Joel M. Koblentz is the Senior Partner of the Koblentz Group, a “Sensitive Matters” firm specializing in executive search, recruitment of board of directors, and the evaluation of key senior management. Over the past 30 years, his firms has conducted several hundred board recruitments for Fortune 500 companies as well as serving emerging public companies and private equity clients. Suffice it to say, they have worked with CEOs of every dimension.

We’ve been talking lately about CEOs who fail to recognize or acknowledge that they no longer have the right mix of experience, competences or vision to continue to lead their organization.

Just how does a CEO know when it’s time to go?

And if the CEO doesn’t see the problem, what can the board of directors and other senior leaders do?

“The poster children are public company Founder-CEOs who too often have their ego tied up in the business and believe that no one can run the business the way that they can,” said Joel. I agree—anyone who has that fierce “it’s my baby” attachment to something they’ve created is going to be wearing some blinders.

Great CEOs, and for that matter great leaders in all walks of life, are emotionally secure and confident; they are capable of being proactive in addressing their shortcomings. They understand that they must prioritize creating value in the present, but meanwhile, place equal priority on preparing the company for success in the future. “The best CEOs understand their role as a liaison to value creation while constructing a solid bridge to the next generation of leadership,” Joel observed.

The entrepreneurial CEO who excelled at founding his or her company may or may not have the qualities of a great manager CEO. Skill at leading a start-up organization does not predict an individual’s aptitude for leading the organization that start-up becomes. Certainly, many CEOs are challenged by their own limitations: ego, will to win, reluctance to admit errors, or failure to develop others.

Leaders must be clear-eyed about their skills and shortcomings. The most successful leaders seek feedback—negative as well as positive. They learn through failures as well as mentoring, coaching, and other leadership development tools what to do to stay effective in their role, and when the time comes, how to manage a transition to a successor in a way that leaves the company in a better situation than when they arrived.

“Where many leaders fail is in assuming that they are the best to lead under any circumstances. They just don’t fully recognize their own shortcomings,” Joel said, and I agree. Effective leaders are keenly aware of their limitations and recognize that their specific strengths are right for some times, but not for all times. As Joel put it, “The mélange of gearing, competences, experiences and emotional intelligence are unique to every leader.” To effectively lead a company today means that the leader must possess the right blend of targeted skills, experience and competences, and apply them at the right time to address the challenge of creating value at each cyclical inflection point. CEOs must commit to candid self-reflection about their fitness to lead. It is a job you must re-apply for each time market conditions shift.

But even the best CEOs get caught between knowing that it’s time to depart and meeting their commitment to finish what they were recruited to do. When a CEO’s blinders prevent “knowing that it’s time to go,” what can others among the senior leadership do?

In his work with executive search, Joel has seen that too frequently boards recognize the issue, but fail to be proactive in addressing it. “In these circumstances, beyond coaching the CEO, the board has a responsibility to the shareholders and to the broader community of stakeholders to assess the company’s state and determine whether their CEO is qualified to soldier on. This is tough duty for Directors especially if, as a board, they are not prepared to address succession,” Joel remarked. “None of us are leaders for all seasons.”

We are doing business in a world where decisions must be made at accelerating velocity, in unforgiving markets. The “hit by a bus” succession plan is far more common than many CEOs and boards of directors will admit. Leaving decisions about succession to be made in the midst of a sudden turn of events, in such challenging conditions, is simply irresponsible governance.

Directors must call for candid conversations with their CEOs about the leadership required to assure continuity and to meet challenges in the future. Especially in publicly traded companies, succession management must receive consistent board-level focus.

In our view, CEOs owe—and are owed–an honest assessment of fitness to lead in the current circumstances. Those CEOs who are honest with themselves and forthright with their board are, by definition, true and selfless leaders. The Directors who successfully carry out their role in the evaluation of their CEO and in the succession planning process are also acting as true and selfless leaders.

From our client work, Joel and I have seen organizations meet the challenge and responsibility of helping the CEO know when to pass the baton to a new leader. Two key attributes are usually present in these organizations: They have earned trust between the Board and their CEO and have learned how to make decisions objectively leading to an effective and efficient transparent and well-defined succession process. We believe there is true benefit for CEOs and board members to work proactively to “bake” these attributes into their companies and governance.

I’ll let Joel have the last word. “CEOs, when it is time to depart—work with your board to make an orderly transition. Don’t hang on! Let your success be your legacy!”

Nour Takeaways:

1. CEOs must recognize two priorities: value creation in the present, and succession planning for future.

2. CEOs must recognize that changing conditions bring new requirements, and honestly reflect on whether they are no longer the right fit for the job.

3. Boards must be prepared to give their CEO feedback and engage in succession planning, to ensure the organization can meet tomorrow’s challenges.

 

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