Leadership Succession: The future of every organization

I love the book, “Hope is not a strategy.” 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.

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 has a knowledgeable leader in place who can 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, 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.

Sometimes faulty 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 Scenario:
An executive team sits around a boardroom table, late in the afternoon. Coffee is stale, dinner plans on the horizon… they are reviewing the last agenda item- replacing a member of the group that is leaving.

“Bill is the obvious choice,” says one member, indicating a mid-level manager. “He has 10 years of experience with the company, the right education, and a solid track-record of success.”

“Yes, but if we promote Bill, there is no one to take his place,” says another.

“I’m afraid we can’t afford to free him up right now. It’s easier to recruit externally for the higher-level position than it would be to back-fill Bill’s job,” The CEO reports. “We might as well get started now.”

John may never know about the conversation in the boardroom, but he’ll undoubtedly be puzzled and frustrated at the outcome. Many people and organizations never grasp the fact that it’s not just personal performance that counts, it’s also their promotability – which includes having a way to ensure that their job will get done if they’re promoted.

The Solution:
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. Senior leaders and/or boards of directors must openly discuss people with the potential to become top leaders. We’ll need to identify future business challenges and the necessary skill sets to establish competencies by which we can develop successors. There needs to be healthy debate and discussion at this step.

Sometimes, we identify more gaps than available people. In that case, we also need 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,” then should go through a series of formal assessments and performance feedback sessions. Everyone involved in the now know what skills need to improve, and we can match those skills to the success factors identified as crucial to the continued growth of the company. A development plan is developed and initiated, that could include training, coaching, and developmental assignments.

Challenges to Consider:
Key position openings are occurring at the same time as there are statistically fewer people to fill the jobs. “Over the next 15 years, there will be a 15% decline in the number of 35- to 44-year-olds,” explains Tom Saporito, senior vice president, RHR International in Chicago. This means fewer people available for top management slots and high-performance executive talent will be in demand.

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 the middle managers, 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.

So, what do we do?

Well, research clearly shows that many successful succession plans have certain elements in common, such as:
o Visible support from the CEO and all members of top management.
o Clearly identified leadership criteria.
o A defined plan to find, retain and motivate future leaders.
o Simple, easy to follow, measurable processes.
o Using succession planning to reinforce the corporate culture.
o The process focuses primarily on leadership development.
o The process is a real organizational priority.

The most important thing we can do today is to act. Begin the process of identifying the 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. 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. “Hope” is a lousy business strategy.

But that’s just me…

KB

Kevin Berchelmann
www.triangleperformance.com

Comments

  1. says

    Great post!! Succession planning is either non-existent or too complicated to master in most organizations. You have provided great examples and a good road map for getting this done right. I plan on sharing this with several companies struggling with this very issue.

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