For more about the road to succession planning please refer to Succession Planning- FAQs you need to know. There is no shortage of organisations taken at face value, that benefits from succession planning. Speaking of this process, they often refer to a single-purpose tool purely for mitigating risk. This ill-informed view could result in the plan being treated as a stopgap measure intended to buffer the organisation against contingencies and market disruptions, rather than an indispensable strategic component that fosters business sustainability that builds an adequate pool of talents and grooms them to their best.
A well-planned succession strategy, beyond question, is a sharp instrument for projecting and meeting future demand of leadership. A strategic plan and a course of measures could be formulated to achieve that goal, but the package of benefits that succession planning could bring is not that plain. In pursuit of identifying a rightful successor, organisations need to look beyond the tip of the iceberg to grasp the very nature of succession planning so they can reap its maximum benefits.
By addressing the demand for leadership, succession planning helps:. Maintain business continuity, besides future proofing your organisation from economic uncertainties and labour market changes, succession planning reinforces retention and engagement levels of top performers, as a result driving business efficiency and effectiveness.
Our view is that succession planning is a constituent of the Workforce Planning Framework and in that respect, should be continuously conducted throughout the life of the business to align it with any major business decision and strategy execution. Yet organisations at times completely turn the case on its head.
They view this process as merely a one-off event that is delegated to HR functions only and is isolated from the workforce and business plan. This lack of integration could lose or even cut the link connecting succession planning with coaching and internal talent development programs.
The consequence is immediate: a blurred picture, or even lack thereof, into the performance and progress of the overall succession plan. A training and development plan is key to the planning of power transition as it lays the groundwork for grooming talents. In exchange, a succession strategy once deployed helps develop a strong talent bench strength for assuming leadership mantles, thus, mitigating vacancy risk and aiding in every facet of the business.
In order to make up those deficiencies and close the existing talent gap , organisations are compelled to align firmly succession plan with coaching and internal talent development or any coaching plans. What the company represents to your customers, properly understood, can be relevant for ages.
Most organizations hold tightly to their models and loosely to their value propositions when just the opposite is called for. Especially during moments of transition. There are plenty of lawyers and accountants who can furnish the formulas, set up the structure, process the paperwork and tabulate the taxes associated with transitioning a business from one generation to another. Each month, When Growth Stalls examines why businesses and brands struggle and how they can overcome their obstacles and resume growth.
SmartBrief offers more than newsletters, including SmartBrief on Leadership and newsletters on business transformation and for marketers and advertisers. Originals Resources SmartStudio Subscribe. Industry News. Why your succession plan is failing. Steve McKee. It is not. Others delegate succession planning to the CEO, which is an equally unacceptable abnegation of duty. For instance, we know of a major company, valued at hundreds of billions of dollars, with a CEO in his late sixties who has been unwilling to properly develop any potential replacements.
Succession planning should start the moment a new CEO is appointed. Take Ajay Banga, the former chief executive and current chairman of Mastercard: He began discussing when he might cede the CEO role to a successor even as he was interviewing for the job himself. The process should remain robust, with directors constantly monitoring and if need be adjusting the pipeline. If that level is empty, directors can promote or hire high potentials into it or the C-suite.
By now most directors know the attributes and skills that senior executives need. At the leadership advisory firm Egon Zehnder, where one of us Claudio worked for three decades, the list used for CEO searches includes intelligence and values.
The firm also assesses candidates on strategic orientation, market insight, results focus, and customer impact, and their competence at collaborating with and influencing others, organizational development, leading teams, and change management.
Meaningful succession planning calls for finding rising managers who either have the right levels of all those capabilities or, more likely, the potential to develop them. Four critical traits—curiosity, insight, engagement, and determination—signal potential, and with the proper coaching and support, people who demonstrate them can be groomed for high-level positions.
One important development area for any CEO is emotional intelligence, which encompasses flexibility, adaptability, self-control, and relationship management. You might think that those soft skills would be more challenging to learn than hard ones such as calculus or coding.
But as Richard Boyatzis of the Weatherhead School of Management has conclusively demonstrated, people can pick up these crucial leadership competencies even as adults. Another way for boards to help potential successors get ready is to insist that they be given challenging rotations and stretch assignments, as was common at General Electric in its glory days and is practiced with great success at Unilever and McKinsey today.
When you expose your highest potentials to new geographies, businesses, situations, and functions, you can become a leadership factory. Faleye found that the proportion of U. While there are clear benefits to getting oversight and advice from outside experts, we believe independent boards are less equipped to manage CEO succession. With so little exposure to internal up-and-comers but extensive knowledge of potential external hires from their own organizations and other board experiences, directors are understandably more likely to favor outside CEO candidates or be unduly influenced by individual opinions.
We believe that boards should make room for one to three executives who are potential successors to the CEO. Not only does that allow directors to see likely candidates in action, but it better prepares those individuals to take on the top job.
When Faleye compared the performance of internally promoted CEOs who had prior director experience against that of insiders who lacked it, he saw that during their first two years the CEOs with board experience had an average return on assets that was Interestingly, this massive difference disappeared during year three, suggesting that while both types of executives had similar levels of competence and potential, the exposure to strategic board-level discussions as well as the relationships established with directors drastically flattened learning curves.
Watching her firsthand, the board became confident in her competence and potential and, after her appointment as CEO, was more open to her plans to radically transform the company by expanding its portfolio beyond sugary drinks and steering it toward greater social responsibility.
Boards should make room for one to three executives who are potential successors to the current CEO. Board experience helps prepare those individuals to take on the top job. Succession planning is not only a way to make sure company roles are always fulfilled—they have other benefits, too. Most importantly, faster hiring, faster time-to-productivity, and it helps improve employee retention.
If employees know they have a bright future at a company, they are more likely to stay with the organization. Therefore, internal recruitment is a great motivator.
As a result, you will have improved employee retention, along with more skilled and motivated employees. Alternatively, with a succession plan, you can avoid the extra hiring costs and eliminate the uncertainty of whether the employee will blend in. Perhaps the most remarkable result of a good succession plan is a boost in overall employee performance.
Clear goals, skill-building opportunities, and an opportunity to grow is an effective performance booster. To develop a successful succession plan, you should typically keep the following things in mind:. Many companies develop succession plans to find replacements in case an employee decides to leave.
This is a proactive approach that not only enables you to make changes according to your own planning, but also allows you stay prepared for abrupt changes outside of your control. Succession plans should always be developed while keeping business continuity in mind. They help find the right successor for a job or position who can not only do the job—but do it better, if possible. Another mistake many businesses make is to only develop succession plans for their executives.
That not only limits the scope of the talent pools but may also alienate aspiring employees who may be looking forward to certain roles. Ultimately, every employee is essential to ensure smooth business operations. Furthermore, the companies that develop succession plans for every employee often overlook whether an employee wants a role or not.
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