In a striking rebound, the IPO landscape in the Americas has surged this year by over 20% compared to the same timeframe in 2023, with the proceeds from these offerings more than doubling due to the larger size of the deals[1]. This resurgence is led by the healthcare and technology sectors, particularly biotechnology, which alone launched nine deals raising a collective US$1.5 billion. Artificial intelligence (AI) continues to capture the market’s imagination, but investors are increasingly demanding tangible proof of its potential impact. Despite the looming challenges of global geopolitical tensions and the upcoming U.S. presidential election, the robust start to the market and growing investor confidence suggests a promising horizon for public listings, extending beyond large-cap entities to a broader spectrum of companies into 2024-2025.

Drawing on three decades of experience  advising boards and CEOs through complex leadership challenges, we have observed the speed bumps investor-led boards face when transitioning to become more independent. A critical juncture often arrives when financial sponsors perceive a viable route to an IPO. The significance of a board’s capabilities and composition in maximizing a public listing cannot be overstated, yet one of the greatest barriers is often the reluctance of directors to relinquish their positions when it becomes clear that change is necessary. While some boards hesitantly skirt around these issues, the most successful ones embrace a proven pathway to prepare their governance structures for the public markets.

To navigate this transition and effectively prepare for a future IPO, chief executive officers and boards should consider three governance best practices:

1. Board Architecture

The axiom in real estate that “the taller the building, the stronger the foundation needs to be” equally applies to board structure. Recent shifts in corporate governance have redefined board construction to better weather potential challenges. In advance of any public listing, it is essential for boards to address these fundamental governance tenets.

• Vision, Purpose, Strategy: Boards must align their governance framework with the company’s long-term vision.
• Stakeholder Interests Analysis (SIA): Understanding the influence and impact of various stakeholders is now essential for board members.
• Capabilities: It is crucial to identify the skills and experiences needed for directors to effectively govern and guide management.
• Committee Structure: Expanding beyond traditional committees, modern boards might include dedicated groups for risk, finance, climate, digital, or cybersecurity, which in turn demands new directors with this expertise.
• Board Size and Composition: Decisions about the number of directors and the balance between independent and executive members should be made early in the board’s formation.
• Governance Guidelines and By-laws: These should be established early to embed best practices and operational guidelines for board function.

2. Board Leadership

Determining the leadership structure of the board is perhaps the most critical decision post-architecture finalization, influencing the board’s capabilities, effectiveness, and culture:

• Board Chair: Financial sponsored boards typically have the Chair position occupied by an individual connected to the lead ownership group. However, once a path to IPO is in sight, selecting the right Non-Executive or Executive Chairman is paramount to unlocking the full potential of the board and its impact on the company.  
• Committee Chairs: Once a Chairman is identified, selecting committee chairs with the necessary experience and capacity is vital for advancing board objectives and helping the company and board get ready for any pre- and post-IPO governance challenges.

3. Board Recruiting

The current environment for board recruitment is fiercely competitive, with a pressing need for directors who bring diversity of thought, background, and expertise. When adding additional independent directors to the board, we have found it is important to keep the following concepts forefront when building out the rest of the board.

• Value Talent Over Titles: Prioritizing current capabilities over past titles often leads to more effective board compositions, with non-CEO members making substantial contributions.
• Focus on Needs, Not Replacements: It’s important to seek directors who add the needed capabilities for executing the strategy rather than trying to replicate any outgoing director’s contributions.
• Look to the Horizon: Boards need to balance the short term “open seats” on the board with their longer-term director succession needs. Any director added to the board must have the potential to take on additional leadership responsibilities in the future. This is especially true with smaller sized boards with less options for committee chair positions.

By adhering to these best practices, companies who are on the path to an IPO can assemble a board that not only meets today’s challenges but also positions the company for sustained success in the public domain.

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Brett Stephens is the CEO of RSR Partners and helps lead the firm’s Board & CEO Services. 

RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1993 by industry icon and Chairman Emeritus, Russell S. Reynolds, Jr. Over the past 30 years, the firm has conducted thousands of projects for Boards and CEOs at public, private equity owned, and family-owned businesses across a range of industries including asset management, consumer markets and enterprises, financial services, healthcare, industrial, marketing and digital, and technology. To learn more about RSR Partners, click here.

[1] Data provided by EY Private.

Peter Drucker was a wise sage. Many companies and even some industries have evolved to greatness thanks to his contributions to management thought. Despite his gifted prescience, Drucker could never have imagined the current environment, nor the unexpected journey through which Covid has taken each and every business. Still, a quote from Drucker rings true: “The greatest danger in times of turbulence is not the turbulence. It is to act with yesterday’s logic.”

Every business leader seeks to understand the current environmental factors and the future of the marketplace. To that point, operating plans consistently open with a view of the present market conditions and a prediction of those to come. It took a pandemic to teach us that our clairvoyant skills are lacking. Even now, we have no idea if our economy is heading into hyper-inflation, recession, or a soft landing. In a time that Drucker refers to as “yesterday,” the conventional wisdom among the wise CEOs would have been to move to a phase of business preparation, anticipating the challenges of the market situation to come. Let’s call this “managing according to maintenance objectives:” optimizing the chances for retention of current state with plenty of emphasis on contingent planning.

In essence, lifeboat management.  

I offer here my thoughts on a different prescription. Keeping with the nautical metaphor, I appreciate the words of Union Naval Admiral Farragut when he said, “Damn the torpedoes!” Are there any lessons to be applied from the fog of war to the current fog of business? I speculate that today’s CEO Farragut would state unequivocally that success is not about survival or maintenance management. Rather, he’d call it seizing greater initiative while expecting inevitable risk.

Having the good fortune to know many great CEOs who would emulate Farragut, I perceive a common denominator among them. It is an insatiable, often unassailable drive to achieve breakout growth for their business, environmental factors notwithstanding. Their passion is palpable, sometimes in visible relief and sometimes not, but always motivating them to find seams and ingredients and synergies for sustainable surges of growth. To many casual witnesses, the business aspirations are almost unimaginable. However, it’s precisely the CEO’s imaginings that seem to prompt the urge to break through the fog, to lead with abandon.

When was the last time you witnessed someone whom you’d describe as an executive who leads with abandon?

In observing these CEOs and their teams, I have come to recognize some common elements that I’ll call the “formula.” These include some leader qualities and some new items of process thinking. These include: a spirit of adventure; a fresh way of expressing vision; a continuous attitude of nimbleness; an approach to embedding strategy as “water cooler” conversation; and a more flexible way to think about organization structure to meet market needs and opportunities.

The Courage to Pioneer

Serving as a business leader in today’s environment is tricky. The most effective CEOs seem to exhibit a pioneering spirit, like Paul Bunyan’s courage to wield a mighty axe for cutting new paths ahead. And it isn’t just a market share strategy in the minds of these few, but a desire to drive demand, to expand markets, to capture much more than their fair share of growth in categories, markets, and channels. Despite the reality of tightening/high-interest money, markets full of ambiguity, and the sequential pressure of business targets that keep approaching at high speed, conservatism does not rule among the best in breed, often called “pacesetters” in today’s lingo.

I see new shoots of growth among many companies, largely because their CEOs are continuously acting in a contrarian fashion compared to competitors. This behavior often includes rapid refinements in market and channel strategies to secure fresh growth in adjacencies, digital initiative to reach new customers and find new supply chain efficiencies, a redirecting of investments from over-mined markets into new product and new market innovation, rethinking the diversity of the business model to capture new opportunities through added services and e-commerce, and even nimbly and rapidly partnering with other companies to gain resources needed to tackle previously inaccessible customer needs, or to create new needs that haven’t yet been articulated. Budgets in some of these progressive businesses are also being shifted from process improvements to commercial innovation.

These pioneer CEOs are taking advantage of market pressures that slow some competitors. As such, their enterprises can leapfrog to future state.

Destiny and Destinational Planning

To many of these great executives, the most significant current question is not “how?” but “what?” That’s to say they often refine and sharpen their view of “what” the future looks like. They have full conviction in the capabilities of their teams and companies in determining their own destiny. Forget about incremental growth plans. Their thinking is not grounded in a cement mentality reflecting the business position of today. They formulate a vision of their business’s destination for tomorrow, more specifically, the overall objectives for two or four or even more years down the road. And they are not afraid to refine along the way or to think bigger if so inspired. Their process for planning and action is based on the “destinational” vision: a longer-term deliverable and a working backwards to define intermediate milestones as well as the related hurdles of consequence along the way.

Once that rock-strewn path is determined, then the focus of attention becomes about resourcing, i.e., what resources do we need to eliminate the obstacles? The tactics of execution spill out from there, and always with precision in mind.

Agility and Flexibility

I’ve alluded to the need for many businesses to undertake occasional refinement/continuous improvement. That’s probably a euphemism; most companies these days need much more than refinement, they need overhaul. Just ask a banker how their industry is prepared for challenges in 2023 and 2024. You may see some uneasy stares. Corporations and even small companies mired in entrenched systems, conventions, and processes rather than market foresight for the future, will likely begin to feel rapid decay over time.

Recently, I spoke at some length with two very senior operating partners at a successful and prominent middle market private equity shop in New York City. Their stature and growth suggest they are big thinkers and unusually thoughtful. That was quickly borne out in the conversation which was a by-exception dialogue, meaning we only discussed bold thinking for an hour. As we traded perspectives on the distinctions between today’s good CEOs and those who are truly great, we continued to circle back to their overriding hypothesis. The best CEOs at this moment in time are those who demonstrate “clear ability to pivot.” This needn’t be expanded upon at this juncture, as it is the fodder for another post, but ponder the point and consider how it applies to the strategy discussions around most of today’s boardroom tables which appear sleepy in contrast.

One last point on pivoting. I have a fervent view that companies today must have something called “organizational elasticity.” During the intensity of Covid, we all heard how business cultures need “resilience.” But I see resilience as an ingredient of foundation, namely, an ability to withstand unusual and extreme pressures.

“Elasticity,” on the other hand, is more about flexibility and the rubber-band stretch that a leadership contingent and their teams can withstand, bend with, and rebound as new space is explored and tested. The pioneering I have highlighted cannot be undertaken unless the organization has the mental preparedness and curiosity to peruse new forks in the road, to make some probes of reconnaissance, and to recover to a stable track if the diversions prove unproductive. Organizational elasticity requires all in a company to understand and agree to the attendant nimbleness of the journey. Change that finds a more open and faster-lane approach should be embraced. Rigidity should be institutionalized in mission-commitment, core values, and collaborative interest, not in growth initiatives, organizational dynamics, or processes.

The Compression of Strategy

The best CEOs are redefining strategy. In a classic sense, strategy has normally meant an articulation of direction for the long term, indicating dimensions of both azimuth and time. I’ve already addressed direction in the pioneering sense. But we now find highly successful CEOs and leadership teams who have compressed the strategic timeline into more tactical timelines. They ask questions like, why should this initiative take 3 years? Why can’t we achieve the same course correction in 3 months?

Incidentally, when was the last time the company reported upon the achievement of the long-term objectives that it set forth 5 years earlier? What’s the purpose of a long-range plan anyway, other than some vague hopes of where we seek to be in a few years? There’s nothing wrong with that, except it’s fictional when companies apply the metrics and objectives that they really don’t expect to discuss at the end of the journey. I’ve already addressed that topic in the explanation of destinational planning.

Organizational Implications

We all have seen a variety of corporate org charts that generally depict conventional details like seniority, pecking order, and lines of responsibility. Such mappings are not unimportant. “Org Charts” in my humble opinion are soon to be artifacts of past companies and cultures. Those leaders who are maneuvering through the fog these days are doing so with gusto, and most are thinking of their organizations as competitive teams, not silos and compartmentalized ownership and reporting lines. Great teams think about overall team objectives first, recognizing they have a variety of star players to carry the ball, and the teams make the distinction between who’s on the field (or the “floor”) and who’s on the bench, and sometimes the substituting happens at a moment’s notice depending upon the tenor and sway of the game’s score and the intuition and judgment of the coach.

Which makes you question: how do such companies keep straight their HR design and structure?

The future-leaning answer is they don’t, primarily because their teams are organized in a fluid fashion around the strategic growth issues of their company, not around units, functions, and roles. Think project and program management, for example, with constant asset deployment and redeployment. There’s a necessary fluidity required to stay ahead of market circumstances to achieve aspirational objectives. More to come on this very critical org piece in an upcoming post. Drucker was not only clairvoyant in realizing the danger of “yesterday’s logic,” but he was giving a clear warning to the hidebound CEOs who think that lifeboat or playbook management is the key to success. The very best of the pacesetters are making up some things as they go about the business of working to achieve the unimaginable. Managing a company in a dynamic foggy market is the “Wheaties” of today’s most athletic and most organizationally ambitious CEOs.

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Alan Renne leads the firm’s Industrial practice and is a key member of the firm’s Board and CEO Services team. Alan specializes in helping companies build competence and effectiveness within their leadership teams and at the board level. He has advised numerous organizations and C-Suite executives on leadership development, succession planning, and organizational design and development.

RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1994 by industry icon, Russell S. Reynolds, Jr. The firm has conducted thousands of projects for Boards and CEOs at public, private equity backed, and family-owned businesses across a range of industries including asset management, consumer goods and services, industrial, technology, and healthcare. To learn more about RSR Partners, click here.

This article was originally published by Corporate Board Member.

What first-time candidates need to know about the board recruiting process.

Over the last year, corporations have made tremendous efforts to diversify the composition and enhance the capabilities of their boards. As board recruiting strategies evolved to identify diverse and qualified talent, an increasing number of executives were exposed to the board recruiting process for the first time. In fact, 35% of new directors in the S&P 500 and 25% of new directors in the Russell 3,000 were first-time directors.

Board search firms like ours are now often coaching executives through the recruiting process since so many are unaware of the plethora of machinations and nuances involved at each step. There are certain actions that should be taken by the candidate during each step of the board recruiting process, from the moment a prospective candidate is notified of a board’s interest, through the interview process, and when a formal invitation to join a board is extended. We have witnessed many missteps due to unfamiliarity with the process and mistaken assumptions, which can impact a candidate’s credibility.

We’ve compiled our best advice into this roadmap to help first-time candidates navigate the board recruiting process to increase chances of success. If you are an aspiring public company director and have never been recruited to a board, this roadmap is for you.

#1: The Success Profile

Companies in the Fortune 1,000 generally retain a board search firm when they need to add a new director to their board. The reasons for recruiting a new director can vary. There may be an upcoming retirement, an unforeseen departure, the need to add specific experience or expertise, or a need to increase diversity.

In our experience, the board has a clear understanding of what specific skills and experience gaps it needs to address most of the time. However, sometimes the search firm will work closely with the chairperson, CEO, lead director, and chair of the nominating and governance committee to facilitate stakeholder feedback meetings to gather input on the ideal success profile. In many instances, the CHRO and even the General Counsel can play an important role, providing input, guidance, and direction. A board typically puts together a search committee of these key stakeholders.

Once the board search committee has agreed on the ideal skill matrix and professional and personal characteristics of potential candidates, the search firm develops an initial list of potential candidate ideas. The list can be quite extensive. Over the course of several weeks, and sometimes months, the board and the search firm will narrow down and prioritize the top candidates. This initial number can range anywhere from two to fifteen individuals for each open board seat. The search firm will then be authorized to approach those select prioritized candidates regarding the specific board opportunity.

#2: Evaluating Potential Opportunities

When a search firm first reaches out to you about a specific board opportunity, you should be aware that the firm and the board have already conducted an extensive amount of research, due diligence, and third party referencing on your potential candidacy. Unlike the executive search process, the initial outreach is not a learning session about your career highlights and aspirations. Instead, the conversation is intended to provide you with as much context on the opportunity, the company, and the key constituents involved, to determine if you are interested in considering this specific opportunity.

If you are interested in the opportunity, you must first clarify whether you are allowed to sit on an outside company board. It’s critical that you know this information upfront. Unlike executive search, it is not necessary to keep a board opportunity confidential from your company. Oftentimes a company will have a policy on whether employees can serve on boards. A policy will also limit the type of company boards executives can sit on, especially if the board or if members of the board present a conflict of interest (for example, you will be barred from sitting on the board of a competitor and significant supplier). Most policies dictate that sitting executives are only allowed to sit on one board—so remember that if you agree to serve on a board, you may not be able to entertain another board opportunity until you rotate off or retire from your executive role. Many companies also have a process to have a board opportunity approved. We have also encountered situations when a company’s strategy has impeded a candidate’s ability to serve on a board. For example, if the company will be going through a restructuring or a merger, an executive who will play a significant role in the execution of the strategy may not be given approval to sit on an outside board for capacity and optical reasons.

Second, while this may seem premature, you will need to confirm whether the board meeting dates conflict with your company’s board meeting dates or other significant company meetings. While schedule conflicts are easy to determine, board candidates sometimes leave this step towards the end of the process which can lead to unexpected and unsuccessful outcomes. When evaluating any board opportunity, it is critical for you to do this step before moving forward.

If you pass these first two hurdles, you should then ask yourself the following questions:

• Is this the type of board role I would accept if offered?
• What are my motivations for considering this board? (People, products, learning, impact, stature, financial, etc.)
• Can I impact the success of the board and this company?
• Would my CEO/board/company want me to serve on this type of board?
• Do I have the bandwidth (200 hours/year) to be an effective director as well as successfully perform my current executive responsibilities?

If the answer to any of these questions is not in alignment with you pursuing this opportunity, you should let the search firm know within seven days. It is critical to be honest about these questions as early in the process as possible. We have seen candidates who are aware that the answer to one of these questions might pose a problem but continue to move forward with the process anyway. They mistakenly believe that exploring the opportunity will allow them to learn without commitment, enhance their candidacy for other opportunities, and extend their network and relationships. However, boards do not like being turned down during the final stages of the search process for any of the above reasons. Your candidacy likely has an impact on the board’s broader recruiting strategy, or they may have slowed down attempts to attract other candidates to spend time with you. Being disrespectful to the board’s time can have unintended consequences and can affect your personal brand in the marketplace.

If you decide to pursue the board opportunity and you are confident in your answers to the above questions, you should take the necessary time to review your company’s policy on serving on an outside board and perform as much due diligence as possible about the company, the CEO, and the board. This includes:

• Position specification (from the search firm)
• Annual Report, Proxy, and 10-K
• Analyst reports on the company and industry
• Investor presentations
• Bios of board members and the management team
• Perspective from close and trusted relationships that know about the company or industry.

#3: Interviewing with the Board

Once you have agreed to move towards formal interviewing, and generally following an extensive discussion or interview with the search firm, you will be invited to an initial meeting with the designated board search committee lead. At this time, you should have received preliminary approval from your company to consider and potentially join this specific board. After your initial meeting, there will be immediate feedback from the board search committee to the search firm about your potential candidacy and fit.

We are often asked how boards evaluate prospective candidates. While each situation is unique, we have found there are three common themes that are addressed during the first few meetings:

Will you be able to successfully transition from being an executive to a board member? As there are many different types of leadership styles that can be effective as an executive, some can be obstacles when becoming an effective director. No matter your leadership and communication styles, you need to understand and demonstrate during your interview the skills and perspective needed to be an effective director versus an executive. As a board member, you are expected to provide guidance and advice; not to require the details that an operator of the company would need.

Will you be an effective listener? As a director, you will need to listen to the perspectives of your fellow board members and the management team, but also from all your stakeholders. The most effective directors are those who can distill complicated issues into profound brevity and can help unify others to make decisions together. You will need to be willing to learn from the diverse perspectives of others and allow them to change and reshape your thinking. We have helped boards recruit talent for more than 30 years, and we can assure you that the most ineffective directors are those whose default communication approach is to talk instead of listen.

Will you be able to ask good questions? As a director, the ability to ask questions that provide enhanced insights to make better group decisions is the key to having an impact in the boardroom. Questioning is a uniquely powerful tool for unlocking value in corporations as its fosters more-effective interactions, strengthens trust and chemistry, and better aligns the board and management team on the most critical issues. How you approach your conversations with the Board Search Committee will provide them insight on how you would interact as a director. For each open board seat, it is common practice that only 2–3 candidates will be invited to formally interview. Often, the board has a variety of skill and experience needs to be filled, and each potential candidate will bring something different and unique to the table. Future committee membership and board leadership, as well as factors such as ESG needs (Environmental/Social/Governance) and diversity can play a role in the assessment of the candidate’s fit. If you have been asked to interview, you should consider it a huge compliment and a testament to what board members know or have heard about you.

As you progress through the process, you will also meet the chair, CEO, lead director (where applicable), and most likely the rest of the nominating and governance committee. In many cases, it will be appropriate for you to also meet with a specific member of the management team, depending upon the committees on which you are potentially slotted to serve. You should prepare to meet 5–7 different individuals during the process and expect the interview stage to last 2–3 months.

Once the board has decided they would like to potentially invite you to join the board, several key next steps will take place:

• Formal Approval. You will need to let all relevant stakeholders at your current company know about your candidacy, to gain the final approval to accept an invitation to join the board, if offered. This ideally is done before the following steps.
• Candidate Background Check. You will be given an authorization form to sign and return.
• D&O Questionnaire. You will complete the questionnaire provided by the company to fulfill SEC requirements.
• Formal References. You will need to provide a list of references that provide a 360-degree perspective. The search firm will be responsible for leading this process.

#4: Receiving and Accepting an Invitation

Assuming a positive outcome to the steps above, the nominating and governance committee will recommend that you are formally offered a seat on their board. Once the full board votes on that motion, the chair or the chair of the nominating and governance committee will call you to formally confirm your selection and invite you to join the board as well as attend the next board meeting. It is routine for a candidate to immediately accept the offer unless the candidate was obligated by his or her company to reconfirm their approval before formally accepting the offer.

You should then inquire about the timing of the press release and, if not, the publication date for the annual proxy statement. It is critically important that your current company, CEO, and board are comfortable with the timing. Once the announcement of your board appointment becomes public, you should take the time to personally call everyone on the board whom you met and thank them for the help and guidance they provided to you throughout the process.

Corporate boardrooms continue to be reshaped for the new future ahead of them. It is more critical than ever to get the right board members at the right time for a company to optimize its impact on the world around them. Hopefully pulling back the curtains on the mystique of the board search process will help improve the outcomes and experience for boardrooms and candidates alike.

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About Our Board & CEO Services Practice

Our Board and CEO Services team partners with CEOs and boards to understand issues, assess opportunities, and strategically advise to ensure sustainable growth strategies are optimized. We are committed to executing an action plan that addresses sensitive and complex leadership needs and ensures clients are well positioned for the future. RSR offers trusted advisement rooted in years of experience and market knowledge. We excel at optimizing board and CEO effectiveness through transformative thinking about structure and operations. This helps us to engage closely with clients to drive greater accountability and enhanced performance. Our practice group leverages RSR Partners’ renowned experience in corporate governance with the firm’s industry and human capital consulting expertise to create an integrated and seamless approach. The range of services we provide to boards and CEOs include:

Board Services

• CEO Succession Planning
• CEO Search and Selection
• Managing CEO Transitions
• Director Recruiting
• Director Succession Planning
• Board Evaluations and Effectiveness

CEO Services

• C-Suite Search and Talent Pipeline Development
• Building High Performing Teams
• Leadership Assessment and Succession Planning
• Discreet and Thorough Candidate Due Diligence
• CEO Advisory Support
• Helping CEOs Select an Outside Board

RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1994 by industry icon, Russell S. Reynolds, Jr. The firm has conducted thousands of projects for Boards and CEOs at public, private equity backed, and family-owned businesses across a range of industries including asset management, consumer goods and services, industrial, technology, and healthcare. To learn more about RSR Partners, click here.

This article was originally published by Corporate Board Member.

Boards that are built to last evolve with the changing needs of their companies and leadership teams. Consider these four guideposts.

The third quarter of 2021 was the most active Q3 for global IPOs in 20 years, according to EY. The IPO rebound, popularity of SPACs and continued surge of private equity and venture capital activity has put tremendous pressure on boards to be ready for being a public company. As a result, many lessons and themes have emerged that serve as beacons and sirens for all boards to consider.

Over the course of our 30 years advising boards and CEOs, what clearly stands out is that the boards that are built to last evolve with the changing needs of their companies and leadership teams. In addition, considering the challenges and opportunities presented by ESG and DE&I initiatives, the stakes for boards to appropriately address stakeholders and have a meaningful impact are at a generational precipice. Accordingly, we are sharing our insider’s perspective on the four most important guideposts your company or organization should think about when building or enhancing your board.

#1: Board Architecture

In the real estate industry, there is a saying that, “the taller the building is, the stronger the foundation needs to be.” The same applies to creating boards of what we call “forever businesses.” As with the previous inflection points in corporate governance best practices, the past two years have reshaped the thinking around how to build a board that is strong enough to confront inevitable headwinds. Every board must start or revisit what their ideal board framework is to successfully execute the company’s strategy in today’s environment and in the next 10+ years.

1. Vision, Purpose, Strategy: All boards must approach their governance framework by understanding the journey they will need to take to reach their aspirational future state.

2. Stakeholder Interests Analysis (SIA): A new but now critical component for all owners and boards is to understand the ecosystem of stakeholders who will have influence or direct impact on the organization.

3. Capabilities: Boards should identify the skills and experiences directors needs to possess to help govern the company and advise management through any challenge.

4. Committee Structure: The number, types, and charters needed for each committee to effectively govern should be carefully crafted. Boards are moving past the standard three committees to include separate risk and finance committees as well as climate, digital and cyber which will require new competencies on the board.

5. Board Size: The number of directors, including independent versus management, should be determined in advance of building a board.

6. Governance Guidelines and By-laws: These should be developed early and include annual director versus classified elections and governance best practices.

#2: Board Leadership

Once the board architecture is finalized, the most critical and important decision is determining the leadership structure of the board, the characteristics of each key position, and who will serve in those roles. Especially for companies preparing for an IPO, the chair of the board, lead director and committee chairs will heavily influence the capabilities, effectiveness and culture of the new board.

1. Board Chair: Every organization has a unique journey ahead of them. Whether it is appropriate to have an independent board chair versus a combined chair and CEO is situationally dependent. Often, the capabilities and experience of the CEO must be overlayed against the needs of shareholders and other stakeholder groups. The board chair sets the tone and tenor for almost all significant forthcoming decisions.

2. Lead Director: If the board determines the best board leadership structure for several years is a combined chair and CEO role, it is imperative to clearly define and empower the duties of the lead director to help carry the workload of the chair and CEO as well as serve as an effective counterbalance to the internal power dynamic.

3. Committee Chairs: As most of the heavy lifting is handled by committees, it is critical for those chairs to have previous committee experience, the necessary capacity and the relevant capabilities to serve. ESG, DE&I and other significant compliance and oversight issues are landing on the doorsteps of the committee chairs, and it is their responsibility to help move the board and their fellow directors forward on addressing these issues.

#3: Board Leadership Succession

One of the most important but often overlooked aspects of building a board is Board Succession Planning. Many boards will prioritize and focus their time and attention on adding directors who can address specific capability gaps when the opportunity arises. This is because succession tends to become apparent when a retirement age or term limit is reached. During the last two years, we have seen a material weakness in the preparedness of boards to have actionable solutions available to address unexpected retirements, especially with committee leadership positions. Some boards approach succession planning like CEO succession planning. However, unlike CEO succession planning when a small number of executives are being groomed and developed for the position, more optionality is required for board succession planning given the demonstrably larger number of directors. All boards need to have a short-term and medium-term succession plan and roadmap for all the key leadership positions that is reviewed and confirmed annually.

1. Develop Director Succession Roadmap: An anticipated and emergency plan should be completed annually for each board leadership position. Ideally, the plan should consider how to fill the position if the need arises immediately, in one year, three years, five years, etc. Boards must pay close attention to the skills, experiences, and behaviors they desire in their leaders.

2. Refreshment: Build your roadmap with the intention that committee chairs will rotate every five years.

3. Diverse Board Leadership Equally Important: Similar to the board as a whole, leadership positions on the board must exemplify diversity as well. This will signal the board’s commitment to diversity as well as help enhance board culture.

4. Board Evaluations: The assessments of the individuals’ performance in these leadership positions must be part of the annual board evaluations. Expectations for the positions are rapidly evolving.

#4: Board Recruiting

The board recruiting landscape is currently incredibly active and competitive. There continues to be an urgency to recruit new directors who can add diversity of thought, experience, expertise, age, ethnicity, gender and/or geography. Whether your board is preparing to go public or is a public company board that just needs to address or enhance a specific capability gap, follow these best practices that we have gathered from advising a wide spectrum of clients on board recruiting.

1. Failing to plan is planning to fail. While focusing on addressing your most pressing gaps on the board, only add a director who has succession potential for one of the board leadership positions. If the director does not have that potential, it will present significant issues down the road.

2. Start yesterday. Many boards wait to recruit until it is definitively known that there will be an “open seat.” What we have learned from working with some of the most effective and well-run boards is they develop a candidate pipeline six months before the need is anticipated. In many cases, boards start sowing seeds with high priority candidates 12 – 24 months in advance.

3. Add what you need—not what you lost. When directors retire or leave a board where they played a significant role, the board needs to avoid the temptation to try to replace the voice and perspective that was lost.

4. Prioritize talent over title. Boards who are willing to focus less on a candidate’s title and more on specific expertise have a better chance of identifying candidates who also have the necessary knowledge to have a real impact and improve the effectiveness of the board. Serving on a board requires someone not only with a specific capability but also broad general management experience. Candidates with previous board experience typically will have an impact immediately and beyond their specific area of expertise. Additionally, it is important to recognize that titling structures differ from company to company and industry to industry. A CEO may bring cachet to the board, but many non-CEOs bring further valuable contributions.

The value of a properly functioning board cannot be underestimated. Your board plays a crucial role in the success of your business. With growing shareholder activism and stakeholder pressures, better corporate governance can only be achieved through a successful working relationship between your board and management as well as positive social and cultural board dynamics and interaction. Taking the necessary time and effort to build or enhance your board is time wisely spent.

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About Our Board & CEO Services Practice

Our Board and CEO Services team partners with CEOs and boards to understand issues, assess opportunities, and strategically advise to ensure sustainable growth strategies are optimized. We are committed to executing an action plan that addresses sensitive and complex leadership needs and ensures clients are well positioned for the future. RSR offers trusted advisement rooted in years of experience and market knowledge. We excel at optimizing board and CEO effectiveness through transformative thinking about structure and operations. This helps us to engage closely with clients to drive greater accountability and enhanced performance. Our practice group leverages RSR Partners’ renowned experience in corporate governance with the firm’s industry and human capital consulting expertise to create an integrated and seamless approach. The range of services we provide to boards and CEOs include:

Board Services

• CEO Succession Planning
• CEO Search and Selection
• Managing CEO Transitions
• Director Recruiting
• Director Succession Planning
• Board Evaluations and Effectiveness

CEO Services

• C-Suite Search and Talent Pipeline Development
• Building High Performing Teams
• Leadership Assessment and Succession Planning
• Discreet and Thorough Candidate Due Diligence
• CEO Advisory Support
• Helping CEOs Select an Outside Board

Much has been written and debated about CEO succession. The pandemic has taught most companies that succession is a heavy-lifting exercise when it comes to business continuity. Boards are increasingly concluding that the full weight of succession planning rests squarely on their shoulders, which leads to the critical question that every board must answer: promote from within or search externally? Executive search and consulting firms, including ours, are often engaged to help boards resolve this complex situation, but the inclination to conduct a search may sometimes be premature. Having completed over 1000+ assignments for Boards and CEOs over the past two decades, we wanted to share a few observations when planning for the selection of your next CEO.

Internal or External?

There is no solution that applies to all situations. Given the extraordinary dynamics of today’s marketplace, one might argue that finding a CEO with the needed agility calls for assembling the broadest internal and external group of candidates possible. However, our conversations with many seasoned Nominating & Governance and board Chairs (“Chairs”), who are at the center of CEO succession, have shown that this is not necessarily the case.

The consensus seems to be that knowledge of the business, people, and its culture trump almost every other consideration, and thus an internal candidate is strongly preferred, especially when the business is on an upward trajectory. Many feel that deep knowledge and intimacy of the business can provide quicker impact with reduced risk of failure and that consideration of outside candidates for calibration should only be done as a very last resort, and when the CEO succession planning process has failed.

Many reasons exist to recruit or vet outsiders, such as the need for strategic or cultural changes, a requirement for specific expertise in dealing with unanticipated market challenges, activists, or a merger. These occurrences notwithstanding, most boards realize an outsider will take extensive time to assimilate and consolidate as needed. Even proven successful CEOs who have already demonstrated great learning skills still take time to settle in before they create an appreciably positive impact.

Therefore, while it may seem counterintuitive to our own business model, we encourage our clients to go through the process of deep self-reflection and succession planning regularly. This preparation may avoid the need to launch a rushed CEO search later. The process itself is very revealing for most organizations, and boards are recognizing that preparation is the key to optionality. 

Engagement

CEO succession is a passionate and delicate topic. It involves changes and sometimes challenges that affect leaders who are considered to be the very best in commanding complex organizations. But for the boards who assume this monumental responsibility, it need not be a cause for angst. With a commitment to diligent planning, extensive engagement with candidates, a high level of candor in discussion, and an enlightened view of the opportunities and resources that present themselves to the company, succession planning can be a smooth journey, and even stimulating. When boards come to the point of treating succession as a non-episodic issue that deserves constant reflection and attention, the organization will find a more secure position for the exciting future ahead.

In the past, boards have overly relied on the perspective of management to develop, manage, and provide solutions for succession planning. With CEO tenure trending towards 5-year terms, boards need to own the responsibility and develop a perspective that is integrated but independent from management. One of the best ways to subdue unease around the topic is to make CEO succession planning a board priority and a regular topic of discussion. Most public company boards keep CEO succession as a standing agenda item but at private equity backed or family-owned companies, there is certainly room for improvement. By continual engagement on the topic on a formal level, and even under less formal conditions, boards can avoid being overwhelmed by the planning and enactment of succession plans. It is critical that Chairs start the conversation and be frank and open. Once they start the conversation, others on the board will engage.

It also helps to acknowledge and appreciate the sensitivities around CEO succession planning. Few changes in a company can affect such a breadth of internal and external constituents as a change in CEO. It is a critical event, shrouded often in unspeakable sensitivity. Framing the discussion as a neutral one can help directors open up. No CEO likes thinking about being replaced, but by setting expectations early that tenure is fixed, the topic is less likely to be taken personally.

A piece of the ongoing puzzle and dialog around CEO succession is building the competency agenda for the CEO, known as the “success profile.” For several years, we at RSR Partners have advanced the concept of “stretch versus fit.” For example, some boards aspire for greater growth trends and feel that goal can be achieved with some modest tweaking to strategy and culture which the incumbent CEO is unwilling or unable to embrace. Generally, while boards may have no regrets about the past, many have more expansive and aspirational visions for the future. As it relates to the “spec” capabilities required of the next CEO, they question whether to stay squarely on course or to drive change. Invariably, boards harbor some hopes and dreams that a CEO change will provide opportunity for added business propulsion, so they look for both steadiness and value-adding creativity in the next CEO.

My longtime friend and colleague, Alan Renne, who is a senior member of our Board & CEO Services practice and Head of our Industrial Technology team, has commented that “what the pandemic has taught most companies is that both culture and strategy are symbiotic in a sense, although neither can stand still under the pressure of unpredictability, which we’ve seen through the Covid period. Hence, we all hear the constant chatter about how companies require leaders with agility, nimbleness, resilience, etc. The point related to CEO succession is that the ‘stretch’ requirement can feel like a moving target since the marketplace is not static. So, boards must continually engage in the discussion about the CEO spec in the context of possible changes in strategy and culture, and therefore make in-flight course corrections on an ongoing basis.” Alan’s observations are spot on, and it is often during these continual discussions, that inspiring and innovative solutions to the CEO succession issue present themselves. 

Bench Strength is Key

Finding an organization’s next CEO should be inextricably linked to understanding the capabilities and skills needed for success and filling those gaps at the C-Suite level. Succession planning goes hand in hand with talent reviews and leadership assessment, which help reveal opportunities to develop rising stars for succession consideration. The Nominating & Governance Chair’s mandate to ensure effective governance means that Chairs need to have a thorough understanding of the talent within the organization. They are expected to know when it makes sense to go to the market for the skills and experience that are needed, especially within the bench levels, so chairs are spending more and more time identifying and getting to know future leaders below the C-Suite.

Stars often rise from the “minor leagues” and good oversight on their development is key, especially as the CEO specification continues to evolve. Issues of executive development and retention go hand in hand, and boards should have their sleeves rolled up in these discussions.

“One of the most delicate topics today in leader development relates to promotion and rotation,” Alan states. “In many cases, companies are eager to keep great talent rising, challenged, and filling development gaps. Consequently, top players are often continuously pushed ahead to the next bigger job, but sometimes too quickly. High potential leaders need time to formulate strategies, build plans, execute, refine, and manage for a period that demonstrates sustainable success. Moving leaders too quickly can short-circuit that process and even disrupt business effectiveness. Boards should engage early in the leader development process because they have the seasoning of experience to spot these things and can offer valuable advice that will benefit their CEO succession plans.”

Retention and motivation of executives should also be high on the radar screen, especially considering the new phenomenon of “opting out,” discussed further below. Some Chairs have admitted that CEO succession can also be a challenge since it can be hard to retain A+ executives in the C-Suite if the company is unable to offer the compensation and flexibility of larger operating portfolios. If retaining and motivating talent within management is a priority, it should tie very closely into succession planning.

The “Siren Song” of Private Equity

Private equity firms are more actively and aggressively recruiting high potential talent from public companies. “There is a war for talent,” states Thames Fulton, a senior member of our Board & CEO services practice. “We often counsel boards so they understand and can deal with these incursions to their executive teams. We have been asked to educate the high-potential corporate executive who unknowingly thinks the grass is greener in private equity, thereby helping a board to buy some time in their succession planning.”

Conversely, there have been some great executives coming out of small and mid-cap companies because their leadership model is lean and therefore very hands-on and experienced. Large cap companies are starting to recruit those executives. “We spend significant time with our small and mid-cap clients, strategizing on how they can build their leadership bench in a way that earns loyalty and commitment from their teams,” adds Thames. 

Competing for leadership talent in this environment can be especially challenging for organizations with limited bench spots. Boards must get creative about generating roles to provide opportunities for succession. There are ways to stimulate succession preparation with retention and development strategies. Dovetailing the creation of those roles with efforts to fill gaps in the competence between the bench and CEO can significantly impact an organization.  

The Nexus of Board & Management and the “Opting Out” Phenomenon

The CEO role has always carried with it great cachet – authority, visibility, power, influence, prestige, impact, and wealth potential. In recent years, as terms like “servant leadership” and “shareholder capitalism” have occupied rightful places in the vernacular, the CEO role has become ever more complicated. More importantly, the pandemic circumstances over the past year have placed a glaring light on the CEO role. It is an extraordinarily intense and often grueling job, fraught with gut-wrenching decisions, overwhelming workload, tricky management and leadership challenges, and high pressure deadlines. Consequently, boards need to have intimate insight into the thinking of their future succession candidates. This can be incredibly important when gauging the bench’s proclivity to carry the CEO title.

In our discussions with the bench strength of today’s public companies, especially those seen as the best and brightest, we see an emerging phenomenon. Many are now seeing the CEO role as the great heavy-lifting job that it is, and they conclude that the associated sacrifices are too great for the potential rewards. In their minds, they are choosing to opt out in lieu of other career trajectories, including private equity backed opportunities. This is just one example of how boards need to know about personal decisions, especially as they consider high potential candidates for succession, which begs for deeper interactions between boards and the promising talent in the management ranks.

“When addressing clients’ CEO succession needs, we often overlay our board and executive search processes,” comments Gretchen Crist, Head of our firm’s Consumer Goods & Services practice. “This is an advantage during CEO succession projects because we can operate at the nexus of boards and management. We appreciate the board perspective and can integrate intelligence on proficiencies and personal motivations from the front lines of the business.”

Moreover, the succession planning process should be encountered as a moving target that never stands still – because markets, companies, and people are ever-changing. As such, the regularity of discussion between board directors and management should likewise increase. The Chair’s role is to help facilitate those conversations. Some Nom & Gov Chairs have occasional one-on-one conversations or visits with key members of management, while others have 8 – 10 executives attend each board meeting, and some attend dinners, on a rotation. Developing trusting relationships with members of management is good for both knowledge and retention. 

Strike a Balance

“Succession planning has evolved into a rigorous process,” concludes Alan. “Our clients look down many levels into the management ranks to identify star talent. We are assessing their leadership abilities, putting their development plan in place, conducting a risk analysis around who might be poached, and benchmarking against external candidates and competitors. The goal is for the board to have transparency around who will be the next CEO if everything goes according to plan, and, as is often the case, if conditions change, to be sure to have a current CEO spec and a competency structure ready to go, should a search be unavoidable.”

“There also needs to be some flexibility and nimbleness,” adds Gretchen. “Clients do not need their succession plan to be perfectly buttoned up. It is fluid and dynamic. It’s important to get the dialog going and be open minded as the conversation evolves.”

There is so much to discuss during the CEO succession planning process, that it is natural and cyclical for the board to continually address the topic. Timing, the methods of evaluation of candidates, the development plans to help high potential executives build competencies, the regular review of the CEO spec, as well as a periodic revisiting of those stretch topics – like strategy and culture – are crucial to be sure that strong candidates of today have the skills to meet the expectations of tomorrow.

The clock is ticking… and boards need to be prepared when the time comes to make the best and most informed decision possible when selecting their next CEO. There is no more important responsibility for directors in this new world of stakeholder capitalism than CEO succession. 

We are here to help you get it right.

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About Our Board & CEO Services Practice

Our Board and CEO Services team partners with CEOs and boards to understand issues, assess opportunities, and strategically advise to ensure sustainable growth strategies are optimized. We are committed to executing an action plan that addresses sensitive and complex leadership needs and ensures clients are well positioned for the future. RSR offers trusted advisement rooted in years of experience and market knowledge. We excel at optimizing board and CEO effectiveness through transformative thinking about structure and operations. This helps us to engage closely with clients to drive greater accountability and enhanced performance. Our practice group leverages RSR Partners’ renowned experience in corporate governance with the firm’s industry and human capital consulting expertise to create an integrated and seamless approach. The range of services we provide to boards and CEOs include:

Board Services

• CEO Succession Planning
• CEO Search and Selection
• Managing CEO Transitions
• Director Recruiting
• Director Succession Planning
• Board Evaluations and Effectiveness

CEO Services

• C-Suite Search and Talent Pipeline Development
• Building High Performing Teams
• Leadership Assessment and Succession Planning
• Discreet and Thorough Candidate Due Diligence
• CEO Advisory Support
• Helping CEOs Select an Outside Board

RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1994 by industry icon, Russell S. Reynolds, Jr. The firm has conducted thousands of projects for Boards and CEOs at public, private equity backed, and family-owned businesses across a range of industries including asset management, consumer goods and services, industrial, technology, and healthcare. To learn more about RSR Partners, click here.

And why the CEO can no longer go it alone.

The COVID crisis interrupted what was likely to be an unprecedented movement at the CEO level in 2020. January 2020 set a record in the US for the most CEO departures in one month (219 according to the Business Insider), setting pace to eclipse 2019 when a staggering 1,640 CEOs left their positions worldwide (according to Challenger, Gray, & Christmas). However, when the extent of the COVID crisis unfolded, many of our clients paused sweeping changes at the CEO level in order to exhibit stability and trust to their shareholders, customers, and to their employees.

It goes without saying that the remainder of 2020 put CEOs – new or experienced – under great pressure. CEOs were not only dealing with the COVID pandemic, but with social, economic, and political uncertainty. This type of unsettled environment tends to either accelerate transformation or exacerbate imperfections. Throughout 2020, while many of our clients evolved, innovated, and thrived, we also witnessed many recognize that their CEOs lacked some of the capabilities needed to survive, and, even more concerning, flaws in the wider C-suite leadership team supporting the CEO. In fairness, 2020 raised the bar in terms of what CEOs and their C-Suite teams need to be ready and capable of handling. Not every leader possessed the toolkit.

While much remains uncertain, organizations and boards are now acting on the lessons they learned from last year and are primed to enact transformation at the C-suite level. In particular, CEO succession planning – whether near or long-term – has rebounded. We are seeing an appetite to recruit CEOs who can lead transformation, and, for our clients who experienced growth in 2020, a strong desire to raise a CEO successor within an organization to ensure the successor will hold true to the values and strategic course that made the organization successful. This why, now, organizations and their boards are redefining the capabilities that are expected from a CEO and the C-Suite team, and these leaders certainly have their work cut out for them. 

Expectations of Today’s CEO

What is expected of a CEO in today’s world? Broadly, CEOs are required to (1) set and articulate a vision; (2) engage with their employees and workforce; (3) collaborate intimately with the board on strategy and other stakeholder priorities; and (4) develop a consumer-driven marketing and sales plan that will achieve growth while maintaining an operational structure that yields profitability. These are very high level and palpable statements, but our clients have very specific ideas about which duties the CEO must actually perform and be personably accountable for.

Vision

There is a now clear requirement for CEOs to be able to articulate the organization’s purpose and mission with heightened clarity and to engender confidence and trust when conveying this vision, reassuring employees, customers, and shareholders. A vision is what helps keep organizations focused – during stressful and complex times as well as during periods of growth and success. Setting forth a vision sounds simple, but it is rarely as straightforward as it seems. No one has a crystal ball. However, in the wake of 2020, there is little patience for a CEO who struggles to set a path and is only focused on the short-term. In addition, an inability to communicate a vision in a way that galvanizes and motivates is an ineffectualness that organizations will be unable to overlook going forward. 

Employee Engagement

CEOs and their C-Suite are now on the front lines of building employee loyalty and ensuring employee satisfaction teams. They can no longer be disengaged and allow managers to handle what is happening personally for employees at other levels of their organization. CEOs are expected to take deliberate measures to understand and address the emotional and motivational impact of the COVID conditions on the workforce at large and meet employees’ concerns and emotions with empathy and understanding. CEOs and their C-Suite team need to have some awareness of the familial challenges faced by their employees. There is now a greater emphasis on workforce oversight generally, including “work from home,” remote, or hybrid capabilities, and heightened environment, health, and safety standards from an operational perspective. CEOs need to be thinking ahead about how to cross-train for contingencies and emergencies and reassess labor and workforce policies and programs to be efficient, effective, and considerate of employees’ time and interests. Furthermore, employees and stakeholders (and consumers – see below) are looking to CEOs to at least demonstrate awareness, if not champion, a message of social change on issues of race, gender, justice, and equity. Studies have shown that employee satisfaction increases productivity and innovation, and helps organizations retain top talent – which, as discussed further below, is even more of a priority for the CEO than in the past.

Board Collaboration

Organizations increasingly expect their CEO to be intimately and regularly engaged with the bord of directors. Specifically, on CEO search assignments, clients ask for executives who want and have significant board exposure. CEOs now participate with the board on discussions and directions related to the more far-reaching issues of stakeholder capitalism and the related environment, social, and corporate governance issues – including rethinking and redefining the organization’s diversity, equity, and inclusion strategy. Consistent, regular communication with the board and external constituents, such as shareholders, and with financial services providers, is expected to be managed personally by the CEO. CEO candidates also need to be prepared to demonstrate capital allocation experience that increased returns, enhanced performance, and perpetuated the culture and values of their organizations. They also need a solid knowledge of board governance and board leadership. The interaction and relationship between boards and their CEOs is now deepened and significantly heightened.

Consumer-Focused Growth & Optimization

Growth and optimization could probably be two separate capabilities, but it is worth discussing them together since they are so intertwined and important to profitability. The COVID-19 pandemic and the upheaval of 2020 taught many organizations that they need to be extremely strategic about their spend and investments and ready for disruption at any time. CEOs are sharpening sales and operations planning capabilities and improving forecasting and planning processes and tools, as well as enhancing vendor relationships and related collaboration. At the same time, boards are now requesting a high-level review from the CEO regarding opportunities for the sustainable organic and inorganic growth of the business. For many organizations, this means CEOs are managing the unprecedented acceleration of digital transformation through the supply chain and into the customer markets and channels. This is complicated by the recent trend of consumer concern with the ecological impact of their purchases and with the corporate philosophy and social positions of those businesses and CEOs. This results in an intense rebuild and refinement of the operational excellence toolbox to advance the lean journey and requires a sapient brand and marketing strategy. Plus, all of these decisions should now be made under the assumption of ambiguous market conditions, an accelerated timeframe, and increased cybersecurity risk.

Why the CEO Can’t Go It Alone

If this seems like a tremendous amount of expectation and pressure for a CEO – it is. And everyone seems to recognize this. However, admitting that the CEO role has evolved in an extraordinary way in a short period of time does not necessarily change our clients’ point of view of what they need; especially now that we have all experienced disruption first-hand and have seen some leaders rise to the occasion in equally extraordinary ways. We instead often counsel our clients to take a very close look at the C-Suite team that is already in place, assess strengths and weaknesses, and addresses gaps – because ultimately the CEO will need to be able to profoundly trust their team’s capabilities, judgment, ability to execute, and ability to deliver results.

To that end, we often end up searching for CEO candidates who have the ability to harness the power of their C-Suite teams, which is a unique skill in and of itself. There seem to be two factors that contribute to a CEO who constructs a powerhouse executive leadership team: (1) an ability to regularly reassess the leadership competency model for the organization, and (2) a believer in systematic succession planning. 

Reassessment of Leadership Competencies

Assuming that at a minimum the C-Suite supporting the CEO has the experience, skills, and characteristics necessary for each specific role, the CEO must also mobilize these leaders to tap their creative spirit and work together on innovation strategies and growth planning. This requires each and every executive to demonstrate grit, resilience, and agility in their respective roles. The CEO will need develop a culture that embraces technology, digitization, and calculated risk in every leadership vertical. The C-Suite team will likely look to the CEO to cultivate this environment and enable change management. Therefore, the CEOs we have seen spend considerable time thinking about the leadership competencies of the individuals that makeup their C-Suite and encouraging those competencies experiences more success because they have faith in their support system. Importantly, it is through this process CEOs can develop meaningful relationships with their teams since there needs to be frequent listening and feedback sessions. This is a great way to build loyalty and retain top talent. And this is not just a one-time exercise – CEOs will need to continually reassess and plan for how they address the leader competency-building agenda for the future as the capabilities and traits needed from their leadership team adjust to the latest market, social, and political trends.

Systematic Succession Planning

While the above exercise will contribute to the CEO’s talent retention strategy, organizations still need to develop extensive succession plans, particularly with the C-Suite bench. Boards have traditionally taken a significant interest in CEO succession planning, especially in light of the aforementioned statistics, but in today’s environment, CEOs must actively involve themselves in succession planning for every C-Suite role – whether it is a long-term plan or for emergent circumstances. Just leaving one of these positions vacant for an extended period of time can irrevocably harm the success of the CEO by drawing attention away from any of the CEO’s other responsibilities. It is also important for CEOs to have a thorough understanding the talent that is being developed and is ready to step into various roles, as well as the impact the inserted talent will have on the chemistry and skillsets already found in the existing C-Suite. 

In short, building a high performing executive leadership team is the number one factor to the success of the CEO. Deprived of a C-Suite team with the relevant leadership competencies, CEOs will shoulder excessive expectations and be overburdened by the tactical elements of their job description. For organizations to sustain and thrive through times of disruption and for generations to come, succession planning must be a priority for the board and CEO. As CEO recruiting and succession planning heats up in 2021, we’ll be putting forth the CEO candidates that possess the integrity to trust and build their leadership teams.

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About Our Board & CEO Services Practice

Our Board and CEO Services team partners with CEOs and boards to understand issues, assess opportunities, and strategically advise to ensure sustainable growth strategies are optimized. We are committed to executing an action plan that addresses sensitive and complex leadership needs and ensures clients are well positioned for the future. RSR offers trusted advisement rooted in years of experience and market knowledge. We excel at optimizing board and CEO effectiveness through transformative thinking about structure and operations. This helps us to engage closely with clients to drive greater accountability and enhanced performance. Our practice group leverages RSR Partners’ renowned experience in corporate governance with the firm’s industry and human capital consulting expertise to create an integrated and seamless approach. The range of services we provide to boards and CEOs include:

Board Services

• CEO Succession Planning
• CEO Search and Selection
• Managing CEO Transitions
• Director Recruiting
• Director Succession Planning
• Board Evaluations and Effectiveness

CEO Services

• C-Suite Search and Talent Pipeline Development
• Building High Performing Teams
• Leadership Assessment and Succession Planning
• Discreet and Thorough Candidate Due Diligence
• CEO Advisory Support
• Helping CEOs Select an Outside Board

RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1994 by industry icon, Russell S. Reynolds, Jr. The firm has conducted thousands of projects for Boards and CEOs at public, private equity backed, and family-owned businesses across a range of industries including asset management, consumer goods and services, industrial, technology, and healthcare. To learn more about RSR Partners, click here.

The annual letter from our CEO, Brett Stephens, to our clients and friends.

Dear Clients and Friends,

2020 has been a year of unprecedented change and reinvention. We have been honored to work alongside so many of you, helping you navigate these tumultuous times as successfully as possible. Effective leadership in the C-Suite and at the board level has never been more important, and the discreet advisory work we perform for Boards and CEOs has surged in response. We have spent many hours engaging with you on topics such as achieving agility; the emotional intelligence and moral quotient of leaders; the importance of diversity, inclusion, and equality initiatives; deploying technology, AI, and virtual work environments; managing risk; and addressing environmental, social, and governance concerns. Some of these topics were discussed at length during the roundtables we hosted earlier this year, and we expect to tackle these topics again at our 20th Annual Directors Dinner in January 2021. In the meantime, we wanted to share with you some additional trends that have emerged during the last few months that we expect will continue to evolve in 2021:

1. CEO Succession Disruption: CEO turnover reached a record high in 2019 but slowed temporarily during the crisis. The stress and trauma of leading an organization through a crisis often accelerates a CEO’s departure. When we reach a turning point and conditions stabilize, we expect to see a shift in the C-Suite at many organizations — even at companies that survived or thrived. Not only are public companies actively thinking about CEO succession, but our private equity clients have been building their potential inventory of CEO candidates in anticipation of deal activity returning significantly in 2021. Now is the time to begin CEO succession planning if you have not already. We have been trusted by boards and CEOs with succession planning for more than 25 years, and CEO succession is our premier service because we have minimal off-limits restrictions — meaning, we have unparalleled access to top talent and leadership across all industries due to our boutique size. In addition to our reputation for discretion and for identifying ideal successors, our clients also engage us to manage leadership assessment processes, if needed (with our neutral, third-party assessment partner); to help with the on-boarding and integration of the new CEO (whether an internal or external candidate); and to advise the board, CEO, and CHRO on how to manage the transition with leadership and throughout the broader organization. 

2. Board Recalculation: The dialogue around which competencies, capabilities, and perspectives a board member needs to be effective in the “new normal” has gathered momentum. Some of our clients came to the stark realization that their directors were lacking the knowledge and experience necessary to help leadership execute the new direction that was charted in response to the pandemic and economic crisis. We are advising our board clients on how to effectively remake and reshape themselves with directors who possess the skills and capabilities to guide leadership through disruption and reinvention. Transformation at the board level typically takes time given how board dynamics can affect decision making, so we expect director recruitment to remain very active and increase in 2021.

3. Diversity Recruiting: The desire for more diverse boards has gained significant momentum across the country, making it critical to work with a board recruiting firm that has access to and existing relationships with high quality candidates. We often counsel our clients on how to achieve their long-term diversity goals in addition to managing immediate needs. (94% of our elected board candidates were diverse in 2019.) Similarly, at the C-Suite level, large Fortune 500 companies have the resources and prestige to attract diverse candidates, while mid- and small- cap companies will need to seek advisors who can prioritize them in order to compete for diverse talent. We have been more successful than our large competitors at attracting diverse talent to mid- and small-cap organizations, especially under time constraints. No matter how it is done, additional diversity of thought and experience in the C-Suite and at the board level should be a positive outcome of the conversations taking place across our country about diversity, inclusion, and equality.

4. Separation of the Roles of Chairman and CEO: Similar to past economic downturns, boards have increasingly recognized the benefit of a Non-Executive Chairman who can help the CEO navigate through a crisis. Based upon the consistency of the demand for our services advising on these arrangements, we believe splitting the Chairman and CEO roles will be a more frequent occurrence in 2021. However, such a decision requires concise communication and planning and should not be made to generate press coverage. Organizations need a highly analytical and candid assessment of their strengths, shortcomings, opportunities, and risks — with a learned objective and with experienced advisors — to make the right decision for their organizations at this crucial and unpredictable time.

We continue providing services to Boards and CEOs on a broad range of governance and leadership needs. To cite a few current examples, we are:

Board Recruiting and Advisory

• Advising a Fortune 500 financial services company on its director succession and diversity recruiting needs. 
• Partnering with a leading consumer products business to increase the diversity of its board.
• Working with the board of a large healthcare services business to remake the diversity of its board.
• Helping a large asset management business reimagine the capabilities and experience of its board. 
• Recruiting a diverse, high-ranking Army officer to an international professional services firm. 
• Helping a leading aerospace and defense company with long-term director succession needs. 

CEO Services

• Helping a mid-market private equity firm quietly attract a new CEO to a recently acquired portfolio company.
• Executing the CEO succession plan for a renowned industrial technology company coming out of activism. 
• Providing external CEO succession candidates in advance of a strategic pivot for a leading industrial services business.
• Advising the CEO on the selection of a CFO for a pre-IPO private equity-backed data analytics company. 
• Identifying a CHRO who can transform the culture of the department for the Chairman and CEO of a healthcare company.
• Helping one of the largest organizations in Japan develop a CEO succession bench.

Leadership and Talent Consulting

• Counseling the CEO and CHRO of a manufacturing company as they undergo a culture renewal project. 
• Advising a consumer goods company managing a sensitive board assessment project. 
• Defining the role and responsibilities of an Executive Chairman for a large information technology company following a merger.
• Leading a board competencies gap analysis for a leading telecommunications company.

In the event you have a sensitive board or leadership need in the coming year, we would be honored to share our experience and expertise regarding this critical process and help you solve for your organization’s immediate needs, and for its long-term success. Thank you for the continued trust and confidence you have placed in our firm. We look forward to working closely with you in the year ahead, and for many years beyond. 

Barrett J. Stephens
Chief Executive Officer
O: +1 (203) 618-7022
BStephens@RSRPartners.com

Few would argue that we are now living in a VUCA world. The acronym was coined by the U.S. Army in the 1990’s to describe the post-Cold War world (volatile, uncertain, complex and ambiguous). When external and unforeseen forces, such as a national emergency and the COVID-19 pandemic, cause a misalignment in an organization, boards and CEOs must rapidly adapt their strategy, processes, and people, around the evolving needs of their customers. Organizations that are agile and able to respond quickly will be primed to outmaneuver their competition and create a new future in which they can survive and thrive. 

One of the most important and highest risk groups of individuals in our business ecosystem are boards of directors. We have been in close communication with our clients these last few weeks to support them as they plan to mitigate disruption at the board level. Based upon the actions of many clients, we are sharing a few takeaways that all boards can consider when navigating these uncharted waters.

Consciously Aim to Protect Culture and Chemistry in the Boardroom

A majority of our clients have opted to conduct their upcoming board meetings virtually, and some boards of prepared and progressive companies are considering virtual annual meetings. If in-person board meetings continue to be disrupted, it will be important for board members to exercise some of the best practices developed by successful virtual teams, such as setting a clear meeting agenda and agreeing on rules of engagement and discussion.

It is also key for board members to heighten their communication skills and emotional intelligence. If ever there is a time to over-communicate and ensure empathy is factored into decisions, it is now. Keep the lines of communication open with all board members. The Lead Director or Chair is regularly speaking with the CEO and possibly the Chairs of the committees (if actionable work is being done). However, board members can sometimes be the last to receive news. To ensure the culture of transparency and engagement remains top priority, make sure all board members are receiving timely information and kept in the loop on what is happening. Further, it is reasonable for boards to expect CEOs to provide daily (or more frequently) dashboards of key performance indicators and other news, so that communication remains up-to-date.

The robust discussions and the head nodding in agreement is lost, but the Lead Director can take a moment and describe what they are observing (Such as, “I see a lot of heads nodding in agreement but we will pause for questions in a moment.” Or “I see a number of people looking anxious to chime in. Please be patient and I will call on each of you.”)

Trust, transparency, and accountability can quickly erode inside a boardroom during a crisis. It is imperative for the Chair and Lead Directors to put a road map in place to ensure board effectiveness and impact while preventing self-interests from emerging. Conflicts are more difficult to resolve in boardrooms when directors do not have the necessary face time for clearing and resolving differences of opinions. How the internal board dynamics at BP quickly eroded during the Deepwater Horizon spill is a reminder of what could happen to those companies who are slow to respond.

Practice Using Technology

Some public company board members may not be adept at utilizing technology to attend meetings or engage in discussions virtually. It’s important to minimize discomfort and embarrassment by encouraging board members to practice or test their virtual capabilities ahead of meetings. Boards should have technology teams on-hand to equip and prepare directors and help troubleshoot technical issues. Directors should also practically prepare for virtual meetings – likely much longer than the telephone committee meetings they typically experience. Now is a good time to send your board members reminders of telephone etiquette. It may seem obvious but suggest that they prepare a pitcher of water or a pot of coffee and to have snacks readily available so they can remain engaged with the cadence of an audio or video conference. These types of little things can make a long meeting experience much more productive for those on the other side of the call. And remember to be near a power outlet and to use your mute button. Any distraction takes away from productive dialogue and critical decision making.

Minimize Any Potential Succession Disruption

Most management teams have developed contingency and succession plans for times like these. However, as the shock to the economic system is not fully known, it is imperative that boards take the time now to agree on and clearly identify the key positions and individuals that are critical to the success of the organization and begin the grooming process – and contingent grooming processes – sooner rather than later. Boards should not only have a comprehensive understanding of the leadership bench underneath those critical roles, but they should develop and continuously refresh a short list of external leadership options which can address any gaps in the succession plan. In addition, all boards should build their own director succession plans to ensure there is continuity with committee chair positions.

The next few weeks will undoubtedly be challenging times for boards.

Chemistry, performance, and decisiveness in virtual environments, and under stress, will be key to any board’s ability to be agile and responsive to customers. Having the right board composition can be critical at times like these, and boards that are effective and propel diverse thinking will find better solutions and be a step ahead.

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About Our Board & CEO Services Practice

Our Board and CEO Services team partners with CEOs and boards to understand issues, assess opportunities, and strategically advise to ensure sustainable growth strategies are optimized. We are committed to executing an action plan that addresses sensitive and complex leadership needs and ensures clients are well positioned for the future. RSR offers trusted advisement rooted in years of experience and market knowledge. We excel at optimizing board and CEO effectiveness through transformative thinking about structure and operations. This helps us to engage closely with clients to drive greater accountability and enhanced performance. Our practice group leverages RSR Partners’ renowned experience in corporate governance with the firm’s industry and human capital consulting expertise to create an integrated and seamless approach. The range of services we provide to boards and CEOs include:

Board Services

• CEO Succession Planning
• CEO Search and Selection
• Managing CEO Transitions
• Director Recruiting
• Director Succession Planning
• Board Evaluations and Effectiveness

CEO Services

• C-Suite Search and Talent Pipeline Development
• Building High Performing Teams
• Leadership Assessment and Succession Planning
• Discreet and Thorough Candidate Due Diligence
• CEO Advisory Support
• Helping CEOs Select an Outside Board

RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1994 by industry icon, Russell S. Reynolds, Jr. The firm has conducted thousands of projects for Boards and CEOs at public, private equity backed, and family-owned businesses across a range of industries including asset management, consumer goods and services, industrial, technology, and healthcare. To learn more about RSR Partners, click here.