When Russ Reynolds founded our firm back in 1994, he knew that “bigger isn’t always better.” And so, he purposely created a boutique firm with a truly collaborative and client first culture, and with a goal of providing our clients with “high touch” service and unbiased advice. We started out in the boardroom, focusing our efforts on recruiting directors. As would later be the case with all of our practices, senior members of our board practice would lead and execute every engagement and handle all candidate interface, assessments, references, and client interaction. Russ anticipated that staying small would prove to have a big and lasting positive impact on our clients and help preserve our client service culture as the firm evolved. He was right. For the past 30 years and still today, we have consistently achieved, and often exceeded, our clients’ recruiting objectives, and have successfully maintained long-lasting and meaningful relationships with them. While we have expanded our offerings to include executive search and a variety of advisory services, board recruiting continues to be at the core of what we do.
The demand for outstanding director talent is as high as ever. This is especially the case when considering corporate boards’ ongoing efforts to maintain the right mix of skills and experience and the right balance of gender and ethnic diversity in their ranks in order to enable them to stay ahead of an everchanging world in which their respective companies compete. Often, boards encounter supply and demand imbalances for certain types of candidates they seek. That’s why it is very important that the board recruiting firm can guarantee access to any and all relevant candidates without any exceptions. That is a promise that we have continued to keep with our clients since our firm’s founding. Given our firm’s size and structure, we purposely conduct a limited and distinct number of search assignments at any given time, and our engagement review and acceptance process ensures that at RSR Partners, there is no competition for candidates amongst our clients.
Our extensive candidate sourcing network continues to expand and advance. We utilize our own database, social networking tools, and other internet-based candidate search technologies (e.g., LinkedIn, BoardEx, etc.) that have leveled the playing field between boutiques and large firms when it comes to candidate identification. All partners from all practices are engaged as well for candidate ideas. As such, we have the ability to identify most any candidate who aligns well with a given profile.
The benefits associated with partnering with us to achieve our clients’ most important recruiting objectives are no better reflected than in the continued success we have had in achieving our clients’ diversity objectives. Since 2021, 86% of our board placements were either gender and/or ethnically diverse (it’s important to point out that diversity was one of a number of criteria each of these placements met).
As a small and agile team, we are also known for our thorough and rapid kick-starts to board recruiting assignments. We have always strived to complete our board searches within four to five months. There have been times when searches have taken longer than anticipated, but we have always completed our assignments and have amassed a 100% placed candidate “stick rate” along the way.
If I had to point to one step in the board search process that we have learned goes a long way toward ensuring a successful outcome, it would be to put a great deal of thought and effort at the beginning of the process into creating the candidate profile. This candidate profile development process should be a collaborative undertaking between the board and their search firm, and it can be completed in a short period of time. It starts with reviewing the director skills and experience matrix in the proxy and interviewing each member of the client’s Board, their Chairman, CEO and, depending on the nature of the search, certain members of the executive leadership team. Interviews focus on what skills and experience are needed in the next director and why, as well as the characteristics that make for a great cultural and chemistry fit on the board. Then, we undertake a comparison of what criteria the board currently possesses and identify gaps, which in turn, helps to refine the candidate profile. It is important to note that the matrix in proxies does not always provide an accurate picture of the degree to which skills and experience reside on the board (i.e., checking the box versus specifying the strength of a particular skill or experience each director indicates they possess using a 1,2 or 3 rating.) The interview process is therefore helpful on several fronts – it provides a deeper understanding of skills and experience that all the directors contribute, determines what the board is looking for in its next director, and creates alignment amongst the board members around the candidate profile.
Before finalizing the candidate profile, we typically review five to ten candidate ideas with our client to get their feedback and confirm we are in agreement. Sometimes adjustments are made after the client has the opportunity to see how the profile on paper materializes in viable candidates. The goal being to create a profile that is both on target and realistic. So, when clients commit to undertaking our candidate profile development process, it almost always leads to a more successful outcome.
As the leader of RSR’s Board Practice for almost two decades, I am proud of our track record in assisting a wide variety of clients – from start-ups and private companies to Fortune 50 corporations – in achieving their board recruiting objectives. We look forward to continuing to partner with existing and new clients and staying true to the principles that Russ established in the early days of our firm:
We continue to be a small firm with big results.
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Carter Burgess is head of the firm’s Board Recruiting practice and a senior member of the Board & CEO Services team. As practice leader, he focuses on director searches, the build-out of entire boards, comprehensive board composition analyses, multi-year succession planning strategies, and board performance assessments for companies in a broad array of industries.
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.
This article was originally published on LinkedIn here.
Over the past 30 years of working closely with public company boards and CEOs, we’ve had a front row seat on the debate of whether to keep the Chair and CEO roles separate or combine them. While shareholder proposals advocating the split are common (especially when CEO transition, underperformance, misalignment, or crisis occurs), US public companies have been allowed some freedom to choose what board leadership model works best for them. However, since 2020, we have seen a subtle but meaningful change in the power and influence of the Independent Chair that is different than the past several governance cycles.
The role of a public company CEO has become increasingly complex as societal issues now fall on management’s doorstep. In many cases, the role and responsibilities of the Independent Chair has increased to help the CEO and the board to confront the range of stakeholder concerns. However, much is predicated on the chemistry and dynamic between the CEO and Chair and whether this change is a positive and productive shift. Countless articles have been written about what makes an effective Independent Chair. But at the end of the day, the formal and nuanced definition of the Chair and CEO roles and relationship between them is at the core of success and failure.
It is not a stretch for the outside world to imagine that when a CEO is not able to also assume the role of Chair (as it is easier for them to control the agenda), they would want to have an outsized vote to help select who would become the new Chair. Depending upon how the board views the CEO, they will either amplify or minimize the CEOs voice on that decision. At the end of the day, all stakeholders should seek to have a dynamic whereby the Chair is an adviser, a coach and supporter of the CEO but also provides constructive tension and accountability that pushes the CEO and management team to deliver on their strategic plan. As a result, the Independent Chair needs strong situational awareness to understand when to use their influence vs. authority.
When digging into recent governance data on the 1000 most valuable US public companies, some statistics caught our attention this week:
During the business reset and inflection the past few years, half of the Independent Chairman positions turned over at the 1000 most valuable US public companies. As we saw firsthand with many of our clients, most of these boards had more than one potential Director who could serve as the new Chair. During previous cycles, it seemed more politically obvious who was the right person for the role. What has materially changed today is the amount of time and deliberation it takes to pick who should be Chair and the impact it will have on the CEO and its various stakeholders. ISS and Glass Lewis have recognized the value and new work requirements of the Independent Chair by counting it as 2 outside boards instead of 1 when considering over boarding. While I have more than a few differences of opinion with the proxy advisors. In this case, I feel they appropriately value their importance and responsibilities.
The impact a great Independent Chair has on the board, management, and the company is not entirely visible or understood by the viewing public. But during a company’s most challenging and seminal moments, you will get peek behind the curtain.
We anticipate in the coming months helping shine a brighter spotlight on those Independent Chairs who have helped their companies get one step closer to their aspirational goals. In the meantime, please don’t hesitate to reach out to our team if you want to share or acknowledge the impact your Chair has had on your organization.
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Brett Stephens is the CEO of RSR Partners and helps lead Board & CEO Services at RSR Partners.
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:
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:
#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:
#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.
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 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 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.
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 Services
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.
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 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 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.
A confluence of issues confronting organizations and their boards today is now landing on the doorsteps of Chairs of Nominating & Governance Committees. More than 25 recent interviews revealed that it is now key for Nominating and Governance Chairs to “lead with influence” in order to effectuate change.
As defined by the ever-reliable Merriam-Webster, influencing is the “act or power of producing an effect without apparent exertion of force or direct exercise of command.” In other words – and contrary to some opinions – overt efforts to influence often fail. It is far more effective to influence others by operating as a conduit of communication and connectivity. As highlighted in the first of our series, Perspectives from the Chair, Nominating & Governance Committee Chairs (“Chairs”) are at the forefront of many critical topics facing boards today. As such, Chairs are now “carrying the flag” to ensure the collective board and organization are meeting the needs and expectations of all stakeholders. As the more subtle nucleus of communication and connectivity in boardrooms, the opportunity for Chairs to be influential is significant.
The Chairs we spoke to agree that to effectively influence the many change initiatives they are leading, it is important to master the following guiding principles: (1) listening to understand; (2) building relationships; (3) acting with courage, and (4) staying informed.
How are these principles actualized on a board? What do Chairs need to keep top of mind and practice regularly to effectively lead with influence? In the past, some Chairs felt that they were perceived as the onerous compliance police. Today, as one of the key constituents of board effectiveness, there is a desire to be seen as a partner who is passionate about driving the performance of the boards and organizations they govern and delivering results and successful outcomes for all stakeholders.
Listening To Understand
Taking the time to listen to varying points of view is essential to the Chair’s ability to influence. Dr. Steven Covey describes this process well: “If I were to summarize in one sentence the single most important principle I have learned in the field of interpersonal relations, it would be this: Seek first to understand, then to be understood.” While it can be tedious and cumbersome, showing appreciation and empathy for others’ perspectives demonstrates that the Chair is someone who listens, reflects, ask questions, and genuinely cares. Being knowledgeable and conversant about the viewpoints of others on the board can help open the door for Chairs to lead change and enroll fellow board colleagues in the actions they deem necessary. Jane Warner, Chair of the Nominating & Governance Committee of Tenneco Inc. and member of the NACD Nominating and Governance Committee, and Director at Brunswick Corporation and Regal Beloit Corporation shared, “Nom & Gov Chairs need to have a consultative personality to create inclusion among the board and not just focus on the charter requirements of the committee.”
Building Relationships
Leading through influence means building strong relationships with board colleagues. Taking time outside of board meetings to bond on both a personal level as well as on board subjects is very important to establishing trust and respect. Scheduling lunch or dinner meetings or visits to the offices of board colleagues is an effective way to build this necessary connection. It is also a great opportunity for Chairs to be transparent so that others know and understand their work environment, culture, and values, and why the Chair is suggesting certain goals, directions, and actions. The more Chairs get to know other board members and their views on specific matters facing the board, the better equipped Chairs are to exert influence and optimize their chances of progressing the outcomes they desire. “Nom & Gov Chairs who connect with their director peers in a personal way increase their ability to influence,” adds Gretchen Crist, Head of RSR’s Consumer Goods & Services and Human Capital practices. “When your fellow board members genuinely feel they are important and valued, the more responsive they are when you need their support in return.”
Acting With Courage
Given the responsibilities of the Nominating & Governance Committee, the Chair must sometimes make bold and unpopular decisions either involving, for example, a board member’s term renewal, performance of a board member, or a conflict of interest. Being put in this position requires the Chair to possess the fortitude to live with the consequences, especially when others do not see the situation the same way. Chairs gain this courage by maintaining a track record of good judgment. Over time, other board members trust and respect Chairs for their knowledge and decision-making based on facts and not emotion. It is also easier to display courage when the Chair has strong relationships on the board. As Neil DeFeo, Chair of Nom & Gov Committee for Driscoll’s, shared, “Without courage nothing happens. If you consistently stand for what is right in a respectful and authentic way, you are much more likely to have a win-win result.”
Staying Informed
“Critical governance topics are constantly evolving. Therefore, staying up to date is essential. Most importantly, establishing the right pace on the adoption of best practices and new trends is a core competency that the Chair of the Nom & Gov Committee needs to develop,” explained Graciela Monteagudo, ACCO Brands Nominating and Governance Committee member and Director at WD-40. It is also important for Chairs to stay on top of governance trends as board directors are increasingly held responsible for actions taken by the organization. Furthermore, driving for an aligned understanding across the board on whether the organization wants to be on the leading edge of change or to be more of a later adopter is also critical in discerning the right pace of change for your board. A number of Chairs mentioned that they utilize other members of the Nom & Gov Committee to assist in staying alert to evolving governance matters including how these topics interconnect with other board committee initiatives. Inevitably, some directors will capture key issues or consider a certain trend applicable that others did not flag. Chairs agree that is it helpful to share the responsibility of staying informed.
Conclusion
With such a strong emphasis today on building engaged, diverse, and transparent boards, the key to better corporate governance lies in the working relationships between boards and management; in the social subtleties of board interaction; and in the competence, integrity, and constructive involvement of individual directors. The Chair plays a pivotal role in influencing this desired outcome. Chairs agree that the door to being able to influence opens when others sense the Chair is being influenced by them. Essentially, board members feel understood by the Chair and appreciate that the Chair has taken the time to listen in a deep and sincere way. This is the moment when the ability to influence begins to gain momentum – and Nom & Gov Chairs are seizing this opportunity.
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 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 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.
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 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 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.
A confluence of issues confronting organizations and their boards today is now landing on the doorsteps of Chairs of Nominating & Governance Committees. More than 25 recent interviews revealed that Chairs are leading the conversations and actions around hot topics such as DE&I, ESG, and board effectiveness and governance, and acting as agents of change for their organizations and boards.
Board priorities are rapidly increasing in today’s challenging environment. Many of these high-profile responsibilities are becoming urgent tasks for the Chair of the Nominating & Governance Committee (“Chair”). In addition to their existing focus on board composition and effectiveness, as well as board and CEO succession planning, Chairs are now grappling with new business imperatives such as Environmental, Social & Governance (ESG), workforce safety and transformation, and Diversity, Equity & Inclusion (DE&I), and are expected to be experts on governance, the organization’s strategies, and the leadership capabilities of the management team. Often, Chairs also act as the hub of information for the board, coordinating responses across all board members and committees. The granularity of the work for Chairs has dramatically increased over the years and is now much more intense.
It is crucial today for boards to be informed and be proactive around topics such as ESG and DE&I and recognize their influence on board composition. Chairs are at the center of this conversation due to their role in sourcing and championing new directors. “Every board I serve on is having these conversations and pushing forward on ESG, Diversity, and replenishment,” said Deb Henretta, Director at American Eagle, Corning, Meritage Homes, and NiSource. “The goal is to achieve a more enlightened and more forward, future-ready board.”
Having these conversations is a step in the right direction, but Chairs also need to set goals and apply metrics to measure and communicate achievements. Committee activities have become more interconnected as boards strive to make progress. As a result, developing a clear action and communication plan can be a challenge, especially for Chairs trying to amalgamate messaging and reporting. Moreover, Chairs are often responsible for conveying the plan to stakeholders and leadership teams. As Margaret Preston, Director at Otis Elevator and McCormick, asked, “How do we communicate to our various stakeholders on these topics and how do we incent and reward management against these priorities? This is an opportunity, and at the same time this creates a structure for us to do this work and do it with real transparency and deliver results. But it will take some organizational effort and a clear delineation of roles and responsibilities to get there.”
Chairs continue to spend a significant amount of time on succession planning for all committee chairs as well as board leadership. To be effective, Chairs must be well versed on corporate governance and board refreshment strategies. Topics such as mandatory retirement age and whether to set limits on director tenure continue to be hotly debated. Determining limits and appropriately setting expectations regarding board tenure for new and existing directors has become another duty for the Chair. Laura Unger, Director at Nomura Holdings, Navient, and CIT Group, noted, “Chairs need to set expectations for all Directors so that a board seat is not a lifetime appointment. It is imperative to set expectations when Directors join, to depersonalize the process, so it won’t be as difficult as it has been to refresh the board and change out directors as necessary.”
In this new environment, boards have become more open and receptive to annual board and individual evaluations. Evaluations can help boards understand their strengths and gaps in relation to the capabilities and experience needed to support the organization’s strategic plan – and its ESG and DE&I goals. How to strengthen these annual evaluations will become a decision left to Chairs as they refresh the board’s skills and experiences and aim to increase diversity. “Written responses to questionnaires alone are quickly becoming a dated practice,” said Greg Lau, Head of RSR’s Board Advisory practice. “Now, individual director and selected management interviews are becoming the norm to not only gauge effectiveness but help the Chair facilitate refreshment. The conversation is around how to conduct them productively, how to appropriately communicate the results, and how those results should inform refreshment decisions.”
As the dynamics of succession planning, DE&I, ESG, the company workforce, director evaluations, and setting board expectations on tenure – and the goals, metrics, and communication that accompany these priorities – all converge with the Nominating and Governance Committees, the agility of the Chair will be tested. As many Chairs hold themselves to higher levels of accountability, especially to stakeholders, they are working overtime to meet their new challenges and pivoting in new ways.
They are agents of change, personified.
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 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 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.
