As a world-class search and leadership development practice, Korn/Ferry is frequently called upon to help an organization select its next CEO. Sometimes we are asked to find a replacement for a CEO due to retirement, because the company is under-performing or entering a new stage of growth, or because the CEO has moved to a new opportunity. At times, we may be asked to assess a slate of internal candidates for CEO potential. And usually this request comes with a similarly tight timeline and narrow focus. We are told: "We need a new CEO; help us find the best internal candidate."

It is important for your organization to have competence in either case: Our Search professionals will find and present a great slate of qualified candidates — and they've done this thousands of times. We can also, with great confidence, assess a set of internal candidates and help guide the selection of the CEO successor. But if all we do is respond to this kind of request with a transactional solution, we will have missed a key opportunity to partner with an organization in a deeper, more strategic way.

This is because CEO succession is NOT a transaction; it is a major systemic change. When there is a change at the top, the organization's strategy, vision, values, culture and market value are all in play. And it's not just the CEO whose position is affected: whether the winning candidate comes from inside or outside the organization, the change affects all of the relationships on the organization's leadership team, and the change in the top team will be felt all the way to the street. Here are some ways your organization will need to fully address succession at the top:

The Organization Is Always in CEO Succession
Best practices suggest that CEO planning should occupy about a three- to five-year window from the time the need is first anticipated until the new CEO is fully in place. With the average CEO tenure at about four years, this means that many organizations should always be thinking about CEO succession. In one case, the CEO announced that he would retire in about three to five years, and the organization asked us to create a process for developing internal candidates. Unfortunately, the incumbent CEO took ill and died within a year of beginning to think about developing a successor. Needless to say, the organization scrambled to switch from development to assessment and selection mode, and the new CEO had to take over with very little preparation for the role. Waiting until the incumbent CEO announces he is ready to move on is a very dangerous and risky way to manage a business. When should an organization start CEO succession planning? Now.

The Organization Needs a Valid Model for the CEO Position
Evaluating potential candidates is crucial. But evaluating them against a solid, research-based, experience-validated set of leadership competencies is more than that — it is a fiduciary responsibility. Too many knowledgeable boards put together a "homespun" idiosyncratic list of leadership characteristics, brainstormed in a subcommittee working session. The resulting CEO model is not only invalid; it is often immeasurable. Nor is it clear how the model represents the vision, values and strategic direction the organization needs to pursue under the new CEO. We can work with your organization to affirm its vision, mission and strategic direction; assess the organizational capabilities needed to get there; and identify the objective competencies of leadership, learning agility and decision-making capability, as well as the motivators and emotional competencies needed for success.

Of course, leadership goes beyond a paper list of competencies. It is also crucial that the individual has a requisite set of experiences, character and ethical standards to handle the job. Korn/Ferry's professionals can consult with your organization about these qualities and the best ways to assess them.

As strong as internal candidates may appear, it is often a crucial practice to compare an internal slate of CEO candidates with what is potentially available outside. This can be more cost effective than a full search, and this benchmark information can be leveraged into a full search later if viable internal candidates do not emerge. In the interim, understanding your bench strength is critical to future leadership success.

Don't Just Assess; Develop Talent
Creating a culture of development at the top has multidimensional benefits: retention, engagement, sustained performance...and can create an environment that supports the emergence of the next CEO. Even if the next CEO is not found within the organization, a culture that identifies and develops its leaders is likely to have leaders who are open, trust-based strategic thinkers and also emotionally intelligent. In such a culture, selection of a new CEO will be eased, and acceptance of a new leader more readily extended among the existing team. On the other hand, when a culture of development has not been created, the sudden assessment of top talent (or launch of an external search) can create an atmosphere of anxiety and competition — like a "horse race" in which the "horses" have not been properly conditioned!

In order to succeed in succession, your organization should encompass intensive, focused leadership development programs that build self-awareness, growth and development for top talent. For likely CEO successors, any development program needs to also include key actions to help candidates round out their experiences. These may include enterprise-wide initiatives that each candidate can lead to demonstrate their strategic, collaborative and silo-breaking leadership competencies; stretch geographic assignments; and provide social and business interaction with the board. Stretching top candidates — and giving board members the opportunity to know the candidates over time — is another key to organizational and succession success.

Support the New CEO with an Onboarding and/or Coaching Program  
Whether the new CEO is an external hire or internal promotion, despite the best development and preparation, he or she will benefit from support in the new role. An external hire will benefit from an onboarding process that helps him or her identify and establish key relationships, become quickly acquainted with the intricacies of markets and strategies, and generally adjust to the new culture. But even internal candidates, who may know more about the inside workings of the organization, can be surprised by the requirement of the new role.

A few years ago, we worked extensively with an executive in a leadership development program. One of the stated intentions of the program was to assess and develop this individual as a possible CEO successor. The selection process was long and emotionally draining, but we helped him through it and he emerged with the position. His pursuit of the position was a success, but when we spoke with him after a few months in the job he commented on how his life had changed. Among other things, he was unprepared for the new sense of isolation he felt at the top — all of his relationships had shifted, and he had lost his sense of being a peer among peers. In this case, he knew all of the players — but he needed support in learning to work with them in a role that was more visible and more accountable than any he had held before.

Another new CEO suddenly recognized the challenges of communicating across a global enterprise. He needed support to develop strategies, technologies and messages through which he could convey his full sense of passion for the organization he was now leading.

Help the Incumbent CEO Transition
Whether the situation is a CEO replacement due to performance or retirement, the incumbent often needs assistance to move on with dignity, purpose and discipline. A CEO is often a high-energy individual for whom work has been an important part of his or her purpose and identity, and the transition out of the CEO role represents a major life change for the individual as well as for your organization. Your organization should help individuals transition into a new leadership role, as well as help them transition out of the organization with a plan for a new life that is purposeful, compelling and rewarding. Transition and life planning coaching eases the stress of transition for the incumbent, their team, family and organization.

Develop the New Senior Team
The senior team is in succession, too. With a new boss, the team faces new expectations, communication styles and ways of working. Some of the team members may be disappointed not to have been selected. Others might be anxious about what the change in leadership means to their careers and relationships. Introduction of a new CEO almost inevitably means realignment of the senior team, and it is critical to create a team whose members trust and respect one another, who communicate well, and are committed to their success and the success of the organization. Senior team development can parallel individual development in the culture of continued development. Of course, each member of that team has talented people reporting to him or her. We recommend cascading assessment and development throughout the organization to continue the cycle of planning for the future. As we said at the outset, best practice CEO succession is an ongoing process of optimizing organizational success on a seamless, continuous basis from one CEO to the next.

Kevin Cashman is a world-renowned thought leader on leadership development and the best-selling author of Leadership from the Inside Out. He is a Korn/Ferry Leadership and Talent Consulting Senior Partner for Board and CEO Services. He is recognized as a pioneer in leadership development and executive coaching, focusing on optimizing executive, team and organizational performance. He was recently named one of the top 10 thought leaders by Leadership Excellence magazine. He has written numerous articles and papers on leadership and career management, and has been featured in The Wall Street Journal, Chief Executive, Human Resource Executive, Fast Company, and Strategy & Leadership, as well as on Oprah, CNN, National Public Radio and other national media. Mr. Cashman was formerly the host of CareerTalk radio and is currently a leadership columnist for Forbes.com.