CEO Succession Planning

Transcription

1 CEO Succession Planning 21ST ANNUAL FARMER COOPERATIVES CONFERENCE NOVEMBER 7-9, 2018 ST. PAUL, MN PETE KAPPELMAN

2 Collective Board Responsibilities 1. Monitor business performance and approve operating budgets 2. Discuss and approve long term strategic plans 3. Select CPA firm for annual financial audit 4. Establish policy and declare patronage dividends and retirement of equities 5. Understand the risk profile of the cooperative and oversee risk management programs 6. Establish internal board policies and procedures 7. Review amendments of by-laws and submit to membership for vote 8. Authorize disposal of cooperative owned real estate 9. Monitor to ensure succession plans for the CEO and senior management team 10.Select, evaluate, and compensate the CEO

3 CEO Succession Best Practices Evaluation Best Practice Comments 1. Clear role specifications for the CEO informed by the Board and detailing experiences and competencies to run the company 2. Regular assessment of the CEO against both the role specification and his or her performance 3. Active development of the internal bench with potential CEO candidates identified, assessed, developed and benchmarked against the best external leadership 4. Emergency planning for any sudden, unexpected CEO departure CEO establishes annual goals; reviewed/approved by the Board Executive Committee reviews CEO s progress/results Potential internal candidate are given successively broader roles, ongoing coaching/development and exposure to the Board Pink Envelope

4 Research on Internal vs. External CEO succession Internal CEOs perform better when strategic change is not needed and there is longer planning time for succession Source: Schepker, Kim, Patel, Thatcher & Campion s Meta-analysis across multiple studies (2017) Companies that exclusively promoted from within outperformed others across ROA, ROE, earnings growth and value created for owners Source: Kelly School of Business, University of Indiana/A.T. Kearny s 20-year study of S+P 500 companies External choice is better if there is a significant need for strategic change due to past company performance and internal candidates do not possess the experience and information to make change Studies include Georgakakis & Ruigrog (2017), Dess and Beard (1984 and Hudson, Malatesta & Parrino (2012)

5 Generic internal candidate selection process Step Search committee confirms job focus, criteria for success and internal vs. external Search committee reviews candidates experience and assessments Search committee interviews internal candidates Board reviews committee recommendation and interviews final candidate Offer extended, accepted, and CEO announced Timing <1 month <1 month <1 month <1 month

6 Generic external candidate selection process Step Timing 1. Search firm interviewed and selected 1 month 2. Search firm identifies viable candidates, conducts interviews and recommends candidates 2 to 3 months 3. Interviews scheduled and conducted 2 to 3 months 4. Decision made, offer extended 1 month 5. Candidate accepts offer, gives notice, and start date determined 6. Candidate begins 1-2 month 7-10 months

7 Criteria for CEO Selection 1. Has strong awareness of the environment and how the company competes Understands the industry, disruptions and opportunities to differentiate from the competition Develop strategies to compete and grow the company Has marketplace-back, value-added, branded, insights-to-innovation viewpoint Brings global perspectives and experiences 2. Mobilizes talent to achieve the company s vision and strategies Selects, develops, motivates and retains top talent Builds high performing teams and has followership Drives productivity to fuel growth Creates a climate for innovation 3. Gets results Establishes clear priorities, goals and accountabilities Has a track record of meeting or exceeding financial results Manages P&L and balance sheet Generates financial returns on investments and cash to members

8 Criteria for CEO Selection (cont.) 4. Acts with integrity Has high ethical standards of leadership and builds trust Maintains integrity of products, processes and relationships 5. Problem solving Demonstrates ability to think critically and quantitatively about business problems Has strong business and financial acumen Anticipates and solves problems 6. Communications Has strong executive presence Enhances the company s image with industry associations, governmental agencies and the community Advocates for food and ag and will influence legislation on behalf of the company and its members 7. Board Relations Maintains productive relationships with the board Provides guidance to the board and achieves alignment on company direction

9 Questions?