Personal Finance

Lessons from C-suite on handing over the baton

Change of guard can make or break a company depending on how it is done. FILE PHOTO | NMG
Change of guard can make or break a company depending on how it is done. FILE PHOTO | NMG 

Sample this: A CEO’s time to leave an organisation comes and a new one takes over but the process is muddled by internal company politics like the CFO being passed over for the post and the absence of goodwill in both the incoming and the outgoing CEO, especially in cases where the outgoing boss is being bundled out due to non-performance or other such issues.

The company is listed on the stock exchange and this information becomes known to the market. What follows is a free-falling of the value of the company shares and everyone suffers.

This is how a first time transition between county governments could unfold if not managed and coordinated properly.

The elections of new county governments in the just concluded 2017 General Election has presented Kenyans with a new constitutional experience.

It is the first time that county governments are transiting from the first crop of governors to newly elected ones whether re-elected or newly elected.

As is expected with a new experience, this transition has left Kenyans guessing and second-guessing on what should or should not happen.

In corporate leadership, this type of transition at the C-suite level is more often than not characterised by a well-coordinated and structured handing over in a defined transition period, mostly a month or two.

In politics however and where public resources are concerned and the complication of a first time experience, there were bound to be hiccups.

While the county government handover was supposed to be guided by a law that failed to pass in the last Parliament, the changeover could benefit from lessons in effective succession at the C-suite level.

Literature on effective CEO transitions exist and the most cited include that from Harvard Business Review (HBR), US HR firm Russell Reynolds Associates and the Canadian HR Council. About four strategies are cross-quoted in these sources and they include the following:

One, there must be a transition plan and the executors should include the board and senior management.

An article appearing in the HBR notes that in the US, presidential candidates typically name a transition team and begin planning for a new administration months before a single vote is cast on election day, because they want to be prepared in the event they win.

In corporate life, however, too many CEO transitions are informal or improvised. In a 2010 survey conducted by the executive search firm Heidrick & Struggles and Stanford’s Rock Center for Corporate Governance, half the companies surveyed reported providing no formal transition plan for a new leader.

Secondly, some critical questions must be answered and HBR talks of three variables which are: first, is the new CEO from inside or outside the company?

Second, will he or she take on that role immediately or spend time as a “designated successor,” working alongside the outgoing CEO while typically carrying the title of president or chief operating officer?

Third, whether or not the transfer of power is immediate, will the outgoing CEO continue to be a presence in the company, as chairman of the board or as an adviser?

Thirdly, most succession planning experts agree that there must be an intensive knowledge sharing. The Canadian HR membership association, HR Council proposes that the outgoing and incoming CEO meet frequently for in-depth discussion regarding the operating styles, histories and expectations of board members and senior management, as well as other stakeholder constituencies, including investors, creditors, customers, analysts and regulators.