The Lost Art of Succession Planning

It had been more than a decade since the board brought him in as president of the foundering company. They had needed someone with the confidence and determination to shake things up and redirect what was once a profitable enterprise. It was not easy, particularly the people side. As president, he had to dismantle old loyalties, habits and cultural norms, and implement a new vision. He eventually replaced three-quarters of the executive cadre, most with people new to the company.

Despite the agonizing decisions and wrenching change, things had gone relatively well. He was generally satisfied with his accomplishments. The company was again a force to be dealt with. Recognizing his responsibility for the company's transformation and renewed prosperity, the board appointed him chief executive officer four years ago. But he and the board now understood that time was working against them. New initiatives were necessary to sustain growth. New leadership could and should take the company the next step.

The CEO was not yet ready to retire, but he sensed that the board was restless for the new thinking that would facilitate the future strategic direction of the company. Banter at board meetings touched on how he would use his leisure time. Then came the questions from board members about issues of succession. His answers were not as crisp as usual. The discussion made him uncomfortable. He recognized that the company's lack of preparedness on this point was ultimately his responsibility.

He and his team had been so busy fixing, implementing and creating, that they had given virtually no thought to leadership development and succession planning. He believed that the company certainly had more talent to draw from than when he arrived, but he was unsure who could provide the top leadership necessary for the future. Prior to his arrival, his predecessors had badly misjudged the talent requirements. Now he was wondering if he had done the same.

It was his job to provide the board with legitimate choices for his replacement and that of other key executives. They may choose to go outside again, he thought, but they surely should not have to do so. He also recognized that his job is to guarantee that talent is available to fill new positions resulting from growth, and to ensure the development and renewal of leadership capabilities, in general, throughout the company. The task before him was clear: begin immediately a process matching the talent with the company's strategic imperatives. Then take the necessary steps to promote the growth of people and put into place a system to measure objectively their progress. He wondered how he could have underestimated such an important responsibility.

You are Not Alone
The above scenario is more the norm than the exception. The majority of companies today do a haphazard job of identifying and developing successors for key positions. A survey of more than 500 human resources professionals conducted recently by RHR International revealed that succession planning is neglected or done poorly by most. Less than one-quarter of the respondents said their company has a well-developed management succession system. Less than one-third said their organizations link succession planning to strategic business needs. And slightly more than one-third incorporate succession planning as part of a broader management development effort. Almost half the respondents said their companies are not prepared to replace key executives when faced with a sudden departure.

The fact is, not preparing for the inevitable exposes a company to significant risk. And, after all, everyone will eventually leave a job, whether through natural progression or unusual occurrence. Succession planning, therefore, should be systematic, ongoing and practiced throughout the company, especially for critical senior management positions.

Asking Yourself the Right Questions
In order to be effective, a succession planning system must address needs on a number of levels. Where to start? Ask yourself the following questions.

What will be the future business environment in which our company finds itself?
Will it be similar to today's? What market conditions are likely to change, necessitating a redirection of the company's strategy? Usually, major shifts are only partially predictable and planning future management needs around them is problematic. In addition, incremental changes across a broad spectrum of business factors can dramatically affect what it takes to succeed in a job. It is inexact, to be sure, and may seem like crystal ball gazing, but the future business environment must be taken into account before any discussion of staffing needs can occur.

What talent will we need to meet the demands of the future?
Of course, this must be based on the predictions you made about business environment. It is important to extrapolate the characteristics that individuals must possess to succeed in that environment. Is your company going to seek a new customer base or go global? Will product development become a greater priority? These choices change the general skill profile most important for success. They also change the mix of leadership characteristics and experience required for individual positions.

What talent already exists within the company that meets those demands?
Are there people in the company whose characteristics match these newly-determined criteria or whose talents have been underutilized? Many companies have undertaken extensive outside searches only to discover the ideal replacement within their own ranks. It is important to conduct a thorough assessment of all high-level talent. You should also concentrate on mid-level, high-potential individuals.

What potential talent exists that can be developed over time to meet the demands of the future?
With a strong and focused development program you can continually nurture the potential within your company so that there is always a pool of qualified individuals from which to draw. The ongoing attention usually heightens employees' sense of worth and their loyalty to the company. These developmental experiences benefit the company and the individuals, whether or not they are chosen for promotion.

What action plans will help us reach the level of internal talent capacity we need to drive the company in the future?
This is the key to true preparedness. Building sustainable development systems and linking them to succession planning creates a readiness to replace key people in a timely manner. A good succession plan helps you know where your talent resides and where you are weak. It provides a clear view of the road ahead so that you can take the appropriate action when necessary to replace a key executive, whether from within or through an outside search, if necessary.

It is the Journey, Not the Destination
One of the primary reasons for companies' failure at succession planning is that they treat it as a one-time event, rather than a process. Senior management often establishes a succession planning episode in response to an emerging need. After they pass that hurdle and fill the key position, they revert to their old ways.

To be successful, a succession system must be tied to the company's strategic business plan and integrated with other human resources systems. Top management must take ownership through active involvement and visible support. It must be a dynamic, ongoing process that provides multiple-source, objective assessment of individuals.

Once established--and that can take several years--a good succession planning system nurtures the executive skills and talent needed by the company to be successful. It also breeds loyalty within the company's management ranks, a loyalty inspired by the opportunities available to people through the fair assessment of both the company's needs and its existing capabilities.

All Companies are Not Equal, All Needs Not the Same
Taking into account the vast differences among companies, no one system is right for every one. However, there are some basic guidelines that can prevent unproductive false starts in addressing succession planning needs. Following are some key factors to consider when developing a succession planning system:

Keep it Simple
Don't create a system that is more complicated than your organization can sustain. Today's information technology makes it easy to develop a system that looks good, but is devoid of human judgment. Don't worry about complex forms, reports and lavish databases, but about essential and useful information. Encourage good listening and thoughtful questions as a way of getting at that information.

Make Assumptions
As difficult as it is to accurately predict the future, you must force yourself to make assumptions about what your organization needs to carry on. You may not know when or how your company is going global, for instance. What matters is that you have plans to do so, because that colors how you view candidates for top positions.

Put Accuracy above Consistency
Don't worry about consistency with past judgments of a person, but about accuracy of the judgment. Executives have a natural tendency to be declarative and they like to be right, even when evaluating people. However, there must be a willingness in this process to take risks in discussing people and their development. Accuracy comes through the regular sharing of perspectives. Raters must recognize that their job is not to be an advocate, but to fill in the pieces of the puzzle.

Follow through
Recognize that the succession planning process doesn't end with the review. It requires consistent follow up, development plans and regular revisions, based on newly acquired information, to gain the greatest value from the system. Day-to-day pressures often place development planning and implementation on the back burner. This results in development plans being completed just prior to the next review, leaving little time to assess the impact. It is important to start development as soon as you identify the needs, and to set and hold yourself accountable to concrete deadlines.

Be Patient
A succession planning system evolves as those responsible for it develop their understanding of its goals and methods. The raters' sophistication increases over time as they learn to evaluate people appropriately and to link the strategic development of the company to the leadership demands. The payoff is not instantaneous.

Planning is Key to Leadership Continuity
Succession planning seems to be a lost art because relatively few companies today go about it in a broad and systematic manner. This is at least partially due to the past decade's short-term emphasis, which placed the focus more on the present than the future. Consequently, as senior management looks for the next generation of leaders, they are finding shallow pools of developed talent.

Maybe it is the very phrase succession planning that perpetuates the notion that it is an event. At RHR, we encourage our clients to think in terms of Leadership Continuity Planning.™ There is a growing awareness that, rather than taking the episodic approach in response to specific position needs, it is necessary to start meaningful and planful programs. Companies are again recognizing the value of a programmatic approach to development. They are working to regain the important safety net that a succession planning and management development system working together can provide. It's just good business.