action in developing the proper message and coordinating communications strategy both internally and externally. When thinking about a possible transition announcement, there are several foundational elements for successfully positioning a senior executive change.
Why is the CEO leaving?
There are a handful of standard reasons a company gives for an executive’s departure. Whether a CEO retires, steps down, is terminated, decides to spend more time with family, or pursues new opportunities, companies must present a clear rationale for the departure. Given nuances in language that could imply the motivations of the executive and company, word choice is especially important. Transitions that appear confusing, mysterious, or acrimonious will spook investors or stoke speculation.
In the age of investor activism, boards look for opportunities to demonstrate they will take action when a CEO is viewed as underperforming. This may lead to a press release that does not shower the outgoing executive with praise, therefore signaling a less-than-favorable view of the executive. Or the announcement may state the departure is by “mutual decision,” again a clear signal. Communicating CEO departure is a delicate balancing act.
When is the right time to communicate about a succession?
CEO transition announcements generally take financial markets by surprise and create immediate concern. As a result, some companies have found ways to prepare advance messaging for a planned transition to precondition the market to a future change.
For example, Kinder Morgan made a quick reference to a future CEO transition in its comments at an investor conference before an established timeline or formal announcement had been made. In another example, when dealing with a series of executive changes over the course of 15 months, Mack-Cali Realty Corp. issued an update about its executive search process six months after the CEO stepped down. Ultimately, the company named its new CEO, COO and president, CFO, and chief legal officer and secretary in one release. It should be noted that Mack-Cali’s case is fairly unique; in proprietary research, Edelman found the majority of companies identify a successor in the initial transition announcement. However, companies stand to learn from Mack-Cali and Kinder Morgan’s inventive approaches to communicating succession plans.