WHY SUCCESSION PLANS RARELY WORK
April 28, 2014 2 Comments
In my last blog post (see “How to identify a future leader” posted April 21, 2014) I stated that while many companies have implemented some formalised succession planning processes, most of these didn’t really work, as very few achieve the intended goal of a structured, planned successful handover to a recognised and identified successor. A number of readers have asked me to elaborate on why I believe this is the case, so here are some of the major barriers that I believe can get in the way of successful succession planning both at C-level and also with succession at lower management levels.
– Boards are generally not good at picking a CEO … I see that many Boards tend to promote and hire in their own image, which is generally by its own nature outdated, and tend to protect the status quo while believing they are driving change. This is also one of the reasons why there are few women in senior CEO roles. Whilst I am not an advocate of quotas for gender equality, I do believe in the need for a level playing field for all.
– There is a belief that if a CEO has done it before s/he can do it again … I believe that if a CEO has done it once before then s/he has proved that they can do it once, so far. I am amazed at the C-level musical chairs played by some very average executives who just keep moving from one company to another, avoiding serious testing. Business conditions change almost daily with shifts in market conditions, technology, go-to-market, competition and regulations, so what someone did yesterday will most likely not work today. A good known internal candidate will generally be a much better bet than an outsider who looks as though he may have “done it before”.
– Horses for courses … Bringing in a “hatchet man” to slash-and-burn and to right-size a company that is struggling, and that has lost its mojo, means finding someone with a particular set of skills in being able to drive a turnaround of an ailing business. However, we should not believe that a turnaround CEO will have the same set of skills that will be needed in a CEO to lead the healing and growth phase. A blood-letter will very rarely be able to morph into a healer. When a board brings in a turnaround CEO, they should identify and start preparing his successor on day one.
– The step up to a CEO role from the level below is a massive one … The single-step promotion from Director to a senior VP level is generally not an enormous step, usually involving more of the same but larger, or more of the same but geographically wider. However, the single-step upwards from a VP role to CEO is enormous, and to believe that it can be done without serious preparation is folly. For a starter, the CEO needs to be able to work with a board, large investors, shareholders, the media and financial and industry analysts which all need a new set of skills, together with an even greater focus on culture, values, strategy and flow down execution than in previous lower roles. In some companies the COO, or the occasional brilliant CFO, may find the step up to CEO as being relatively straight forward, but it is a rare Regional or Divisional President who can take this step without serious preparation.
AT OTHER MANAGEMENT LEVELS
– Who should choose the successor … Generally the manager that the successor will report to will choose the person that he wants in his team. The problem is that in most companies the succession planning process puts that responsibility on selection on the person to be replaced. I have seen too many instances where these selections are not in accord, which is one major reason that analysts believe that only about 30% of promotions are as per the agreed succession plans.
– Sink or swim approach … Very few candidates are bloodied beforehand. I believe that candidates for promotion must be well mentored long term before promotion, and should be developed, grown and tested with a number of challenging assignments that are broader and more complex than their current role, and that carry elements of any potential future role.
– Most companies develop people for the role they are in … I have no issue with developing the skills of people in a way that ensures that they get better at what they do. The problem is that in most companies training budgets tend to be limited, and few companies allocate the funds needed to train and develop for the future rather than just for the now.
– People are pushed into management … I have come across a large number of companies, particularly in the Tech sector, where people are “pushed” into management roles because of the absence of a valid dual career path that allows individual contributors to grow in value, influence, recognition and reward. When vertical growth is the only option, good people will feel they have no choice but to start climbing despite this not being at what they can excel.
– Talent should be built for the organisation … Succession and hi-potential plans are generally built vertically rather than cross silo, and successful succession planning must work across all boundaries. Decisions on promotions and external recruitment into senior roles needs to be cross-divisional and decisions should be taken inter-departmentally. This would also ensure that promotions came to people who had already proven skills in building cross-silo trust, relationships and co-operation, which are mandatory skills needed in successful senior management.
It is critical to remember that the search, recognition and development of talent for an organisation are critical elements of success. Recognising potential in people is an important skill of any leader and there is little to be gained from unrealised potential.