Succession Planning Lessons from McCain/Palin

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In the course of a CEO succession plan we recently did for an NYSE-listed company, board members supplemented their own exposure to top candidates by:

• Hiring a PhD organizational psychologist to conduct structured behavioral event interviews and administer other tests to gather objective information about candidates' leadership capabilities;

• Conducting a climate study—different from a standard 360 review, which can often be skewed—to learn about the type of work environment the candidate created for his team; and

• Retaining a top business school professor to analyze a strategic case study all executives were asked to complete to give insight into their relative strategic capabilities.

This kind of rigor, however, is not standard practice and would actually be considered quite leading edge by most boards who are still largely using the "gut feel" test in making CEO succession decisions. In today's challenging business climate, however, this is the type of due diligence shareholders deserve before any board makes a CEO succession call.

There's No Chief Operating Officer Job at the White House

In Corporate America, one final step typically stands between the heir apparent and the corner office—the role of president and chief operating officer. Though not all companies transition leadership in this way, the vast majority name their top candidate to this post for a period of a year or more before she becomes CEO. This gives corporate boards a distinct advantage in succession planning over presidential nominees. If the candidate disappoints in this final testing ground as chief operating officer, the board can still pull the plug. Not so, with the Vice-President. Indeed, voters may have become more comfortable with Palin if the U.S. electoral system offered this feature.

The lesson for corporate boards is clear: Make good use of that chief operating officer role, if your company has it, to ensure the top candidate really is the right choice to become CEO. All too often the COO role is treated as nothing more than a CEO in waiting—not unlike the Vice-Presidency. Savvy boards design the chief operating officer position as a final testing ground, often assigning specific organizationwide initiatives to the COO and/or transitioning responsibilities between the CEO and COO in 6-month increments to see how the top candidate operates with increased authority and a corporatewide mandate.

The Stakes Couldn't Be Higher

For years to come it will be argued that John McCain's choice of running mate cost him the Presidency. Whether this is true or not, it underscores the significance of succession decisions. A bad choice on CEO succession in the corporate world can have different but no less devastating consequences—erosion of stock price, defections of key talent, strategic missteps. However you voted on Nov. 4th, the McCain/Palin scenario provides an excellent case study on CEO succession planning for boards to objectively discuss and learn from.

Beverly Behan is the managing director of the Board Effectiveness Practice of the Hay Group and co-author of Building Better Boards: A Blueprint for Effective Governance.