Leadership Succession: The Future of Every Organization

There’s a wonderful book entitled Hope is Not a Strategy. In many cases, we hope things don’t happen, but sometimes they do. So, we hope for sunshine, and plan for rain. Such is the impetus for sound succession planning.

Effective Succession Planning Leads to Continuity

Hours after the sudden heart attack death of McDonald’s 60-year-old chairman and chief executive, Jim Cantalupo, directors announced that Charlie Bell, the 43-year-old president and chief operating officer, would succeed him. The swift decision gave immediate reassurance to employees, franchisees and investors that the fast-food giant had a knowledgeable leader in place who could provide continuity and carry out the company’s strategies.

The McDonald’s example is the exception, rather than the rule. Companies typically name an interim chief and then spend several months (or longer) searching for a permanent successor. Take Dana Corp., for example. After chairman and CEO Joseph Magliochetti died suddenly in September, 2003, directors named 2 interim executives – a chairman and a CEO, to lead the company while they searched for a successor. In March of 2004, Dana’s board finally found a new president and CEO, Michael J. Burns.

Faulty Succession planning Can Be Catastrophic

Sometimes flawed succession planning can lead to dissolution. After Reginald F. Lewis, chairman and CEO of TLC Beatrice International Holdings Corp., died in 1993, the company was handed over initially to a three-person office of the chairman and then headed briefly by Mr. Lewis’s half-brother, an attorney. Within a year, another family member, Mr. Lewis’s widow, took over as chairman. Two years later, she began selling off parts of the food company.

Lack of executive talent can have a catastrophic impact on a business. In addition, succession planning is not merely for the top job, the CEO. In reality, good succession management develops a pool of talent with skills, attributes, and experiences to fill specific, often high-level positions.

The Process

Inaccurate assessments of where talent is lacking can blindside a company. We need to know which spots will be empty in upcoming years and what new spots will be created as the company grows. Only then will early identification of key talent allow companies to develop leaders for the future proactively. In short, the solution is to “identify, assess and develop.”A good starting point is a current and projected organization chart, including key staff and their expected retirement dates.

Identifying “high potentials” is not easy. It takes open discussion and sometimes healthy debate among senior leaders and boards of directors to flush out those people with the potential to become top leaders. We need to identify future business challenges and the necessary skill sets to establish competencies by which we can develop successors.

Sometimes, the process identifies more gaps than available people. In this case, it’s helpful to survey and gather intelligence on potential leaders outside the company while defining the advancements necessary within our own management ranks.

Employees identified as “high potentials” or “top talent,” should go through a series of formal assessments and performance feedback sessions. Decision makers know which skills need to improve, and it’s simply a matter of matching those skills to the success factors identified as crucial to the continued growth of the company. Finally, a development plan is created and initiated that includes training, coaching, and developmental assignments.

Challenges to Consider

Key positions are opening at the same time as there are statistically fewer people to fill the jobs. Tom Saporito, senior vice president, RHR International in Chicago notes how over the next 15 years, there will be a “15 percent decline in the number of 35- to 44-year-olds”. This means fewer people available for top management slots with a high demand for high-performance executive talent.

Most younger managers who are available and eager for responsibility are frequently not prepared to take on that responsibility. Downsizing caused many organizations to eliminate middle managers, who were traditionally the source of executive talent and development, leaving these younger managers without mentors and role models.

External hiring is not only costly, but studies conducted by the Center for Creative Leadership reveal that a mind-blowing 65% of senior managers recruited externally fail within the first 2 years.

Solutions

Research indicates that many successful succession plans have certain elements in common, such as:

  • Visible support from the CEO and all members of top management.
  • Clearly identified leadership criteria.
  • A defined plan to find, retain and motivate future leaders.
  • Simple, easy to follow, measurable processes.
  • Using succession planning to reinforce the corporate culture.
  • The process focuses primarily on leadership development.
  • The process is a real organizational priority.

The most important thing we can do today is to act. Begin the process of identifying key positions and assessing available bench-strength. Implement an effort to clearly develop available or outside talent into a group of “high-potentials” that you can look to for greater responsibility. Remember, the process doesn’t have to be overly difficult or complex. In fact, a good argument can be made for shear simplicity. But do something. After all, “hope” is a lousy business strategy.

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