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.