Best Practices for CIO Succession Planning Require Long-Term Preparation

Art by Katherine Streeter

Mansco Perry III, the former head of the Minnesota State Board of Investment, told the fund’s board in December 2021 that he planned to retire in 2022, but he did not provide an exact date.

“I ended up being a little more accommodating than I probably should have been,” Perry says, noting that he did not officially leave his job until October 2022, about 11 months later.

In the meantime, the board set up a committee to find his replacement and worked with a recruiting firm to design a job description and interview both internal and external candidates. Perry did not serve on the committee, but he did provide the names of some candidates for potential interviews. In August 2022, the organization announced the appointment of Jill Schurtz, then the CIO of the St. Paul Teachers’ Retirement Fund Association, who started at the SBI in October 2022.

While the transition was a smooth one, Perry concedes that the organization could have prepared better for the succession. But CIO succession planning is something for which many institutional investors fail to properly plan.

There are several strategies an organizations can put in place to prepare for its CIO’s eventual departure—whether that occurs tomorrow or 10 years from now.

Make It an Ongoing Process

CIO succession planning should begin as soon as a new CIO starts, rather than waiting years or decades for when the CIO announces plans for departure, says Vanessa Akhtar, a managing director at Kotter International, a firm in Cambridge, Massachusetts, that helps companies deal with change management.

“Succession planning ought to be a discussion that the organization has periodically, regardless of the tenure of the CIO or CEO,” Perry says. “I could have said, ‘I’m leaving,’ and been gone in two weeks.”

Regular discussion of succession planning can also help the CIO from taking offense or worrying that about being pushed out when the board considers succession. It also provides protection against the risk of an unexpected event creating a rushed, less thoughtful process.

“You never know what’s going to happen,” Akhtar says. “Someone could win the lottery, or someone could get sick and can’t do their job anymore. The CIO should always be thinking about building a team where if they moved out of their role, the whole house wouldn’t come crumbling down.”

While she just started her role as CIO of Fordham University in August 2022, Geeta Kapadia says she is already working to build processes aimed at prioritizing future succession.

“Part of my mandate is building out an investment team that will alleviate some key-person risk, as well as aim to develop staff who should be able to mitigate the impact of any one person leaving the team,” Kapadia says.

Think About the Future Needs of the Organization

 The first step in succession planning is for the board or committee to consider the criteria that would make the next CIO successful. It is important for organizations to avoid the trap of looking for a replacement identical to the incumbent—no matter how successful they’ve been—and think instead about how the next person will move the company forward in the future.

“We don’t want a bad copy; we want a new original,” says Stephen Miles, an executive coach and founder of The Miles Group, which helps companies develop talent strategies and succession plans. “That’s an important framing, because the role and the needs of the organization change over time.”

A top priority, of course, is the ability to deliver necessary returns on the portfolio, but organizations also want to think about opportunities that might arise in the next three to five years and the CIO skillset that could best capitalize on them, Akhtar says.

“The organization needs to ask what types of leaders they need, what types of change they anticipate and who is best to step into that position, rather than starting with, ‘Here is what has always worked,’” Akhtar says.

In today’s world, it is also critical to consider an executive with the ability to pivot quickly or respond to quickly changing markets, regulations or other conditions.

“Our world is more uncertain and turbulent and volatile than it’s ever been, so when you’re thinking about putting someone in that succession pipeline, it’s important to identify people [who] embrace the notion of agility,” Akhtar says.

Such an approach often means broadening the field of potential candidates beyond obvious or internal ones.

“You should always be trying to hire someone who can be in the seat for 10 or more years,” says Jase Auby, CIO of the Teacher Retirement System of Texas. “You shouldn’t just simply elevate the current No. 2. Oftentimes, the current No. 2’s experience doesn’t translate to 10 or more years.”

Develop Plans for Internal Contenders

Once an organization has defined criteria for the next CIO, it should assess existing employees to identify future candidates for the position, Miles says. That includes people the board may consider ‘not ready’ for the role.

“By definition, nobody is going to be ready now, unless they’ve done the job before,” Miles says. “What we’re really assessing for is their viability for the role: Do they have the requisite ingredients and the capacity for growth to be ready for the role, rather than being ready right now?”

If the answer to that question is, ‘Yes,’ the organization and current CIO can focus on giving those employees more responsibilities, experiences and coaching to further their development.

At Texas Teachers, that process began three years before former CIO Jerry Albright left his post. After he and the board identified Auby, then chief risk officer, as successor, they moved Auby into a deputy CIO role and worked to give him more in-depth exposure to specific asset classes and opportunities to build external relationships.

“I started to be invited to attend meetings I normally hadn’t been in, with the state legislature, our state government and with senior investment managers outside of the organization,” Auby says.

Tweak the Plan Over Time

Regularly revisiting the succession plan, rather than thinking of it as a moment-in-time transaction, typically leads to better outcomes, Miles says. It also prevents incumbent CIOs from getting defensive that a board wants to move on to the next person immediately.

“Thinking of it as an ongoing process makes our hygiene around the process better and allows us to retain some of our highest-performing candidates, because we are doing things with them,” he adds. “They’re being assessed, they’re getting coaching—that creates a connectivity to the organization.”

It can also help ensure that the organization has at least one ‘name in the envelope’ of someone who can take over as acting CIO immediately in an emergency while the board works to find a full-time replacement.

“What we want is to have someone in place who is stabilizing the situation while we run the process to take one last look at the role and assess internal candidates,” Miles says. “Hopefully they’ve been developed, but sometimes the timing isn’t perfect.”

Also Consider Outside Candidates

While most of the time, advanced succession planning leads to the hiring of an internal candidate, Miles says it can be helpful to interview external candidates as well.

“You want to know who’s out there that’s recruitable, available and affordable,” he explains. “That can give you a comparison that allows you to choose the very best candidate for the role.”

There are risks involved in both types of hire. With internal candidates, they often have not performed the role or had as many responsibilities before—no matter how well the organization has prepared them. Meanwhile, external hires typically need more time to get up to speed, and while the organization should interview and consider culture fit, sometimes once the candidate starts, it’s clear that is not a match, Miles says.

Set the Incoming CIO up for Success

In the best-case scenario, the former CIO gives a few months’ notice and can spend time putting processes and procedures in place to reduce friction for the successor. This can also include making introductions and bringing the successor to important meetings.

However, it is not necessary for the former CIO to assist directly in facilitating the transition. Having written processes and records and a welcoming staff can make a big difference.

“I’m very grateful that Fordham had a lot of good systems in place and people who have been able to point me in the right directions and try to shorten that uphill climb to learn as much as you can about an organization,” Kapadia says. “I really appreciated all the face time with people in leadership positions right away, so I could build first impressions.”

The process is inherently smoother for internal candidates in a planned succession, who have the advantage of time with their predecessor. Auby says he appreciated receiving a clear enumeration of the CIO’s duties and the opportunity to gain experience in those areas in which he had less.

“For me, that was the opportunity to be more external-facing,” he says. “I was the chief risk officer previously, and I was much more of an internal presence than an external presence. Just learning how the prior CIO engaged externally was helpful for me.”