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Global energy giant Shell recently announced that Wael Sawan, its head of integrated gas and renewables, would replace longtime CEO Ben van Beurden by the end of 2022. While important changes to the C-suite are rarely smooth sailing, Shell’s board seems to have followed the three essential characteristics of a successful succession: fast, thorough, and consistent.
In early September, Reuters reported that the board was actively working to name the next CEO upon the retirement of Van Beurden, who plans to step down in 2023 after 40 years with the company. Their sources said the board succession committee had narrowed the list down to a few candidates. Two weeks later, they confirmed the final choice.
Having that committee in place and ready to guide the company through the transition is imperative. Too many boards aren’t ready. They simply underestimate the intense emotional toll that a change of leadership has on the organization. We are currently working with a large organization that is replacing three senior leaders–including the CEO–but a lack of planning is resulting in significant delays in filling the positions.
Slow CEO transitions create an intense personal loss for leaders and the team members they leave behind. It stalls progress on strategy as people fear moving in the wrong direction. Transitions can also result in unwanted media attention that the organization is not prepared to handle.
Not Shell. Media coverage has been glowing and the markets responded favorably, with the stock price staying steady–up more than 40% year on year–through the announcements.
Shell was also thorough: It announced that the current leader would advise the board through the middle of 2023. How much they will lean on him remains unknown. However, the message it sends about continuity is meaningful in and of itself: Van Beurden’s 40 years of experience are valuable and there must be enough time for a thorough transition without having a retiring leader linger beyond a reasonable period.
Board members who wait too long to proactively manage succession find themselves in an emergency to which they must react. This can lead to poor decisions, like hiring or promoting the wrong candidate to fill the position quickly or filling the role with an interim CEO who remains in place for too long.
Tapping a new leader with proven acumen and experience provides the comfort of stability: knowing that the company can maintain consistent performance through the transition and into the future.
Again, Shell appears to follow the textbook for doing it right. With the new leader, the Wall Street Journal says “Shell elevates a longtime executive who has steadily taken on expanded responsibilities alongside the company’s natural-gas business that has recently driven record profits.”
Investing in the process, as Shell clearly has done, is essential.
CEOs leave companies for a variety of reasons. Sudden or planned departures can occur because of a new career opportunity, differences in opinion about the organization’s direction, power struggles, or personal issues, to list a few. While planning for leadership changes at the very top of the organization is a primary board responsibility, it is often an afterthought with serious consequences that produce a ripple effect across the organization.
Success does not happen by accident and changes in leadership come with challenges. According to a Korn Ferry study of C-suite executives, 76% of respondents said there was no internal successor prepared for their role. More than 60% of the CEOs surveyed work for organizations that have no succession plan at all.
Leadership during the pandemic has been tried and tested–and even strong leaders can only manage so much. CEOs are being asked to leave at a higher rate than ever before–and almost 18% are seeking retirement. Additionally, CEOs are transitioning roles more frequently at a cost to the stability of the organization. Research also confirms that CEOs leave other C-suite positions vulnerable to turnover.
Addressing these scenarios and discussing preventative measures at the C-suite level is a step in the right direction. The legacy of a business is dependent on many factors–but the demanding work of planning a leadership transition long in advance cannot be avoided.
Laurie Cure, P.h.D., is the CEO of Innovative Connections, a consulting firm focused on enhancing organizational effectiveness by supporting leaders and teams to improve organizational performance. She holds a doctorate in industrial and organizational psychology and a master’s degree in business administration. She is also the author of “Leading Without Fear.”
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
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