McDonald's masterful handling of its CEO transition following the tragic death of James Cantalupo highlights the crucial role of succession planning in protecting shareholder value.
Even in cases in which boards have done an effective job in planning the operational side of management transitions, they often neglect the much more delicate task of communicating succession-related changes to key stakeholders. Whether the transition is prompted by the tragic death of a CEO or is a routine case of management change, the key challenge is to reach consensus on the speed and depth of the change. Is the CEO retiring completely or will there be a gradual transition? Will the responsibilities of the new CEO mirror past practice or is there an opportunity for the board to reallocate some aspects of his or her role?
Many factors influence a successful transition, such as the familiarity of the company's stakeholders with the new CEO and his or her knowledge of the company and the industry sector. In each case, there is an optimal amount of transition time that supports continuity, without creating "lame ducks" of both the outgoing and incoming executives. Companies need to avoid ambiguity about which aspects of the twin roles are being transitioned at which speeds and, having announced a timetable, need to stick to it. Most companies tend to move too slowly in transition rather than too fast.
In planning transitions, it is useful to focus on Three Cs: Change/Continuity, Communications, and Culture.
The single most important aspect of succession communications is for the board to decide on the signals of change the transition should send to all stakeholders. Will the new CEO be charged with radical change? How important is it that the incoming CEO arrives with a new vision? Is there time for a "shakedown cruise"? Does the transition involve only the new CEO and chairman or are there implications for other layers of management? Only by answering such questions can a successful communications plan be developed.
Though it may seem straightforward, communications surrounding management changes can be quite difficult. The communications team must review milestones in the company's year and assess the most appropriate transition. These milestones include annual meetings, the annual report, quarterly investor calls, and analyst meetings, along with other major internal meetings generally led by the CEO. The communications plan should address when and how the changeover is formally announced and how clear the time frame is.
With respect to individual events (e.g. analyst calls), a decision must be made on whether the incoming CEO takes on an enhanced role prior to full elevation or only afterwards. Will there be a step change that gradually brings him or her into taking over the call?
Opportunities for the incoming CEO to hold informal internal meetings, or "listening" tours, in the year prior to taking on the new role should be considered, as well as external meetings with top analysts and major shareholders.
Consideration should also be given to a written internal-communication opportunity for the retiring CEO who remains chairman to outline the critical distinction of activities between himself and the CEO.
Particularly in companies with a charismatic and long-serving chief executive, many communications pathways become strongly associated with the personality of the individual. For the new CEO to replicate these practices is not always helpful. Part of the transition planning should consider whether there are any activities connected with the outgoing CEO that need to be "retired," and how the style of CEO communications could be changed to better fit the new team leader. External leadership positions (community relations, nonprofits) must be assessed to determine which should be transitioned to the new CEO and which should not. Some of these activities or communications could also be transitioned to other senior managers within the company.
Although all changes need to be handled with appropriate sensitivity, visible changes in the communications culture will help new CEOs demarcate their own new operational agenda.
The approach outlined above focuses the attention of senior management and the board both on the strategic communications aspect of the transition and on how to get the communications details right. By creating an internal communications task force of staff and external advisors to ensure that no detail of transition communications is overlooked, companies can manage the small details of transitions that can assume significant symbolic power for both internal and external stakeholders.