The concept of succession planning has been around for a long time.  Boards of public companies and the leadership of most private and not-for-profit organizations know that they need to identify who would step into the most crucial leadership positions in the organization if “someone got hit by a truck or won the lottery.”  So, what’s all the noise about succession planning?  Another example of consultants making things more complicated than they already are?   Let’s take a brief look at this issue and understand why it is more complicated than it first appears.

Various studies indicate that although most companies have what they call a “succession plan” -- in fact, it is just a temporary replacement plan.  Most executives and boards know that their plan does not identify or effectively develop key leadership that can sustain the organization over the long term.  And this situation is potentially very damaging because the rate of failure and movement among executives in the top key positions of the company (e.g., CEO, CFO, COO, etc.) is higher than ever, according to most research on selection and placement.  Why do we have this situation and what can an organization do about it?

Historically, the focus of succession planning has been what to do in an emergency and that remains the approach in many organizations today.   Development of senior executives is often viewed as unnecessary (i.e., “they’re experienced – that’s why we hired them”).   Frequently, Human Resources “manages” the process, but is rarely held accountable for the quality, development or availability of candidates for the top positions in the company.  The succession plans are “tracked”, usually on an annual basis, but there is rarely a sustained commitment and follow-up on development needs. 

Development is supposedly “good for everybody”;  BUT rarely are development activities focused on the top of the house (e.g., the top ten or fifteen leaders).  Most executives receive it on an ad hoc basis only.  For example, if an executive is really inept interpersonally, the company will find him or her a coach.   Most often, leadership development is designed for the mid-level to senior level of management, but even there  it is sometimes ineffective in achieving its stated objectives and the top leaders are often just “observers” or “faculty”.  Of course, there are always exceptions to the rule. One department might decide to focus more attention on this issue because of the particular concerns of a given executive, availability of mentors, demand from incumbents, etc. and that can make all the difference.   However, what is needed is a consistent and disciplined corporate-level commitment to sustained leadership development.

Since internal development efforts often fail to produce adequate talent for the top of the house, it is not surprising that many organizations have become overly reliant on recruiting from the outside.   This is costly for many different reasons, and as many companies can testify, is not often successful at the highest levels.

Succession planning in the past and often today also fails because of three inaccurate assumptions:

• That talented individuals have limited mobility (i.e., they are willing to stay with the company long enough for the incumbent to leave the role);

• That the desired competencies (skills, knowledge and behavior) remain static over time, rather than being influenced by changing business strategy; and

• That the company can heavily influence the career paths of its employees and that these are usually linear, predictable journeys. 

None of these assumptions holds true any longer (if they ever did).  Changing economic conditions, social attitudes, globalization and workforce demographics demand a new approach to succession planning – an approach that’s not simply about “filling the gap.”

To create “real” succession planning, start with some meaningful guiding principles.

• Establish a consensus among the board and the top executives on the business context in which leadership must be demonstrated.  “What are the challenges we face today and in the future and what kind of leaders do we need for us to win?”   This is a discussion about the people implications of the key business issues.

• Make the process collaborative and completely honest.  Sometimes HR can facilitate this discussion, but in some situations an outside facilitator may be required because HR is understandably often “too close” to the incumbents.   For example, if the current CFO is not equipped to face the challenges of the future and there is no one in Finance and Accounting who has been trained to meet these challenges either, there must be a candid discussion about acquiring new talent or finding it elsewhere in the organization.

• Assure a pool of key talent at the top.  If there are five key positions in the company, it may be necessary to have fifteen people who are not just identified, but are really assessed and developed.

• Understand not only the competencies of the incumbents, but also their needs and career expectations.   Often companies lose executives because they did not know that the individual was dissatisfied with certain existing arrangements that could have been altered, if only others had known.   Look for on-the-job training as a means for development and don’t rely primarily on external executive development programs.

• Don’t assume that there are magic answers.  Succession planning is about the assessment of risk, and, consequently, there is always the potential for a range of success or failure.  Boards and CEOs must be willing to face and analyze these risks with a clear eye.

• Recognize that there is no ideal process.  It must be tailored to the history and culture of the organization and based on your business strategy and requirements.  What works at GE, the most talked about company when it comes to succession planning, is often not applicable in other environments.

• Measure the return on investment in succession planning.  “Are we achieving our objectives in the stated time frame?  Are we better prepared for the future?”

To increase the possibility that top leaders of a company will serve long and successfully, the board and the key executives must translate these guiding principles into a process that will assure that the organization has the right talent doing the right things to drive the current and future success of the company.   No organization can achieve this outcome and succeed in the long term if it only plans for emergency replacements.

Steve Bookbinder is an independent consultant specializing in change management, measurement and workforce and leadership effectiveness.  For many years, he was a senior partner at Towers Perrin and worked with a wide range of publicly traded, privately held and not-for-profit organizations.  Prior to Towers Perrin, Steve was a college professor and a human resources professional.  He is the author of several articles on people management and leadership issues and has been frequently quoted in national publications such as The Wall Street Journal and The New York Times.  You can reach Steve at www.stevebookbinder.net