We don’t usually have repeat guests on our show; but the reason for this revisit is very informative. Deke Cateau, who came on last year as COO of AG Rhodes, is back—but, this time as its chief executive. This touches on a subject that many CEOs avoid — succession planning. Maybe, it’s because you don’t ever plan to leave your company. But, at some point, whether because of retirement or sale to a buyer, your company may need a new leader. The question is, how do you do this elegantly?
For A.G. Rhodes, one of Atlanta’s oldest nonprofit organizations, and LeadingAge Georgia, the answer was a carefully developed process for grooming and on-boarding executive talent. The result? Two newly minted CEOs, Deke (welcome back!) and Ginny Helms. A.G. Rhodes runs a group of nursing homes which take care of around 1,100 elders per year, while LeadingAge Georgia is a statewide organization representing other mission-driven organizations dedicated to providing quality housing, healthcare, and community-based services.
These two have risen to the highest leadership positions in their organization because of preplanning and preparation by their companies. During their discussion with CEO Exclusive, they touched on the process, pointed to the keys they believe landed them the top job, and argued for a detailed and thorough personnel strategy.
Institute a Clear Plan
For most companies, the promotion process is viewed as a combination of internal politics, favoritism, desperation, and a little luck. But, for both A.G. Rhodes, and LeadingAge, there was a clear plan of action initiated by the board, a strategy for succession that, in some instances, was happening without the candidates’ knowledge or input. In both cases, their companies created an environment where advancement was not only possible, but probable. All the potential candidate had to do was stick to the path prepared for them, and then show the Board Members what a terrific leader they would be based on their leadership’s criteria. In each instance, they impressed.
“I absolutely benefited from, I think, a very in-depth, although non-formal, succession plan with my organization, “Cateau makes very clear. “I had two stints (at A.G. Rhodes), one as the chief of strategic implementation, and of course when I came on this show last year, I was the chief operating officer.” And now, he’s the CEO, thanks to A.G. Rhodes’ forethought.
It’s the same with Helms. “I’m actually in this job thanks to a strong succession plan,” she says. “LeadingAge were really crystal clear on some attributes that they thought were important, in order to keep the company on the cutting edge of providing great, person-centered care.” Clearly, she met the standards.
6 Specific Recommendations
So what should you be looking for in a CEO? Again, A. G. Rhodes and LeadingAge had different agendas; each aiming to provide the best for their company, employees, and clients.
In a nutshell, here are some of the key elements Deke and Ginny sited in their company’s succession plans:
- Make sure you have the staff that’s ready to step in and take over. As Cateau puts it, “I think any organization should have a succession plan that is identifying managers, middle managers, and giving them leadership opportunities.”
- Include opportunities for grooming potential internal candidates such as: adeptness at public speaking; dealing with the Board; demonstrating understanding of the internal operations and infrastructure of the company, etc.
- Educate your candidates on the company’s vulnerabilities; it’s more than seeing the bottom line. As Cateau points out, a potential leader should be able to see potential trouble ahead, and find the right individuals to step up and fill the role to address the problem.
- Focus your plan and your efforts of all mid-level leadership positions and above, not just the CEO.
- Make sure the candidates recognize their role as the face of the company. As Helms puts it: “They should appreciate the need for strong policy and advocacy.”
- Expose your candidates to the issues affecting the industry and help them develop a series of priorities to deal with them directly.
A.G Rhodes accomplished this via its already established plan. LeadingAge offered a different approach: a leadership academy where such skills are taught (as a matter of fact, Cateau attended this very workshop as part of his ascent to CEO.)
Keep Your Hiring Options Open
Many companies believe in hiring from inside, keeping the process closed to those outside the business. Others actually want the fresh perspective of someone who is not connected to the established corporate culture. Each option has its own advantages and disadvantages, according to the experts.
The major business publications – The Wall Street Journal and Forbes – come down on different sides of the issue. According to Charles M. Elson and Craig K. Ferrere in their article ‘When Searching for a CEO, There’s No Place Like Home,‘ “Internal candidates are usually less expensive to hire and, most important, already know the business extensively. In fact, what most boards don’t realize is that a lot of the corporate knowledge they think of as mundane—whether it is inside-out familiarity with the supply chain or how the widgets are made—is exactly the sort of critical experience that best determines CEO effectiveness.”
Forbes disagrees. Klaus Kneale, in his piece ‘Hiring a New CEO? Go Outside the Company,’ challenges such traditional thinking. Citing a study by Vell Executive Search, he points out that, “Externally hired CEOs at companies with over $1 billion in revenue brought in a median three-year revenue growth of 99%; their internally promoted counterparts achieved only 35% growth.”
Cateau sees both options as perfectly viable. “The internal candidate, of course, knows the organization better, or should know the organization better. And by virtue of that, should be able to understand the nuts and bolts and make changes immediately because of that. They should have less of a learning orientation period.” So, what about the outsider? “The external candidate,” Cateau points out, “they are able to make immediate change because they don’t have to really walk closely through some of your political issues and stuff that you might have to deal with. They immediately come from the outside with a credibility to be able to make change.”
LeadingAge takes a focused approach to this question. For Helms, the object is clear no matter where the candidate comes from. “Get crystal clear on what you’re looking for,” she says, “and then when you see the talent, whether they’re inside, whether they’re outside, you build it.”
Consider Multiple Facets of Diversity
There’s no denying it – we are moving closer and closer to a global economy (with many believing we are already there) and, as such, there needs to be more to your business than a single localized and individualized identity. As Cateau puts it “I think in recruiting for any position, you should be looking at diversity. In that you should ensure that you have female candidates, male candidates, candidates of different racial backgrounds. You have to look at that diversity spectrum initially and ensure that that is being covered.”
Moreover, diversity goes beyond race, religion, or gender identity. “We’re talking about diversity of thought, as well,” Cateau reminds us. “We have to allow employees at the lowest — at all areas in our organization to have a viewpoint, to have a say, and we have to hear them and listen to them because they might have diversity of ideas that could benefit the organization.”
Any change in a company can be disruptive. Your goal should be to handle the recruiting and the passing of the torch with grace. Whether you have your own internal ‘leadership academy’ developing your future leaders, or you have a more informal approach, the question of who will lead your company after you leave is critical to your legacy as a leader. With thoughtful planning, you can find the leader your company deserves.