It’s Urgent – Succession Planning In A Post-COVID World
Succession planning is smart business for businesses of all sizes. From Fortune 1000’s to small, family-owned operations, preparing now for the inevitability of turnover in key leadership positions means avoiding instability and disruption in the future. The COVID crisis has imparted an urgency to this issue as many companies have begun contemplating the consequences of their senior leadership being unable to perform daily responsibilities.
Whether for a defined departure or to
address possible emergency situations, developing a succession plan should be
an important part of a company’s talent management strategy. Simply put, it
involves identifying key roles across a corporation, and what skills,
knowledge, experience, and traits individuals must possess in order to succeed
in those roles. A more developed plan will encompass identifying and developing
candidates in advance of leadership transition, as well as ongoing mapping of
potential external candidates. This can ensure timely elevating or hiring of replacements
so that businesses continue to run smoothly after important leaders depart.
The Need is Ever Present
According to a recent article by Forbes
(forbes.com 4/8/2021) 10-17% of corporations find themselves appointing a new
CEO each year. Yet according to ongoing research by the Association for Talent
Development, only one-third have a formalized succession planning process. Past
research by Deloitte (deloitte.com 9/27/2018) confirms this gap: 86% of
surveyed leaders consider succession planning an urgent or important priority
while only 14% report doing a good job with it.
Companies also face a challenging global
talent environment, with the pending retirement of Baby Boomers in senior
management positions, compounded by the predilection of millennials to
frequently pursue new job opportunities. Additionally, competing business priorities
often present obstacles to committing the time and resources necessary for
ongoing succession planning and leadership development.
Insights from Amazon and What
Constitutes Success
The recent shift in leadership at Amazon
offers an example of a successful CEO transition within a large public company.
The Wall Street Journal (2/3/2021) asserted the groundwork had been laid for
years. The announcement that founder-CEO Jeff Bezos was stepping aside and
naming Andy Jassy, CEO of Amazon’s Web Services business, as his successor was
well-received. Jassy was known to be close to Bezos over decades, and Bezos was
remaining as Board chair. Amazon’s stock continued to perform well in the wake
of the announcement, indicating stability in the C-suite and a successful leadership
transition.
Board Buy-In and Succession Planning
Checklist
With CEO turnover on the rise, Boards
especially should make CEO succession planning a top priority. McKinsey
reported the average CEO tenure at a large-cap company is now about five years
vs. ten in 1995. (McKinsey.com 5/2020)
Succession planning requires the buy-in of company
management and HR. Top management must be engaged in the process. HR must
incorporate succession planning into their day-to-day. A basic to-do list for
the succession planning “team” will help assure readiness:
- establish clear goals,
timelines, and metrics for success - clarify key positions and
correlated talent profiles - identify internal and external
candidates - provide professional
development opportunities and key experiences - benchmark progress for
accountability
CEOs Valued for Management Proficiency and
Leadership
While sector knowledge is important, when
considering their next CEO, many company leaders will prioritize general
management expertise and leadership abilities over technical industry
knowledge. IMSA Search Global Partners’ Russia
Managing Partner Olga Selivanova-Shoff
confirms, “More and more companies realize that in
order to grow their business they need a different set of skills, including
strategic thinking and the abilities to manage uncertainty, build and inspire
teams, and establish relationships with internal and external stakeholders.” Selivanova-Shoff says
clients are often looking outside the company for successors, and she and her
team are frequently asked to map the market of successful CEOs as part of
succession planning. As an example, Selivanova-Shoff shares, “We are currently looking for a CEO of a technology
company. The original founder is stepping down from the operational role and is
considering candidates with non-tech backgrounds in retail, construction,
banking, and general industry.”
Family-Owned Businesses and Avoiding
Bias
Family ownership provides particular
challenges with founder replacement leading to business failure more often than
not. Gallup estimates that, while 80-90% of the world’s firms are family-owned
and account for more than half of US GNP, less than one third will succeed past
the founder and only 12% into the third generation. (Gallup.com 4/9/2019) Selecting
among family members or going outside the family can be emotionally charged and
organizationally detrimental. “Turning to an outside resource such as an
Executive Search firm can provide objectivity and a formal, analytics-driven talent
assessment process,” adds IMSA Search Global Partners
President, Monika Ciesielska.
In the words of Benjamin Franklin, “By
failing to prepare, you are preparing to fail.” Succession planning is a
critical part of a company’s roadmap for continued success. Whether identifying
and grooming internal leaders or engaging a firm to map potential external
successors, putting the process in place now will ensure the right leaders are ready,
especially when change happens unexpectedly.
