Board & management succession planning best practices for sustainable success with answers

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with Dennis T. Whalen & Stuart R. Levine hosted by Passageways

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Stuart R. Levine

Chairman and CEO of Stuart Levine & Associates LLC, a management consulting firm for governance, strategic thinking and C-Suite leadership and Chairman and CEO of EduLeader LLC, an online digital learning company

NACD Governance Fellow and was twice awarded the top 100 director by this organization

Board governance expert, currently serving on the board of Broadridge Financial Solutions, as Chairman of Governance and Nominating Committee and member of the Audit Committee

Best-selling author of three leadership books published in 37 countries with over 1.2 million hard copies sold and his monthly thought-leadership articles are published in Forbes and The Credit Union Times

“The Six Fundamentalsof Success”

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Dennis T. Whalen

Speaker and writer on board governance issues, including board composition & succession, diversity, culture, investor interests and the corporation’s role in society, and audit committee issues, including risk, financial reporting and controls, and audit quality.

Named one of the most influential people in governance in America by Directorship magazine, is an NACD Board Leadership Fellow, and has served on numerous NACD Blue Ribbon Commissions.

Advisory board member of the Strategic Investor Initiative of the Committee Encouraging Corporate Philanthropy (CECP).

Leader of the KPMG Board Leadership Center, which supports directors in their board service roles through an array of events, peer exchanges, in-boardroom briefings, and thought leadership

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The BLC champions outstanding governance to help drive long-term corporate value and enhance investor confidence through an array of programs and perspectives—including KPMG’s Audit Committee Institute, Women Corporate Directors, and Board Exchange.

Best Practices for Sustainable Success

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Board & ManagementSuccession Planning

Do you have a detailed board succession plan that has been implemented?

YesYes, but not sufficientNo, but discussing or on the agendaNo

POLL Q1

5© 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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Boards Continue to Face Challenges

Board composition – and alignment with strategy – is a key priority.

But significant barriers exist to building a high-performing board.

Despite wide recognition of the importance of succession planning in achieving optimal board composition, few boards have a formal succession plan in place.

There are important mechanisms to help maintain optimal board composition – but they are often underutilized.

Generating the necessary change and turnover to achieve the “right” board composition requires an active approach.Source: KPMG Pulse Survey


QWhat challenges or concerns are most influencing how your board is thinking about its current and future composition— skill sets, backgrounds, experiences, and perspectives?

75%Alignment of board talent with the company’s 3 to 5 year strategy

61%Need for greater diversity of viewpoints/backgrounds

54%Business model disruption and other competitive threats

QIn your view, what are the greatest barriers to building and maintaining a high performing board?

69%Finding directors with both general business experience and specific expertise

55%Identifying the talent the board will need in 3-5 years

43%Resistance to change due to “status quo” thinking

QIn your view, what are the most effective mechanisms to achieving the right mix of skills, backgrounds, experiences, and perspectives on the board?

Alignment of board talent with the company’s 3 to 5 year strategy

77%Need for greater diversity of viewpoints/backgrounds

49%Business model disruption and other competitive threats

Here’s What Directors Have Told Us


87%


Why do you think your succession planningefforts may not be optimal?

• Board member push-back• Not enough time allocated on board agendas• Not enough focus on 3-5 year out planning• Not sure

POLL Q2

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• Succession planning as it relates to strategy at the board level:

• What criteria (skills, experience, chemistry) should boards should be

looking for?

o Meeting current requirements and future needs of the organization

• What is the best process?

o Assessment and culture

o Establishing the vision for the organization

o Diversity of thought and intellectual curiosity

o CEO inclusion in process

• No one-size-fits-all approach to term limits

o Refresh processes required to ensure directors continue to add value

o Currency

• Onboarding and integratio

The Challenge of Board Succession Planning


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• Effective annual board assessments that ensure contributions of members

and engagement

o Motivated to continuously improve, not punitive

o One-on-one conversations with board members regarding their tenure

and providing constructive feedback

• Making space on the board – underperforming assets

• More investor attention to individual board members and the process of

board selection

o Effectively communicating to shareholders the skillsets, contributions

and expertise of board members clearly defined through the proxy

• Preparation of board members for committee leadership roles

• Committee chairman succession planning

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The Challenge of Board Succession Planning


How do you handle underperformingdirectors?

• Lead Director mentoring• Independent 3rd party performs evaluation process• People are too soft on grading other directors • It never gets addressed

POLL Q3


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77% of KPMG pulse survey respondents cite a formal board succession plan as one of the top 2 most effective mechanisms to build the “right” board … but only 14% said they had such a plan

• Tasking the governance committee to develop a process in support of long term board succession planning

• Periodically assessing what is right for our board – age limits, tenure limits – to ensure a healthy mix of newer and longer tenured directors

• Assessing our future needs (3 to 5 years out) to identify talent gaps

• Addressing identified gaps appropriately, through education and/or recruitment priorities

• Challenging ourselves to enhance diversity in the boardroom – by industry, expertise, gender, ethnicity, geography, generation

• Developing and implementing a process to reevaluate board composition whenever strategy is updated

Driving progress with simple steps


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• Building board talent aligned with company’s strategy—looking three,

five, or more years ahead

• Recruiting for key skill sets such as strategy, technology, innovation,

globalization, cyber

• Enhancing diversity - experience, gender, ethnicity, generation

• Assessing whether prospective board candidates think expansively, are

future-focused, are curious, life-long learners

• Raising the game in onboarding and director education

• Establishing clear expectations for directors and holding them

accountable through robust evaluations and appropriate follow-up

Raising the bar with Board Succession


Do you have a formal succession plan in place for your CEO?

• Yes• Yes, but not sufficient• No, but discussing putting it on the agenda• No

POLL Q4


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• The fundamentals of governance ensures participation and validation of

strategy and the selection and succession planning of the CEO

• Only 1/3 of respondents in global survey by Korn Ferry in 2015 were

satisfied with the outcome of their companies succession plans. *

• The “how” is still a challenge even when the “why” is obvious

• CEO tenure is shorter – five years

• Proactive succession planning is a direct reflection of board culture and

engagement

• Character is required for regular succession planning discussions

• Consistent board agenda issues allowing for engaging strategic discussions *Succession Matters: Accurate identification of leadership potential, Korn Ferry, May 4, 2015

The Challenge of CEO Succession Planning


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• Key strategic drivers three to five years out with deep understanding of

the company’s strategies, demographic and societal shifts, technology,

economic and regulatory/government influences

• Comprehensive contingency succession plan

o Requires commitment of time and director responsibility

• Responsibility of the entire board linked to HR

o Understanding bench strength and candidates

o Providing development goals and executive coaches

The Challenge of CEO Succession Planning


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• Succession planning as it relates to culture and management:

• 56% see critical gap in the ability to fill senior management roles in the future.*

• Agility and engagement with your senior leadership team in evolving thinking

• Building incentives with senior people re: succession planning and

accountability

• Utilizing directors to mentor and develop talent

o Appropriate director communication with managers below the C-suite can

give directors needed perspective that informs succession planning

• Substantive engagement with potential C-suite candidates to get to know their

values

• Special projects and assignments for visibility and strengthening skills

* Boston Consulting Group research

Leveraging Talent to Drive Shareholder Results


We champion outstanding governance to help drive long-term corporate value and enhance investor confidence.

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© 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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