CHRO’s Impact on CEO Succession Planning

Successful CEO succession planning is crucial for the long-term sustainability and growth of an organization. Top HR executives also continue to play a major role is replacing top leaders. A new report from Spencer Stuart offers five recommendations for CHROs for maximizing the impact of CEO succession planning.

January 2, 2024 – The role of the chief human resources officer (CHRO) has become increasingly complex, with responsibilities ranging from navigating the “future of work” to addressing the implications of artificial intelligence. However, nowhere is the significance of the CHRO more evident than in CEO succession planning, where HR leaders can play a crucial, nuanced and pivotal role, according to a new report from Spencer Stuart’s Cathy Anterasian and Stephen G. Patscot. While CEO succession is principally a board-driven responsibility, the CHRO works closely with the CEO and board as a trusted partner, or even a lead architect, to develop a strong internal pipeline of potential candidates and, ultimately, select a successor, the study said.

Together, they should be ensuring an effective process and a smooth transition, according to the Spencer Stuart report. “The CHRO has a fiduciary responsibility to the board and must execute a transparent process when seeking CEO successors,” it said. “The stakes and consequences have never been greater, given the pace of change and the breadth of issues facing new CEOs. Additionally, CEO succession is not just limited to just the CEO, as often the process has much broader organizational impact.”

Spencer Stuart explains that CHROs can be categorized into three roles with differing degrees of impact on the succession planning process:

• The trusted partner. This is a CHRO who is closely aligned with the CEO and the board, steeped in company strategies, and actively working with the nominating and governance committee on succession activities.

• The emerging partner, who maintains a close working relationship with the CEO but lacks extensive board interaction.

• The limited partner, whose focus is on building trust with both the CEO and the board. These CHROs tend to play a finite role in succession planning.

“Regardless of the breadth of their role in succession planning, CHROs must carefully navigate the delicate balance between their relationship with the CEO and their responsibility to the board,” the Spencer Stuart report said. “The level of skill and sophistication they bring to the table significantly impacts the effectiveness of the succession planning process and the eventual handover of the CEO role — a challenging process fraught with emotions and tensions. As the company’s people leader, the CHRO shoulders the responsibility of managing this process effectively.”

Cathy Anterasian leads CEO succession services for Spencer Stuart in North America. She is an active member of the North American board and CEO practices. Previously, she launched and co-led Spencer Stuart’s global executive assessment services practice. With more than 25 years of experience in succession planning, assessment, executive search and strategy consulting, Ms. Anterasian advises boards and CEOs on the capabilities and potential of their teams, as well as the development of strategies and plans to prepare executives for CEO succession and other C-suite roles. She has partnered with numerous boards and CEOs of Fortune 500, mid-cap and privately held companies to ensure that successful leadership development, selection and transition occur. Ms. Anterasian has engaged with clients globally across financial services, life sciences, industrial, technology, retail and consumer sectors.

Spencer Stuart offers five recommendations for CHROs for maximizing the impact of CEO succession planning.

1. Champion best practices and accountability throughout the process. Since the Sarbanes-Oxley Act granted boards clear responsibility for CEO succession, Spencer Stuart notes that their engagement in the process has significantly increased. However, directors still rely on the CHRO to guide and ensure a well-informed decision-making process within a critical timeline. “The CHRO must advocate for best practices and facilitate a thoughtful due diligence process aligned with the company’s strategic direction and culture,” the firm said. “Working with the board and CEO to define an ideal CEO profile, the CHRO helps align directors and the CEO on selection criteria and succession strategy, minimizing potential conflicts and ensuring a transparent roadmap for candidate development.”

2. Maintain impartiality in decision-making. Boards often have limited visibility into CEO contenders, relying on the CHRO’s comprehensive knowledge of internal candidates. The Spencer Stuart report explains that it is crucial for the CHRO to lead internal candidate development, conduct external benchmarking and identify skill gaps. “While their viewpoint is valuable, CHROs must avoid biases and subjective advocacy, providing a balanced assessment of each candidate’s strengths and developmental needs,” the study said. “The CHRO’s role is to ensure an honest and integrity-based process, even when others develop biases. External support can provide additional guidance and mitigate potential pitfalls.”

Related: How to Develop Effective Leadership Succession Planning

3. Act as a strong ally to the sitting CEO. CEO succession planning can be a source of professional and personal strain for the incumbent CEO, according to the Spencer Stuart report. “The process is often lengthy and can erode the CEO’s sense of control. It is the CHRO’s responsibility to offer counsel, encourage the CEO to step back and make room for the successor, and advise against potential missteps,” the report says. “By keeping the senior leadership team informed and enlisting the support of the lead director or non-executive chair, the CHRO gains allies and strengthens their role as an adviser to the CEO.”

4. Prioritize candidate well-being. The Spencer Stuart report also notes that the succession process can be challenging for internal candidates, who often receive a range of advice from various sources, some of it conflicting. “The CHRO must be mindful of the impact on candidates and other key stakeholders, maintaining fair and objective assessments, and offering support throughout this high-stakes process,” the firm said. “Serving as a safe harbor for internal candidates, the CHRO provides candid feedback and emotional support, and ensures cohesion within the team. The CHRO must also be aware of cultural tensions and address any simmering hostility to prevent organizational paralysis.”

Steve Patscot leads Spencer Stuart’s North American human resource practice and is an active member of the firm’s leadership advisory and CEO practices. During his 10 years with the firm, he has worked with clients on more than 250 CHRO, board director, CEO and C-suite assignments. In addition to his work at the top with CEOs recruiting great HR leadership, Mr. Patscot has been deeply involved in advising boards, CEOs and CHROs on CEO, board and C-suite succession and new leader transition. He has also coached dozens of executives. He and other members of the HR practice partner with boards, CEOs and CHROs from organizations ranging from early-stage companies to Fortune 10 global enterprises to assess, recruit and develop board directors, CHROs and other C-level leaders who strive to have lasting impact on their organizations. They have conducted hundreds of CHRO searches and succession planning projects for the nation’s top public, private and private equity firms.

5. Support the new CEO’s success. Even after selecting a CEO, Spencer Stuart notes that the CHRO’s role continues. “The CHRO assists the new CEO in formulating a 90-day plan covering strategic, organizational and personal priorities,” the study said. “This includes identifying focus areas and differentiators for the new CEO, leveraging the CHRO’s comprehensive understanding of the expectations placed upon them. Additionally, the CHRO can help plan and execute the immediate transition, working closely with the CEO, the committee and the management team to ensure a smooth handover. Encouraging the former CEO to limit their stay prevents potential hindrances to the new CEO’s agenda.”

In conclusion, the CHRO’s role in CEO succession planning is multifaceted and demanding. “With fiduciary responsibility to the board and the opportunity to positively impact the transition, CHROs must bring to the process exceptional skills, dexterity and a sense of ownership,” the Spencer Stuart report said. “When CHROs adhere to best practices, remain impartial, support the sitting CEO, prioritize candidate well-being and facilitate the new CEO’s success, the payoff is a leadership pipeline able to sustain and improve company performance for the long term. The more proactive and engaged the CHRO is, the greater their potential to significantly enhance the process and its outcomes.”

Related: Seven Steps to Successful CEO Succession

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Executive Editor; Lily Fauver, Senior Editor – Hunt Scanlon Media

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