Succession Planning – The Business Case for Leader Commitment

Organizations that are known for growing and advancing leadership talent from within create a powerful differentiator. This becomes part of the employer’s brand and is a significant attraction lever for new talent as well as a compelling retention lever for internal talent.

Great organizations, large and small know that the key to survival and marketplace competitiveness is anchored in their ability to be visionary, strategic, and agile. Status quo, while operative today, can easily become an organization’s bane tomorrow. This strategic mindset applies to the development and replacement of leadership as well. However an alarming number of organizations do not have structured succession management processes in place.

Succession management is a holistic system that targets in on mission critical positions ensuring that talent is identified, available, and ready to step into leadership roles when the need arises. Given today’s labor landscape, it is even more imperative that sound and dynamic succession management processes are in place. In short, the demand of leaders is outstripping the supply and major companies are ill prepared to address this.

This impending scarcity at the C-Suite and other leadership levels is being driven by a couple of forces. One, an estimated 75 million U.S. baby boomers will be eligible to retire by 2010. The average age of the chief executive is 50 and, not surprisingly, filled predominantly by baby boomers. The talent to replace these boomers will come from the next generation of only 45 million available workers. This transition places at risk, institutional knowledge transfer and the overall performance and sustainability of organizations. Secondly, the profile for those in the C-Suite has changed in the last 20 years and is continuing to change. For example, turnover of CEOs of major corporations has increased by 53 percent (influences include merger driven, performance related, and regular transitions like retirement). Consequently, the average tenure of CEOs has declined (from 9.5 years to 7.3 years).

It may be less convoluted to replace a CEO you know will be leaving, however, in a significant number of cases, the CEO’s departure catches an organization by surprise. This translates into a perceived and real crisis to internal and external stakeholders. It leads to remaining leaders and board members trying to make decisions that are in the best interest of the organization at a time when emotions are running high – not an optimal time.

Due to the combination of influences and impacts, it is probably apparent why succession management would be important for the organization at large. Business continuity is at the top of the list. Development and, consequently, retention of key talent is a first cousin. Organizations that are known for growing and advancing leadership talent from within create a powerful differentiator. This becomes part of the employer’s brand and is a significant attraction lever for new talent as well as a compelling retention lever for internal talent. The top companies for leadership development show significant bottom-line advantages including reduced costs associated with turnover and executive recruitment. As an example, companies pay their chief executives nearly three times more when they hire them from outside the company than if they promote from within.

At the individual level, succession planning may not be top of mind for the incumbent leader, particularly if the leader is the CEO or founder of the organization who has nowhere else to advance within the organization, and is not planning on retiring soon. Many entrepreneurs and business leaders so closely identify with their ventures that they think of their involvement as life-long; and no one wants to think about their mortality. Other leaders believe they’re too busy.  However, the individual business case for succession planning is just as important and impactful as the organizational business case, irrespective of the size and structure of one’s business.

Alongside business continuity and sustainability of the business, planned succession gives the incumbent leader a chance to leave behind a legacy. The leader can take time to share his or her vision, philosophy, values, lessons learned, and experiences with potential successors. It gives leaders a chance to reflect on and deliberately shape how they want to be remembered, what role they will play in developing and influencing potential successors, what is next for them, and how they will transition out of their role. A planned succession and smooth transition positively impacts the leader’s internal and external brand.

Senior leaders often view succession planning as another Human Resources exercise, but the truth of the matter is that it should be owned by the leaders within the business. While HR may take responsibility for coordinating the effort – e.g., helping identify positions, facilitating talent reviews and development plans, and measuring and reporting results; an accurate and complete snapshot of talent within the organization cannot manifest unless business leaders are engaged in the process. Business leaders, too, own and underwrite the on-going development of potential successors. Development is an essential ingredient in succession management and one that often dies on the vine. There are so many ways in which incumbent leaders can champion succession management and many areas that hinge upon their input including:

  • Providing a vision for and knowledge of the strategic direction of the business and an understanding of the type of talent that will be needed (e.g., functional skills, knowledge, experiences, and traits).
  • Sharing an assessment of the performance and potential of likely successors based on direct observations and feedback from others.
  • Sponsoring and/or creating relevant development opportunities (e.g., rotations) for identified successors.
  • Devoting time for one-on-one coaching and mentoring of potential successors.

Incumbent leaders can leverage their position and power within the organization to champion succession management as an inclusive process. This can be accomplished by recognizing and articulating that excellence comes in all shapes, sizes and colors and by stressing the need for leaders who can connect to the business’ target markets or who embody the strategy that will improve business performance. Just as recruiters insist upon a diverse slate of candidates from executive search firms, leaders can insist that diversity be reflected in the successor pool. The inability for the organization to do so points to a more systemic problem (e.g., no diverse candidates in the feeder roles) and will require more deliberate and programmatic efforts to reconcile.

At any point in time, business leaders should be able to confidently speak to who is ready now and who would be ready with development for specific mission critical roles in their units. Corporate and non-profit boards of directors are becoming increasingly requiring of this information. Best practices used by companies like Exelon include continual use of quarterly business-unit reviews to guide succession planning and development, and provide an updated snapshot of the leadership bench. This allows for timely feedback and coaching, and identification of credible “ready-now” successors for all senior-level positions.

The incumbent leader’s involvement in succession management is ongoing. The handing over of the baton is a process, not a single event. It is a recurring cycle of events that is “refreshed” prior to new players entering and exiting the game. The stakes are high. Consequently, the commitment requirement is high; and for well executed plans this translates into an ROI to boast about for the organization and individual leaders involved. ________________________________________________________________________

Charmon Parker Williams, Ph.D., an industrial psychologist, is a career and talent management consultant, coach, and contributing writer for Diversity MBA Magazine.

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