Succession Planning as a Contact Sport: Are You Getting Fit for the Future?
Dr. Ed Ryterband


Many corporations hinder their succession planning efforts when they buy into the myth of the "continuous future." The term summarizes the idea that, although a company's business markets and products might change, they will be similar enough to today's conditions to make choosing successors an exercise in replacing or improving incumbents.

As a result, succession planning doesn't lead to fresh strategic thinking. Instead, new leaders are groomed with no thought to what type of leader might be needed to tackle the hazards and opportunities of the future.

This "continuous future" concept has led corporations to overemphasize conventional models of recruitment and assessment. Those models have firms looking in the same, old places for successors in the same, old ways.

Senior managers and boards often think that with proper regard for timing, good references and data on candidates' successes, selecting future leaders will be an easy task. What they fail to consider, though, is whether they can pay candidates enough to attract them.

Recent failures among many high-profile, newly anointed CEOs should compel corporations to recognize that those conventional models represent a risky posture. Mistakes can be very costly.

More often than not, organizations and management are caught off-guard by a sudden senior-level failure or departure, only to find they are struggling to find a successor quickly. Unfortunately, organizations that follow this "triage method" of reactive succession planning often find themselves back at square one a short time later.

Why is this happening so often?

There are many reasons, including where and how companies search for future senior leaders. In a pressure-filled situation, organizations tend to look for familiar people who have had successes in senior jobs in the company or elsewhere. This isn't necessarily a bad idea, but this method involves looking backward rather than toward "future fit" when seeking a successor.

For example, a major retailer has grown significantly because its operating model and merchandising strategy has changed dramatically — the company is operating far beyond its former domestic marketplace. The company also realized some time ago that its success would attract new and more powerful competitors.

Clearly, the leadership profile at this company of today required very different kinds of skills than in its past.

What the company understood some time ago is that the "fit" of each executive should match the strategy of the company several years in the future. This knowledge was crucial to its winning succession plan.

In companies such as this, recruitment and redeployment decisions for senior positions that are based not only on candidates' successes but also on their ability to lead the company into its next phase nourishes the company's continuing growth.

Conversely, when organizations simply expect a new executive to "pick up where the others left off," they can lose strategic wisdom, innovation and competitive edge.



Although there are firms that are noteworthy examples of quality succession planning, most corporations generally follow these misguided principals of "continuous future" planning:

1. If you start early enough, qualified successors always can be culled from internal candidates.
2. If there are no internal candidates, you can go to the external marketplace of executives who have been successful elsewhere and find the right people to fill anticipated gaps.
3. Just in case of an unanticipated departure, you can draw up a table of possible successors who are ready now or "stopgap" people who can fill interim roles.

In fact, many companies don't even follow these rules particularly well and don't look far enough ahead to plan for succession until they absolutely have to. According to a recent survey conducted by Directorship and RHR International, more than 50 percent of board members say they don't have a clear CEO succession plan, and fewer than a third of the directors surveyed say the transition to a new CEO would be smooth if it happened today.

One indicator of a need for new succession planning models is the dramatically higher rate of turnover in the executive suite. Within 18 months of hire, 50 percent of senior leaders are no longer in the jobs for which they were hired, which proves executives and companies all too quickly outgrow each other when the new person is selected based on his or her past performance.

Smart organizations don't wait for the inevitable such as a sudden senior-level death or impromptu retirement. Instead, they take charge of succession planning and manage the timing of succession with "future fit" in mind.

Rules of the Road: Implementing Future Fit

By anticipating business challenges and tying them to succession planning well in advance, companies get ahead of the game. They can take several steps upfront to ensure the process runs smoothly:

• Strategic versus Long-Range Planning. The difference here is that in long-range planning, the firm projects a target x years out that represents an intuitively satisfying rate of growth, then it goes about planning how to get there. Although a future rate of growth is an important desire for a firm to have, it needs to emerge from a clear-eyed view of the resources, challenges and vulnerabilities of the firm. Too often, top management agrees to a growth number without sufficient, candid discussion of future opportunities or risks.
• Independent Time Horizon. An effective CEO succession should not be prompted by the individual's pending retirement. From the start of a new CEO's tenure, the board should be thinking about what kind of CEO the company will need to harvest the opportunities of the future. This same principle is true for each key management position.
• Regular and Rigorous Board-Driven Strategy Reviews. If the board conducts regular assessments of the company situation and monitors changes to the business plan, the profile of the next leader often will evolve more clearly. As organizational structure and culture change, so too must prospective candidates to ensure the best possible fit.
• Refreshed View of Talent. When reviewing potential candidates, it is not enough to look at their record. It also is crucial to take a deep look at intellectual capacity, critical thinking, motivation, flexibility, resilience under pressure, values and interpersonal skills.
• Insider Candidate Assessment. When evaluating insider candidates, multiple interviews are a must, supplemented by firsthand experience with the internal candidate. For board members, such experience is more limited. Nonetheless, recent research indicates board members can and should break out of traditional interview process and get to know the candidates on a more personal level. Seeing individuals outside of their formal, rehearsed "presentation mode" helps the board get a more complete picture of their strengths and weaknesses.
• Developing CEO Candidates. People with the potential for C-suite jobs often are not blessed with patience for routine work — they thrive when challenged with "out of the box" assignments, often in addition to their current roles. The board and top management should stretch their own thinking in developing these assignments for promising executives.
• Looking Further Down for High Potentials. Succession planning for C-suite jobs should begin internally with a future-fit look at the CEO's direct reports and the people reporting to him or her. For added depth on the talent bench, however, the board should look at high potentials further down in the organization. Ideally, high-potential candidates should be identified and given two to five years to prove their fit, depending on their readiness to be redeployed. The board also should determine a planned sequence of roles or projects that are important to the business model and show candidates' leadership qualities.

Developing Criteria for Future Fit: A "Profile of Success"

Visualizing a clear picture of what the company's future business goals might look like will help organizations create a profile of the leadership attributes needed to fill the position. That "profile of success" always will include the experiences and background that are likely to help meet that vision.

But — and this is a big "but" — the profile also must include an in-depth picture of the personal attributes required of a successful CEO. Key questions that should be answered in this profile include: How fast and well do they think and make decisions? How do they motivate themselves and others?

As CEO, the candidate will need to quickly adapt to a new future and have the resiliency to bounce back from failures. The best CEO candidates will have a certain kind of mental and emotional agility because, in a fast-moving marketplace, a company's strategy might need to change in the blink of an eye.

After taking all these factors into account, the task becomes finding the right person. As any board member who has witnessed a failed succession can attest, "fit" should be top of the list in terms of qualifiers when choosing candidates.

But because fit is an intangible and difficult thing to measure, how can companies find the right person with the right fit for the job? The best tools for this decision are the profile of success, as well as the collective "gut reactions" of the board, supplemented by professional in-depth assessments of the candidates' relevant leadership attributes.

Invariably, some candidates will not completely measure up to the profile of success. It is important, however, to pinpoint the areas in which this individual doesn't match the profile — how much it will take to change the candidates or the structure around them to make up for the gap?

For example, an individual was selected as a CEO based on his or her intimate knowledge of the company's markets and winning ways in motivating the company's people. But this person was a lost cause in terms of knowledge of finance. Rather than train the candidate, the board retooled the job roles for CFO and selected a new and more progressive CFO.

Candidates who lack experience in a specific functional area can be compensated for in a variety of ways. Even when they fall short in an area such as communication skills, they might have time to develop, if they are provided planned feedback far enough ahead. On the other hand, candidates who lack a willingness to learn skills and reflect on and maybe alter their approach to leadership will be more difficult to grow, and it will be riskier to put these people in a big job.

Making a New Leader Successful

After management has selected a candidate who satisfies both the professional criteria and "future fit," the hard work doesn't stop — underlying cultural and organizational factors can derail an otherwise promising new hire, making it critical for the company to pay close attention to integrating the new executive fully.

Although many organizations assume a new hire becomes fully integrated into the company in only a few months, research shows the process can run 18 months or more. Management should be prepared to help guide the new executive through the integration process.

Planning for an executive's succession can be a long and arduous process, but it doesn't need to be in vain. By understanding the critical need for a candidate who possesses attributes that will satisfy "future fit" and constructing a profile for success, boards and management are well on their way to leading an effective succession.
Dr. Ed Ryterband is the managing director of the New York office of RHR International. He has been a consultant to senior executives in various industries, including financial services, consumer products, pharmaceuticals, retailing, high-tech and manufacturing.

http://www.talentmgt.com/succession_planning/2007/April/301/index.php?pt=a&aid=301&start=8415&page=3