Research carried out by Heidrick & Struggles and Stanford University’s Rock Center for Corporate Governance states that more than half of the organisations today are unable to quickly appoint a successor, should the need to replace the current chief executive officer (CEO) arises.
This indicates that proper succession planning has not been done beforehand. Planning is needed to manage unforeseen circumstances, such as a sudden demise or permanent disability of a CEO, or a sudden termination.
Succession planning involves the process of transferring the reins of the organisation, when a vacancy occurs in the key leadership role.
However, that is not the only key factor in succession planning. Most of the time, a checklist of potential candidates who can take over a head’s role is prepared.
But what about the ways to handle succession planning? How do you go about appointing a successor? What are things you need to look into? Well, here are some practices that contribute to a positive outcome in succession planning:
1. Plan ahead
Succession planning is part of human resources (HR) management and should not be conducted during a crisis. Hence, do not wait until a leader is planning to leave.
Start planning now and be prepared to face any circumstances that may occur without warning. Being caught off guard without a suitable candidate to take over, can put an organisation in much turmoil and affect productivity.
2. Credible forecast analysis
Firstly, it’s imperative to have a solid understanding of what challenges the organisation is likely to face in the next five to 10 years, and what capabilities are needed of the CEO to ensure the organisation does not sink in this sea of hurdles.
Directors should not assume that a younger version of the current CEO is the answer to that.
GE’s previous three CEOs (Reg Jones, Jack Welch and Jeff Immelt) had completely different personalities.
According to Forbes, in leadership succession, GE has done a good job of looking “through the windshield” rather than “in the rear-view mirror” to understand the leadership skills required of the next CEO.
3. Developing internal and external resources
Development practices vary between internal and external candidates. Internally, the process of development embarks with identifying and grooming a small number of people who show potential of taking the lead.
Investing about two to four years to develop an executive can be very beneficial to an organisation. This could involve rotating the individual in various functional areas, taking on international assignments or spearheading a division.
External candidates, on the other hand, are identified through executive search firms. As potential CEO successors, they are first absorbed into other positions inside the organisation.
The management then invests in strategic approaches for the candidates’ development and explores the candidates’ strengths.
Both the former CEO of Starbucks, Jim Donald and the CEO of Cisco Systems, John Thomas Chambers landed their CEO positions in this manner.
4. CEO and directors should be on board
The CEO and board of directors have to be fully involved and committed in this process. This is not an initiative of the HR department.
There should be regular reviews between the CEO and the board with a healthy flow of feedback; working together to identify the criteria for the next successor and taking accountability for responsibilities.
5. Use business strategy as a benchmark
There should be a good reason for your succession planning and this can be accomplished by aligning the plan with your business strategy.
By “connecting the dots”, an organisation can give coherent explanation that ties to the need for succession planning based on the business case of the organisation or the outcome of not doing it.
6. Simple and straight to the point
Do not complicate things. Refrain from including excessive, difficult assessment ideas in the process for succession planning. You may think that this will add to quality.
On the contrary, too many complexities can prove to be challenging for potential candidates. Remember that the planning process is a tool that emphasises on development, hence keep it simple.
7. Focus on all levels
Your approach to talent development should cross all levels of the organisation. It should not be confined to just certain positions or levels. You may never know where you will find the next CEO and sometimes, the results could be pleasantly surprising.
8. Be realistic
Development plans and ideas are not promises but most of the time, they are communicated in such a way that frustrates potential candidates.
So, don’t pull the legs of high performing leads with development plans that are unrealistic. Approach them only if there is a realistic chance of a succession taking place.
If your organisation wants diversity in leadership, then succession planning should also look into promoting women employees and minorities.
The next dynamic and extraordinary successor with the ability to bring the organisation to greater heights may be amongst these group of employees.
10. Keep political and emotional aspects at bay
The process of succession planning may invite many political, irrational and emotional outbursts from the succession planning team and those around them. It can sometimes come from the CEO who is having difficulty “letting go” or from team members who have their own personal agenda.
It’s crucial for these elements to be managed tactfully without being influenced by emotional and political feelings.
There is no book that specifically teaches you how to manage these emotions when working as a team. This learning comes gradually with experience and emotional intelligence.
Prema Jayabalan believes that succession planning is a crucial element that can make or break an organisation. Do share your thoughts with her by dropping her a note at firstname.lastname@example.org or comment in the comment box provided. For more Top 10 articles, click here.
Published in English daily The Star, Malaysia, 16 May 2015