Valeant Pharmaceuticals appointed an interim CEO today following the hospitalization of the CEO, Michael Pearson, who is suffering from sever pneumonia. Although a temporary leadership structure had been put in pace at the onset of his illness, as it worsened the Board moved quickly to name an official interim manager. A current Board Member and prior CFO, Howard Schiller, was tapped given his key role in the implementation of the company’s current strategy.
This news item should be a lesson for every public or private company Board, that succession planning is key. How would your Board handle the sudden medical leave of its CEO? Are you prepared if you suddenly need to fill his/her seat?
15 years ago, a Board on which I served faced the same issue, although our situation was more dire, as our CEO lost his battle with pneumonia. Like Valeant, we had appointed co-Presidents to oversee the organization during the illness. Once a permanent solution was needed,more challenges arose. As an organization, we learned many lessons during that period, and as a Board we built new muscles to strengthen and constantly flex executive development and succession planning.
Some key thoughts I offer when a CEO takes ill are these:
Recognize that the interim solution may need to be in place for quite a while, so it needs to be workable.
Although no one wanted to think that our CEO would not return at the time, that eventuality should have figured into our calculus. Asking a few direct reports to shoulder more of a burden for a month or so is one thing, asking them to do it for up to a year is quite another.
As a Board, demonstrate support for the interim team.
Unexpectedly losing a CEO is like losing the captain of a ship; the crew and passengers need to know that the course ahead will be safe and sure. The Board needs to support the interim team without micromanaging their efforts. The Board Chair or Lead Director can play a critical role. Board members should recognize there may be a need for more frequent meetings and or conference calls.
Gain consensus on the breadth of the process
In some cases, an unanticipated vacancy can prompt someone to up his/her game and assume a new senior role with vigor. Alternatively, such a vacancy may provide an opportunity for new eyes and new leadership from outside the organization. The Board needs to agree about whether there is a bias for internal or external candidates. There also needs to be agreement on the nature of the process; if external candidates are considered, will existing firms be used or will firms be interviewed; who will comprise the search team; will the job specification remain the same as for the prior incumbent or will it change.
Know that communications to all stakeholders for the next 12 – 18 months is key,
The Board needs to communicate regularly to shareholders, management and staff about both the current business and the succession process ahead. Over communicating is not possible in this situation. To ensure we were capturing as much feedback from the rank and file as possible, the Board instituted a 360 degree employee survey, assessing sentiment 6 months into the interim structure and then 6 months after the permanent successor. We wanted to make sure that certain shifts to the organization had not created unforeseen problems.
Develop your succession plan to include sudden events
Most people consider succession in a more deliberate way, noting the development needs of key managers and the steps they needs to take to grow into a new, more senior role. A sudden illness or death precludes that deliberation. As such, you need the “hit by the bus” section that outlines what happens if the unthinkable does. For those of you who have that already in place, Bravo! For those of you who don’t, add it to your Board agenda.