The transition from one CEO to another is a critical point in the lifecycle of any business.

CEO succession can be planned or unplanned – the decision for the CEO to move on to a new challenge or retire can be sudden and unexpected. Either way, by the time a succession plan is needed, it is too late to start building one. As such, it is the responsibility of the board to make succession planning a priority, in order to provide a framework for a smooth transition to a new leader for the business, when that time inevitably comes.

Creating a CEO succession plan provides an opportunity for the firm to drive the development of the next generation of senior leaders, aligning leadership at the top of the organisation with the strategic needs of the firm.

The foundation for CEO succession planning is the strategic direction of the business, from which the profile and selection criteria for the next CEO can be developed. Getting this profile right is key, because it provides a roadmap for internal candidate development plans and a framework for selecting potential candidates for the job.

The CEO succession plan should think long term. Look beyond just replacing the incumbent – who should be training up for the job after them? CEO succession is an ongoing process so it is important to have a pipeline of talented candidates undergoing development as they rise up through the organisation.

Create a written succession plan. This document should detail how the firm’s officers are elected and replaced, how successors are to be chosen and the respective roles of the CEO, the board and any management committees within the firm. Potential candidates should be assessed against industry benchmarks and these criteria should be detailed in the succession plan. An emergency succession procedure should be included in the written succession plan – in the case of a sudden vacancy for a new CEO.

Once you create your written CEO succession plan, the board should review it at least once a year, to ensure that it is fit for purpose. Future internal candidates should also be reviewed as part of this process, in order to manage the pipeline of potential future leaders of the business. If the capability to manage this process doesn’t exist within your business, it may be worth engaging the services of an external firm with expertise in this particular area.