Strong leadership is key to the success of a company, yet most companies do not have an actionable succession planning process in place to replace departing CEOs or key C-Suite executives. The solution: to craft succession plans closely tied to coaching and internal talent development.
No one would deny the importance of strong, capable leaders at the helm of a company. Successfully managing the transition from a departing leader to a new CEO or C-suite executive ready to step into the position is thus one of the most important functions of a board of directors. But the responsibility of such a task does not lie solely with the board of directors. Effective succession planning begins with effective talent management — developing the great leaders of tomorrow rising through the company. The succession plan must always be ready to launch: a company can ill-afford to be taken by surprise by a CEO or key executive who is, for whatever reason, suddenly departing.
Surprisingly, a large number of companies have neither effective succession planning processes in place, nor the talent development programs that should be underpinning such processes. The reason, as revealed by a Stanford survey of executives and directors at 20 companies, is that many company leaders underestimate the importance of a succession planning strategy — and what their organizations need to be doing today to fill the executive-level voids that inevitably need filling sooner or later.
The findings of the survey, conducted by the Institute of Executive Development and Stanford University’s Rock Center for Corporate Governance, included the following:
- Companies don’t know who inside the organization is ready to fill senior leadership positions. Directors may know what skills and attributes are required, but don’t know who might have those skills and attributes due to the lack of talent development programs.
- There is no actionable succession process in place. Instead, companies avoid talking about executive performance and do not try to groom successors.
- Rather than trying to find the best successors, companies are more focused on reducing risk. This is not a total surprise given that companies are rewarded by regulators, ratings agencies and the market for reducing risks and minimizing losses — not taking risks that could lead to long-term value creation.
- Roles are not defined — or followed. Effective succession planning is a collaborative process involving the board of directors, senior managers, and support staff (notably human resources personnel). With no formal process in place, however, no one knows their roles in the company’s succession planning effort.
- Succession plans are not connected with internal talent development programs. This is a key problem for both the high-potential leaders in the company who are not groomed to take over, and directors who don’t know the skills and capabilities of the senior management team. The default, unfortunately, is to seek a replacement outside the company.
What can executives and directors do to be proactive in developing an effective succession planning program? Here’s a seven-step plan:
- Know what you need and know what you have. Identify the skills and capabilities required of C-suite and CEO-level executives in your company, then see how your executives measure up.
- Don’t just look at the usual suspects. You’re planning for future needs and priorities, and there may be just the right people within the ranks who have the potential to fulfil those needs. Cast a wide net.
- Succession should be a continuous process. Don’t wait until a key position has walked out the door before you start building the profile for the best replacement.
- Who’s doing what? Board members, the CEO, senior executives and support staff should be assigned specific roles and held accountable for their part in the process.
- Connect your succession program with coaching and internal talent development. To fill the pipeline with executive talent requires filling the knowledge and experience gaps in your potential leaders so they can be set to fill the void when needed.
- Bolster the program with coaches and mentors. Professional outside coaches and board mentors will allow potential CEOs and executives to gain new perspectives on the organization. Finally, benchmark other succession planning programs. What are other companies doing? Their needs may be different, but you can always customize their best practices for your organization.
Learn from the best practices of others. Succession planning is a universal concern in business. Companies should take the opportunity to learn what others are doing, and integrate the practices that apply best to their situation.
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- March 2014
- October 2014