Idea in Brief
Planning for leadership succession is the
most important job of
a company’s board of
But boards and CEOs
often neglect this key
other business matters
seem more pressing.
At P&G, A.G. Lafley and
his board began the
process of selecting and
candidates as soon as
Lafley took office.
demands the same
and thoroughness that
risk, and strategic oversight do.
global enterprise that was well positioned for profitable growth—all at once.
So when Norm and I sat down to define the four
core responsibilities of the board, we put CEO succession (and executive leadership development) at
the top of the list, followed by strategic oversight
at the corporate level, overall governance, and enterprise risk. Then, to signal more-intentional and
ongoing involvement of the outside directors in the
succession process, we changed the name of the
Comp Committee to the Leadership Development
and Compensation Committee.
One of our main goals was to develop a slate of
strong internal CEO candidates on a continual basis. We believed this was the safest and surest path
to a smooth succession. For one thing, our own executives would have industry knowledge and experience and a proven track record of results. They
would have completed assignments that tested their
mettle—their leadership, judgment, and character.
Their past performance would, we believed, be the
best indicator of their future potential. To check our
assumptions, we benchmarked internal candidates
against strong external CEOs that our directors knew.
We concluded that an outside option wasn’t needed
and wouldn’t be as good a fit for P&G.
Involve the Board Early and Often
Norm and I did not want to put our board in the position of having to make a last-minute decision on
P&G’s next CEO. (I was sensitive to the fact that I was
the first “accidental CEO” at P&G, selected in a hurry
after the sudden departure of my predecessor. Norm
was determined not to let the directors put off the
process until the last minute or, worse, be left with
effectively no decision—one CEO candidate recommended by the incumbent.) We both wanted the directors to be engaged and personally involved.
Once the directors had agreed with us on their
four core roles, we changed the way the board
worked. We had six meetings a year. The annual
shareholder meeting and an off-site visit to one of
P&G’s businesses accounted for two of them, but
each of the other full board meetings was dedicated
to one of the four responsibilities. And the first meet-
ing of every year was devoted to CEO succession and
executive leadership development.