Executive Session, Episode 51: Antonio Fernandez, Daria Torres and Jonathan Foster

Yeah, it's a great question.

I think the first part of that is really asking yourself and the company from a board perspective, what's the future strategy of the company going forward versus are they happy with the current one? A reactive succession tends to ask, who can replace our current CEO? Whereas a strategic succession asks what leadership will the company need to function the environment going forward, given the environment and business context is constantly changing.

So I think the distinction is pretty significant.

A strategic process from a forward perspective starts with the company's long-term strategy and understanding the competitive environment and external environment altogether.

It considers multiple future scenarios rather than just assuming what they're currently doing is gonna be good enough for going forward.

It defines leadership capabilities before identifying candidates, continues to develop internal talent instead of beginning only when something's wrong or there's an issue with the current CEO.

And it reviews succession planning as part of an annual strategic process with the board as opposed to a one-time governance requirement.

I think the strongest boards treat succession as a continuous capability building process, again, rather than just an event.

How should boards evaluate whether the capabilities that made a CEO successful in the past are still the capabilities the company will need over the next five to 10 years?

Yeah, that's exactly the right question to ask.

And I think that's one of the big mistakes that companies make is they stay focused on what's made the current CEO successful, not what the company needs going forward.

next five to 10 years.

So I think the conversation has to begin with pretty key strategic questions.

What will or can disrupt the current industry and the competitive environment? Where will future growth come from? Which capabilities are now obsolete or not as important in the future? And what new capabilities become mission critical for the company? It's only after answering those questions that I think you need to start identifying what traits are needed from the CEO profile.

I think going forward, boards need to place more emphasis on learning agility from a CEO, the ability to lead large-scale transformations, attracting and retaining top talent, certainly understanding the digital ecosystem and having AI fluency and understanding of how AI can help improve the company and impact on the industry.

Certainly stakeholder management with key constituencies, including the board.

This is an important one, I think, in today's environment going forward, resilience under ambiguity.

There's so much change going on that you really need a resilient leader to kind of manage through all the change.

And then strong cultural leadership and somebody who's experienced in managing change transformation.

I think boards get stuck in, again, what's been successful in today's environment and perhaps industry expertise and maybe knowledge of a particular organization as opposed to shifting and understanding what's needed going forward and the new traits that are going to be needed as CEO.

Internal candidates often bring continuity and institutional knowledge, while external candidates may better support transformation.

How should directors think about the trade-off during periods of disruption or strategic change?

Yeah, I think that's a key question that most boards are asking themselves these days.

I think rather than starting with asking internal versus external, you have to think about what problem is the company trying to solve.

If the strategy is fundamentally sound and successful and execution is the primary challenge, then maybe an internal candidate is probably the best way forward, assuming there are internal candidates.