Any discussion of CEO succession planning has to start with a single fact: most companies do a good job of developing internal candidates. According to one recent analysis, more than eight in 10 executives who are appointed to the top job came from within the organization. Internally appointed CEOs tend to stay in the role longer and often perform better than externally appointed candidates. For those reasons, internal candidates remain the preferred choice of corporate directors by a wide margin.
But while most companies do a good job of developing CEO candidates, a handful do a truly amazing job of it, producing a disproportionately high number of CEOs relative to their peers. Among the companies in the S&P 1500, General Electric produces nearly 25 times the average. IBM produces nearly 20 times more. Procter & Gamble, Honeywell International, HP, General Motors and United Technologies all produce at least 10 times more than average.
Earlier this year, we looked at 2,180 CEOs around the world to see where they worked during their careers. This analysis – which looked at the CEOs of every company listed on the S&P 1500, FTSE 250, DAX 30, EURONEXT 100, Hang Seng 50 and Nikkei 250 – resulted in the identification of 42 companies around the globe that are truly world-class executive talent developers.
The CEOs these companies produce – and the large volume of them – are not the result of good luck or coincidence, but of a commitment to a set of activities designed to continuously identify and develop tomorrow’s leaders; activities shared by a select group of other high-performing organizations around the world, which are adoptable by other companies that want to improve their own internal pipeline of potential CEO succession candidates.
We call these organizations CEO Academies – and their reach and impact in the marketplace are substantial.
So what do CEO Academy companies do that enables them to develop such a strong pipeline of future leaders? First, they understand The Value of People; second, they look Outside and Inside for advice and best practices; and third, they maintain a strong Focus on the Future. We found seven major lessons from the tactics they consistently apply:
1. Find everyone’s value: CEO Academy companies embrace diversity and inclusion (D&I) to develop tomorrow’s leaders and avoid simply cloning today’s executives.
2. Build tomorrow’s foundation: CEO Academy companies push their entire workforce to grow and develop, not just high potentials or other identified groups.
3. Seek out the best: Successful companies bring in outside perspectives. CEO Academy companies do the same, looking for best practices in leadership development from outside their own organization.
4. See the whole to know the parts: CEO Academy companies give their up-and-coming employees a range of experiences, not just deepen their functional expertise.
5. Establish a leadership language: CEO Academy companies create a common understanding of what it means to be a successful leader in their specific organization.
6. Don’t just plan for the future – create it: CEO Academy companies use succession planning to identify up-and-coming future leaders.
7. Leaders develop leaders: CEO Academy company leaders consider people development a key priority and spend their own time on it – not just in a classroom, but day-to-day.
While the model is straightforward, the journey is anything but quick. The average age of CEOs is 55 and rising, reflecting a growing desire for candidates with more experience before reaching the corner office. And most internally appointed CEOs have been with their company for 15 years before promotion, giving them significant time to benefit from these efforts. The journey is long, but the ultimate payoff is significant.
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CEO Academy companies have figured out a method for growing and developing internal CEO succession candidates, a model that benefits the company, the leader and, arguably, shareholders too. The three-part model of The Value of People, Outside and Inside, and Focus on the Future creates a roadmap that other companies can follow as well – possibly transforming themselves into tomorrow’s model CEO Academy in the process.