Pope Benedict XVI’s resignation imparts a key lesson: no organization is immune to the necessity of succession planning. (In fact, even the Catholic Church has faced a Pope’s unplanned resignation about 10 times in history, one article estimates, albeit the most recent occurrence being nearly 600 years ago.)
But while most organizations don’t have the formality of a conclave, it’s critical that boards of directors make communications a formal part of their succession planning process. How a board conveys the rationale for its choice is critical to setting a new leader – and in turn, the organization – on course for success.
In the business arena, effective communications around a CEO transition can directly impact a company’s bottom line. Oxford Metrica (disclosure: an Edelman partner) research shows that the difference between poor and effective communications in the first 10 days after a transition can swing market cap, on average, by 10 percentage points (+5 percent to -5 percent). Poor communications can be particularly souring. In the study, the difference between the best and worst communicated CEO transitions resulted in a 25 percent difference in market cap.
A dispersed media landscape is largely responsible for this ripple effect. As news travels faster than ever, stakeholders seek concrete answers at a more rapid pace. Furthermore, employees have amplified their voices through the use of social media, shedding light on heretofore private dissension and tensions about a choice of a leader. In this environment, a lack of clarity and resolution breeds discomfort.
As a result, there are four basic things from a communications point of view that everyone from boards to conclaves can to do instill confidence during a time of change. These are:
- Build the foundation. Before announcing a new successor, it’s critical to have a framework for the new leader’s story. How does his or her strengths support the organization’s overall value position? This narrative can be shared across all communications and tailored to all audiences, from employees to shareholders.
- Develop a playbook. Create communications materials that announce the new leader and explain rationale for the choice. This will ensure all communicators and executives are in sync on how they communicate the leadership change, instilling further confidence.
- Listen and adjust. Edelman’s 2013 Trust Barometer shows that people have to hear something five times in order to believe it. So it’s critical to consistently communicate from day one through the first 100 days in order to measure stakeholder reactions and course-correct positioning as needed.
- Reinforce the choice. Beyond the first 100 days, all communications about the organization must reflect the new leader’s vision and strategy. This sets the new leader up for success and reassures stakeholders that the choice in successor reflects the best interest of all stakeholders.
While there may be untold reasons for a leader’s departure, transparent and consistent communications is critical to making any leadership transition smooth. Now the world watches to see how the College of Cardinals does in selecting the Catholic Church’s next leader.
Image by Sergey Gabdurakhmanov.