A route map to successful transition at the top
Executive Summary
This paper considers how executive succession planning is developing in a post pandemic era. The lack of research in the leadership succession management arena, when compared to many other leadership topics, provided us with an opportunity to explore past and current literature before identifying key learning and developing evidence-based succession planning models
We introduce and discuss the background relating to succession planning in the executive arena, recognising the need for alignment and integration with other key processes and activities such as strategic planning and development, including competency and cultural frameworks. Case studies both good and bad are considered to understand the overall succession climate and context, identifying the key components from latest research to provide insights and actionable recommendations to move the dial forward on succession planning. Socio- economic background is discussed including the impact on succession strategies and practices by global catastrophic events such as the pandemic, geopolitical situations including the war in Ukraine, the more systemic challenges driven by sociological influences such as generational differences and the technological challenges of digital transformation and AI.
This is more evident in private partnership firms than larger public corporations. There is, however, an across-the- board recognition of the need to prioritise succession management and implement more effectively, and this research paper sets out three evidence-based building blocks to successful succession planning:
- the strategic importance of leadership assessment and alignment,
- culture and the impact of succession on changing dynamics,
- diversity, equity and inclusion; creating the workforce for the future;
together with practical and pragmatic planning tools such as the succession planning orientation model and the 7-step succession cycle model, both developed from our research insights.
Our findings indicate a lack of urgency in succession management together with insufficient rigour and process when applying related activities, resulting in a loss of financial value and an increase in operational risk.
Introducing Succession
Every executive will inevitably depart the corporate stage, but most organisations are not succession ready. Executive turnover is rising, yet most boards have not identified or developed successors. This malaise affects private, partner managed and family businesses as much as the larger corporates, if not more so. According to the National Association of Corporate Directors (2019), private-company boards lag public companies in all areas of succession planning with fewer than 25% having a formal succession plan in place. Yet partnership and private equity firms often have greater succession challenges due to a balanced disbursement of power and control which can result
in both collaboration or competition. This failure to plan sufficiently, often leads to discord, contingency actions and even emergency hire situations even though research indicates planned succession ready appointments, both internally and externally sourced, generally perform better. The sad truth is most boards are not succession ready. Yet there are organisations who have a Midas touch when succession planning identifying the right executive talent at the right time.
Succession planning may be currently fashionable, at least as a topic of discussion but it’s not new. Peter Drucker (1946) asserted an organisation’s survival depends on a capability to identify and develop potential or fit-for-purpose executives capable of taking top command themselves, and to devise a
system under which succession will be rational and by recognised merit rather than the result of corporate internal civil war. A form of succession planning was described by Henri Fayol (1949), a French management theorist, as one of fourteen principles of management, further supporting the importance of the process.
In more recent times executive succession planning has been described as an intentional process to achieve leadership and business continuity including intellectual, emotional and knowledge capital through strategic alignment of internal capabilities (Rothwell, 2010). To achieve this an executive succession plan should be aligned to the overarching business strategy taking account of the strategic intent and direction
of travel (Beardwell et al, 2004). As such, executive succession planning relates to the process of preparing leadership for the future involving a succession proposition for every executive position.
Succession planning does not provide a crystal ball perspective on the future, yet it can prepare an organisation for change by aligning leadership intent with strategic intent (Ritchie, 2020). Additionally, succession planning is not replacement planning, which is a reactive process. Existing and emerging corporate governance protocols, for example relating to business sustainability, continuity and vulnerability, now demand compliance with a transparent and proactive succession process. This involves the
identification of high performing potential successors and appropriate development or identification of external candidates, to achieve progression through stability and continuity of leadership. To successfully achieve this will require the identification and development of key executive competencies that will contribute to organisational performance in a future that is uncertain (Larcker and Saslow, 2014).
The Succession Context
Many boards, CEOs and executives prefer not to consider the painful implications of career mortality and fail to actively plan for this eventuality. It is exceedingly difficult for a leader to step down and hand over the reins to someone else. Research indicated that 50%
of companies were unable to confirm their preferred successor and any preparatory process (Larcker
and Miles, 2010). This is mainly due to a mismatch between prospective candidates and the company strategy, executive insecurities, and a failure to identify and develop a conveyor belt of senior managers for executive development training. A failure to plan for succession is costly. Large companies that underwent forced emergency successions lost an estimated $1.8 billion in market value (Favaro et al, 2015).
Despite succession planning emerging as an established corporate process many decades ago, there remains a lack of rigour and process across most organisations.
In past times executive succession planning was a simple process based on identifying a few key individuals who would be ready to take on the key leadership roles when needed. An increasingly
volatile, uncertain, complex and ambiguous (VUCA) environment has changed this and created challenges to achieving effective succession. Succession planning is challenging, and the changing post pandemic landscape coupled with the increasing impact of generational difference, the accelerating pace of digital transformation, industry consolidation, and flexible work arrangements require boards to refresh their perspectives on top leadership. Added to this, the succession conversation is often a difficult one to have whether with longstanding CEOs or recently promoted and inexperienced (at that level) executives. This challenge can be further exacerbated in a partnership environment due to the complications of transparency, collaboration and multiple viewpoints. This often leads to delaying the conversation and deferring challenges around existing succession planning.
Today, organisations cannot afford to defer succession conversations which may prolong succession decisions. In February 2022, Prudential announced CEO Mike Wells would retire suddenly, and he duly did so in the following month, replaced by the CFO Mark Fitzpatrick, as an interim CEO, with an explicit understanding that he would become a special adviser to the board once replaced. Prudential acted swiftly and was able to lure Anil Wadhwani from competitor Manulife in May 2022, based in Hong Kong to reflect an Asian facing market position, with the proviso that he would not commence until February 2023. Arguably the deferment and related complications impacted upon the company during a period of momentous change relating to geopolitical upheavals between China and Hong Kong and post pandemic challenges. One might wonder what would have happened if their selected candidate had decided not to start the role.
The approach by Lloyds Banking Group was more measured following the decision by the longest serving financial services CEO Horta-Osório to announce in July 2020, his intention to retire by June 2021. Sure enough his successor, Charlie Nunn from HSBC, was announced before the end of 2020, ensuring a relatively seamless transition. The latest CEO transitions in the financial services sector involved a double-header of Dame Alison Rose of NatWest and Peter Flavel of Coutts (a subsidiary of NatWest), who both departed by mutual consent in July 2023, over internal customer de-banking processes which led to a serious error of judgement relating to disclosure to the BBC of former Brexit leader Nigel Farage’s relationship with the bank. Both vacancies were filled immediately internally on an interim basis.
When David Goldberg, CEO of SurveyMonkey Com LLC, died unexpectedly after falling off an exercise treadmill in May 2015, the company speedily considered 75 candidates both internal and external, over a period of two months, before appointing former Hewlett-Packard Co. and Microsoft Corp. executive Bill Veghte to the position. However, Veghte’s reign lasted just a few months, replaced by Zander Lurie, who had been SurveyMonkey’s chair (Hooijberg and Lane, 2016). Lurie was thrust into the CEO position due to a contingency situation yet proved to be a success, against the tide of circumstances. The afore-mentioned research indicates that those companies with Board approved succession plans can act quickly, sometimes in hours, thanks to having short-term emergency and long-term CEO and executive succession plans. Proactive integration of succession planning and development processes e.g., CFO secondment to COO role to broaden knowledge of business; increase the chances of an internal successor being ready and fit for purpose. Such a robust approach will elevate the level of priority and reduce risk.
McDonalds provides a classic succession case study. When CEO Jim Cantalupo suffered a fatal heart attack overnight, Charlie Bell was appointed CEO by 9:30 a.m. the next morning. The McDonalds case study is a notable example of a relay succession approach. The term relay succession, or passing the succession baton, relates to an effective way of identifying and transitioning an incoming CEO (or executive successor) before the departure of the existing CEO/ executive. A key element of any relay race is the baton handoff. As with succession transition many great relay teams have seen their race blow up due to a disastrous or even sub optimal relay handoff. In athletic relays athletes must consider three things at same time; run fast, align their finish with their teammate ahead and execute the baton handoff. Succession planning is similar, requiring the management of multiple moving parts. Executive relay transition enables the shock of change to be managed in advance of the appointment and organisations that utilise a one-year or more relay transition approach experience less volatility and higher performance (Tao and Zhao, 2019).
This raises the question of whether to build or buy executive talent. There is an inevitable tension between the two approaches and often this can be because these are seen as separate rather than as part of one whole solution. A dual perspective, integrating both process strands together as a parallel process will manage both internal expectations and external availability, avoiding potential conflicts of interest.
Research on insider versus outsider executive appointments shows insider promotions did not negatively impact company performance, which is likely due to less change impacts than if an external appointment is made. For external appointments performance fell when a company was doing well and improved when performance was poor, indicating external appointments generally work when a company must manage significant change including performance and culture issues (Khurana and Nitin, 2000), a constant factor in today’s marketplace.
However, external appointments are accompanied by a greater chance of an early exit than an insider promotion. Even if stability rather than change is required, an external parallel search is likely to be beneficial reducing bias, challenging potential myopia and providing alternative perspectives including benchmarking comparisons (Fernández-Aráoz et al, 2021).
In any event internal succession requires a strategic development focus so it is concerning that more than one-third of HR leaders self-affirm that their companies struggle to develop effective senior leaders (Gartner, 2021). An additional factor is the lack of executive focus with board directors spending on average approximately one hour on succession planning yearly (Larcker and Saslow, 2014). Yet 62% of high-performing companies have prepared rigorous executive succession plans. The challenges to achieving an appropriate board focus on succession are many including apathy due to the current executive performing well, no clear internal successor, more time-sensitive issues, discomfort with succession conversations and difficulties in pinning down the relevant skills and attributes, for example via an executive success profile aligned to a vision-based shape of the future. (PwC, 2020). Over recent years the lack of focused action relating to succession planning is increasingly affecting perceptions of stakeholders responsible for monitoring financial reporting and the respective governance regulators. A lack of rigour around succession planning creates uncertainty about the future and conversely a perception of increased financial risk (Bills et al, 2017). This concern has been exacerbated by global transformative changes and risk challenges. For example, the post COVID-19 era has seen workplace change accelerate via digital transformations, flexible organisational structures, remote, hybrid and virtual working, with 88% of companies accelerating digitisation and 66% accelerating automation and artificial intelligence. The pandemic created transformational change resulting in reactive changes impacting on functional processes. This challenged the concept of workplace leadership and introduced a new normality impacting on governance guidelines relating to succession planning. Leaders often cannot now observe behaviours in the workplace, rather they must trust and build trust (Lund et al, 2020; Santora, 2020).
These new transformative changes have jostled for the attention of corporate leadership, slowing the pace of previous change patterns. The previously strong emergence of the diversity agenda has stalled with evidence of a backslide in some areas. For the first time since the diversity agenda took off there is evidence of a fall in positive diversity indicators, for example, senior female and minority leaders (both male and female) are 1.5X likely to leave their companies than men. Since 2020, there has been a decrease in the number of companies with a formal DEI programme, down from 85% to 80%, with an 18% decrease in leaders who can endorse their companies’ diversity efforts. In generational terms there appears to be an emerging trend with young leaders under 35 years most at risk of burn-out (approximately 12% more likely than leaders over 55 years) and within this category minority and female leaders are even more likely to suffer this. These latest statistics may yet prove to have a disproportionate effect on the balance sheets of those corporations who are failing to maintain their diversity focus, and vice versa with research indicating that organisations with above-average diversity are 2.5X more likely to outperform their peers (DDI, 2023). It remains to be seen whether this is due to a lack of focus on corporate principles, a change of direction on the corporate tiller due to the turbulent waters of change or is in response to a wider sociological shift.
At the same time, the CEO and executive average tenure in the UK continues to fall and currently stands at approximately 6 years which is just half of what the tenure was in 1980s (Spencer Stuart, 2022).
This indicates less than effective succession strategies. Following a slowdown in departures, executive transitions have bounced back to pre-pandemic levels with new executive appointees being younger than before signalling a focus on longer term growth rather than survival. Internal appointments (82%) were favoured over external, again another signal to a more strategic succession approach. The tenure of departing CEOs averaged 10 years, higher than pre-pandemic years, with 86% retiring and only 7% resigning under pressure. Internally COO (43%) and CFO (16%) remained the main routes to the top. Gender diversity is on the up, albeit gradually, with female appointments increasing from 6% to 13% in a year (Spencer Stuart, 2023).
It is within this context that we undertook our research to identify key insights around succession planning.
Key Succession Insights
According to Peter Drucker (1946) ‘Succession has always been the ultimate test of any top management and organisation’ yet current approaches differ little from those utilised by mega corporate giants of the mid-century. The forces of corporate governance are challenging this lack of renewal and driving the need for a strong succession approach. Options taken by boards include avoiding the issue, maintaining status quo, or rethinking and innovating to align to today’s world. Whilst the latter option is the obvious choice, the way forward is somewhat murkier. To help this process we have identified three key building blocks of succession that underpin today’s successful succession strategies, namely leadership, culture and diversity and inclusion.
#Building Block 1 – Leadership Assessment and Alignment
Aligning leadership to future need via a strategic roadmap.
A succession process assesses leadership supply and demand necessary to achieve business strategy, identifying potential successors from internal and external environments, and developing or connecting with these candidates. The succession plan should be regularly refreshed by reviewing leadership demand and measuring whether ‘fit for purpose,’ in terms of providing the required executive talent.
Given the intense competition for executive management talent and the rapidly changing nature of business environments, organisations that can build and successfully promote high potential managers will benefit as they will retain tacit knowledge and experience. As such, the practice of developing talent within a succession planning framework has increased and is often seen as a key part of the strategic planning process. To achieve this talent cycle requires an emphasis on a proactive development-oriented approach, yet the evidence suggests there remains a lack of focused senior manager development, with 75% of senior leaders stating that their business units do not have future-ready leaders in place (Beaumont, 2022). There is a growing body of research evidence showing strong empirical links between effective executive succession planning and broader talent management strategies including leadership development and DEI (Jindal and Shaik, 2021). By creating a broad based organisational wide succession planning approach integrated to the internal talent pool there is a greater potential for an internal successor which is associated with positive long-term organisational performance (Schepker et al., 2018).
Leadership frameworks aligned to a future company success profile are a key component of a succession planning process. They provide a blueprint for building skills and value driven behaviours needed in the present or future, and they provide a norm or criterion against which to measure individual development requirements. In a survey of HR leaders, the top priority was building critical skills and competences for the organisation, with leadership capability close behind (Gartner, 2021), showing the importance of a bespoke leadership competency framework to the succession process. The executive success profile, including specific role driven and generic leadership competences, should be integrated into the overarching corporate competency framework and succession planning process, identifying both ‘hard’ technical and experiential learning factors together with ‘soft’ behavioural and relationship factors.
These competencies should incorporate an understanding of neuro-leadership and capabilities relating to EQ and critical thinking. Organisations today need to integrate value driven behaviours into their competency frameworks and relate these to changing circumstances including generational and personality differences e.g., the growing importance of emotional intelligence in today’s workplace. It is not enough for leaders to just facilitate high performance. They must be ethical as well and possess a moral dimension that is consistent with the values and desired culture of the organisation.
Research shows a clear correlation between evidence- based competency driven succession systems (including factoring in behavioural and ethical values) and high performance, with a 22% increase in leader performance and a 4% increase in both revenue and net profit.
In short, competence identifies potential, and context provides evidence of experience in the key strategic areas (Beaumont, 2022). Role and person assessments should link to the strategic plan, including the desired culture through corporate values. A series of discovery phase interviews with board and C-suite executives can help create the required profile of the successor appointment including critical competences required to drive strategic success.
Once a competency framework is completed a leadership succession programme can be created. The favoured delivery combination in Executive team development consists of formal business education, classroom facilitation, role assignments, coaching and mentoring (Hills, 2009). There is a need to bring the various strands together in a holistic and integrated systemic delivery wrapper to build continuous development and reduce the negative impact of leadership development overload. The 70- 20-10 leadership development model offers a proven evidence-based way to do this via learning on-the- job, coaching including peer interaction and formal activities. Research found that leadership development is best achieved through applied learning by putting into practice concepts and approaches in the workplace and concluded that on-the-job learning has three times more impact on individual performance than formal training (Lombardo and Eichinger, 2010).
#Building Block 2 – Culture and the impact of succession on changing dynamics
Embedding succession practices within the organisation’s culture.
Succession planning and culture change are inextricably linked; indeed, the former may be seen as the most unpreventable type of culture change. Executive succession tends to be aligned with organisational change driven by the changing of the guard (Devesin, 2021). Contrast effect theory plays out in the succession arena both negatively and positively, for example, a former executive with a transformational charismatic leadership style may constrain the effectiveness of the new incoming executive in terms of creating and implementing change. Similarly, a former executive with a more transactional leadership and less charismatic style, enhances this potential effectiveness. The indirect effect of these personality differences will impact positively or negatively on employees’ willingness to resist or embrace change.
The succession review process should therefore consider the departing executive’s leadership behaviour and style noting that a changing leadership style because of transition will create positive and/or negative cultural impacts.
For example, a transformational style leader following a transactional style manager will more easily facilitate a change culture and vice-versa (Zhao et al, 2016).
The contrast effect theory in leadership terms is closely related to the concept of organisational ambidexterity (Duncan, 1976), a term coined nearly half a century ago yet is a relatively new entrant into the dictionary of most management practitioners.
Organisational ambidexterity can be explained by likening to the ability of a person to use both of their hands simultaneously to balancing alignment to adaptability; flexibility to efficiency; or step change innovation to incremental progress. Similarly, organisational ambidexterity may be viewed as two different operating models working in parallel like the ideas of John Kotter (2014) concerning change leadership which requires an organisation to be transactional via functional channels and transformational via collaborative networks. Culturally this can be perceived as the balance between exploration of new opportunities and exploitation of existing capabilities (Nieto-Rodriguez, 2014).
Succession planning must take account of this cultural paradigm. Organisations that engage in exploration to the exclusion of exploitation risk too many undeveloped and costly ideas whereas if vice versa an organisation will risk decline and failure.
When succession planning, businesses very often fail to recognise the leadership personality required, that is the impact of a leader’s personality on culture which will affect the balance between managing the current state and changing the business to align to the desired future. Digital transformation (aka the fourth industrial revolution) is driving the need for organisational ambidexterity and will impact succession planning, for example, the re-evaluation of leadership e.g., structures, practices, competencies; while allowing for innovation e.g., AI, application of big data and different ways of working (Jackson and Dunn-Jensen, 2021).
Deciding on and managing the balance between the two is a critical board and executive responsibility and succession planning should consider the impact of potential executive leaders on cultural dynamics.
#Building Block 3 – Diversity, Equity and Inclusion, building the workforce of the future
Integrating and growing the DEI success factor through succession practices.
Diversity, equity and inclusion is a global challenge in boardrooms. Harpole et al, (2022) report that a major challenge is a shortfall of diversity in executive leadership pipelines. This limits options in executive selection and is further exacerbated by a lack of innovation in the succession process. Research by DDI (2023) shows a DEI approach greatly increases the potential of building a high performing leadership team and engaging and retaining high performing leaders. Whether gender, race or other diversity aspects, organisations should strive to develop talent from a range of diverse backgrounds and natures.
Gender is a key driver of diversity and is reflected by the FTSE Women Leaders Review and the Financial Conduct Authority (FCA) recommending that at least one senior board position should be held by a woman.
Fifty-one percent of the 150 FTSE companies have achieved this aim. Women now make up approximately 8% of CEOs in the FTSE 250 and the UK is second (to France) for women’s representation on boards globally. The evidence of benefits continues to stack up, for example, companies with women occupying at least 50% of senior leadership roles generate a return on equity 19% higher than the norm (Spencer Stuart, 2022). Increasing female representation in the management ranks will likely lead to the gender gap being further reduced at higher leadership levels. Succession planning can support this trend by overcoming gender career ‘blockers’ including stereotypical views. Rigorous assessment and open discussion will challenge bias and enable greater diversity (Beeson and Valerio, 2012).
Ethnicity is another major driver of diversity. The Parker Review (Parker, 2016) highlighted the need for greater ethnic representation at executive level. The Review recommended ethnicity targets and to date ninety-six of the FTSE 100 have at least one ethnic minority director; compared with forty-seven companies in 2016 (Tyler, 2023). Progress has been achieved in recent years, yet there remains much more to do. Women and racially diverse executives, remain underrepresented in positions that directly feed into future C-suite roles. The new challenge is around the diversity make-up of the talent pools that provide the candidates for executive level management (Larcker and Tayan, 2020). Progress can be achieved by setting transparent objectives, building diversity into talent pipelines and mitigating bias through training and monitoring.
Diversity must be integrated into succession practices, and the danger of tokenism and the pull of the ‘status quo’ effect must be challenged.
Research shows that a singular female candidate as part of a candidate selection group comprised of males is unlikely to be selected (Johnson et al, 2016) and this may apply to other areas of diversity.
A rigorous and transparent process will reduce the pull of the status quo effect and send out a strong signal of intent to employees and stakeholders.
An increasing area of focus is neurodiversity which is a recognition of the infinite variety of human thinking styles and a fast-growing category of organisational diversity and inclusion that seeks to embrace and maximise the talents of people who think differently.
New learning has led to conditions such as autism, dyslexia, dyspraxia and ADHD (attention deficit hyperactivity disorder) being seen as natural forms of human neurocognitive variation leading recognition of the ‘flip side’ strengths of neurodivergent leaders, such as problem-solving, creativity and spatial thinking.
There is a growing research base which suggests the inclusion of neurodiversity into an organisation’s people strategy adds tangible value particularly in the development of more innovative approaches (CIPD and Uptimize, 2023).
Another developing theme relates to socio-economic background which is defined by the American Psychological Society (2018) as ‘the social standing or class of an individual or group’. Research indicates that inequality driven by socio-economic factors is greatly reduced in countries which adopt a homogenous approach, where similar schooling is provided whatever the student background, rather than a heterogenous educational framework, for example private funded schools with increased resources (Broer et al, 2019).
However, the increase in educational opportunity globally will impact on the veracity of these findings. As in the case of quota targets the search for equality should be balanced to maintain or increase quality and this creates complexity. Many companies are seeking to accept this challenge in order to increase the level of diversity and inclusion through the reduction of barriers to social mobility. A case study example in the UK is the Cabinet Office which has provided guidelines for employers including benchmarking measures relating to the socio-economic background of employees and (Civil Service, 2018).
In whatever form, diversity should run through the succession planning process like a continuous thread of talent, involving proactive selection and development of high-potential talent from a range of diverse including backgrounds, ethnicities, personalities and mindsets. The value of strong DEI practices relates to many other areas apart from succession strategy and this has been further explored in our previous White Paper on how to avoid corporate derailment by a collective leadership approach to systemic risk (Jones and Turner, 2022). These approaches will help to create a strong platform of DEI practices which will increase diversity representation at least at a transactional level, yet without behavioural and cultural change in the boardroom any progress and related business benefits will be limited.
To achieve transformational change will require inclusive driven behaviours from the top down which involve board members and senior leaders to show key traits such as commitment to inclusiveness, a self-awareness of personal biases, curiosity relating to other viewpoints, a collaborative approach and cultural intelligence (NACD, 2017).
On reviewing the succession landscape it is clear there is a compelling need to raise the succession planning bar and this paper aims to help organisations review and improve their succession planning practices by exploring the evidence behind successful succession planning and distilling into practical and pragmatic approaches for corporate consideration.
A Strategic Succession Framework – Our recommendations
The latest series of the HBO (2023) show Succession, shown on Sky Atlantic, features the demise of the media mogul and CEO of Waystar Royco, Logan Roy, and triggers a rapid reactive and chaotic response from his immediate executive team. During the minutes that follow his sudden death the team rapidly draft market statements for the board to approve. It is soon clear there is no clear succession contingency plan in place leading to internal politicking, external confusion and market turmoil. A failure to plan for succession is a key failing of many charismatic leaders. Yet the fictional company Waystar Royco is not alone in not having a succession plan. Notwithstanding, most of our corporate readership will have some form of executive succession plan and most, on reflection, will recognise the need to at least refine the current framework, if not completely overhaul their succession methodology. And they will be right to think this.
Research continues to show that most high-performing companies have rigorous and robust succession planning approaches. This requires a mapping process benchmarked to the latest best practice learning prior to aligning to organisational systems through a best fit approach, preferably by an external consultant to bring expertise and challenge.
There are many examples of effective corporate succession planning including General Electric (GE), IBM and Proctor and Gamble and the distillation of best practice approaches shows several consistent factors (MaxWealth, 2012). Yet the ‘black box’ of succession planning remains a mystery to most leaders and their organisations. In broad terms there are three main orientations to effective executive succession planning.
Succession Planning Orientation Framework
- Process orientation (structured and data driven)
- People orientation (flexible and intuitive driven)
- Balanced orientation (flexible structure and data and intuitive driven)
Process oriented succession practices rely on robust processes, including objective criteria, to evaluate potential assessment for future roles and reduce the impact of bias. If the balance between science and intuition is not correct, then critical intuitive factors may be ignored resulting in executive turnover and low morale due to the perception of threat to reputation and careers.
People oriented succession practices often leave succession decisions to the highest echelons of leadership who favour experiential influences based on reputation and tenure. This orientation is often found in private or family-based partnerships which sustains the existing culture and may utilise a once- a-year review with a façade of standardised processes utilising perceived objective data, for example, the nine-box grid approach. Due to a lack of rigour personal impressions, influenced by internal corporate knowledge and values, will dominate.
Balanced oriented succession practices involving a joint process and people focus are proven to be the most effective by applying positive relationships and evidence-based systems. Critical leadership competences and development will be aligned to the succession process. The balanced approach combines personal (e.g., CV and track record-based recommendations) and science-based (e.g., psychometrics and behavioural interviews) data.
The evidence suggests successful strategic succession involves a balanced approach bringing together multiple moving parts. How best can companies apply this learning? Research indicates a best practice and best fit succession model includes the following key approaches:
- Assign strategic accountability for succession within the board structure, for example, existing sub-committees such as Remuneration and Nominations Committee or a separate sub- committee, involving an independent Director supported by an HRD and external specialists to provide an independent and external perspective, including Those accountable should ensure approaches remain current and fit for purpose by creating a continuous process rather than an agenda point or a one-off event on the annual board cycle of discussion.
- Communicate the nature of succession with the executive team so they understand this is a natural and critical corporate process. This will help reduce the level of concern and sensitivity shown by executives to the sensitive discussion of ‘who’s next’? Confidentiality is critical to a succession planning process noting the motivational impact of high potentials finding out if they are on or off the succession list. The focus should be on development and ensuring executives and their would-be successors are future ready.
- Map each executive and potential executive to a competency-based framework and future corporate success profile involving evidence-based tools and data e.g., psychometrics, behavioural interviews, and adopting a balanced approach using quantitative data with intuitive qualitative inputs. To do this will require an underpinning competency-based framework aligned to the corporate strategy, and incorporating skills, knowledge, values, experience and personality traits. Different organisations will have different outputs e.g., private equity owned corporations may value transactional management driven competences such as pace, work culture and innovation, whereas publicly owned legacy corporations may value transformational leadership competences such as emotional intelligence, listening skills, teamwork and integrity.
- Integrate the executive development process with the broader talent management development framework to build strong pathways for emerging talent incorporating continuous leadership development. Identify high potential people, ensuring a future based focus (most managers are promoted on their ability to do the role rather than the role they will do). Within this development process develop a smart step-up onboarding process incorporating coaching and mentoring support to ensure successful transition into key roles.
Courageously build diversity into the succession process to align to the overarching DEI strategy, including specific targets and milestones. Use evidence-based objective tools to assess experience and potential and to proactively combat biases. A multi-method diagnostic approach minimises opportunities for bias in candidate selection and this will be further strengthened by knowledge and challenge around stereotypical and cultural assumptions.
How best to bring these multiple insights into a coherent strategic framework for succession? Firstly, start with a discovery process based on the following questions:
- Who owns and coordinates succession planning?
- What do we want succession planning to achieve (existing problems and outcomes)?
- What should our succession planning process look like and how will this be different to now?
- What needs to change in the future about our leaders, people, structure and our culture?
- Do we have a fit for purpose executive competency framework?
- What does high-potential mean to us and how do we define this?
- What are the activities relating to our succession planning approach?
- Do we have an adequate succession timeframe to allow for candidate identity, development and role transition?
The answers to these questions will provide the backdrop to the succession route map which will involve ensuring the organisational strategy is defined and aligned to the management structure of roles and responsibilities. From this base a succession process can be progressed and a holistic plan formulated. The 7 step succession cycle model for effective succession planning provides a structured approach to achieving this.
7-Step Succession Cycle Model
- Adopt a balanced oriented system. Ensure system can utilise evidence-based data and intuitive contextual information.
- Align competency framework. Review the required leadership competences including role skills and organisational value driven behaviours and company success profile for the future.
- Role risk Identify the critical roles that require succession planning. At executive and next down reporting levels this will likely be everyone. Yet there may be differences in risk and other roles of strategic importance may need to be included.
- Assess current leadership talent. When assessing the current talent remember that not everyone who is currently successful will be successful at the next level up. Use evidence-based assessment tools and align to performance management processes which monitor track records.
- Identify and develop leadership. Develop a diverse talent pool with aligned development plans to succession requirements e.g., skills, attributes and values as well as alignment to personal aspirations.
- Progress the transition Move identified talent into a transition pathway ready to move into or towards the required position e.g., 1-2 years development path, interim secondment. Utilise a 70:20:10 development approach.
- Evaluate and refresh the succession plan. This will reduce the risk of succession planning becoming a ‘tick box’ process and will identify gaps and talent on a continuous basis. Key performance indicators should be created to assist this process g., internal succession, diversity, succession ready positions, success rate of newly promoted leaders.
The development of the 7-step succession planning process will benefit from an external consultancy perspective to ensure the required expertise is available to achieve the necessary level of rigour and robustness and objectivity. Succession management should address future requirements, yet many succession systems focus only on the present, for example, existing not future roles. Future executives will rely on several attributes that may not be critical in their existing roles, such as an increased emphasis on strategic thinking and innovation. One approach may involve bringing
a sense of immediacy to a three- or five-year focus by developing a set of short-term milestones within high potential leadership development programmes. This will also help to integrate assessment diagnostics into leadership assessment and development processes (Routch et al, 2018).
Conclusion
Reassuringly most corporate leaders strongly believe that leadership succession planning is an urgent and important priority, yet only a small minority believe their organisations do it well. The benefits of effective succession are self-evident whether leading to an increase in leadership diversity, higher quality promotional decisions, better career development opportunities, a stronger organisational culture or improved career transitions.
So, noting a common failure to embrace succession planning the question is why this is the case. Whilst the solutions are clear and evidential the barriers are considerable, notably a lack of understanding and awareness driving a less than urgent approach.
The medium to long-term nature of a succession process contrasts with short-term issues such as managing executive morale and internal politics. Research suggests that most business leaders struggle to view their succession planning practices as integrated with the business planning process.
There is also a greater focus on subjective inputs rather than evidence-based data and a failure to build a sophisticated evidence-based approach, with only a minority of organisations reporting that they have clearly identified validated leadership potential assessment criteria (Tebbe et al, 2017).
Whilst surveys continue to cite executives placing succession planning as their most pressing challenge, this is balanced by a lack of confidence in steps their companies are taking to address this challenge.
Succession planning poses significant challenges to boards as they are not ‘in the business’ and depend on the CEO for succession planning perspectives.
Yet the board has ultimate accountability to adhere to corporate governance guidelines via a systematic succession process.
The organisation’s HRD has an important and pivotal role to play in providing the required information so that the ‘slow burn’ topic of succession is elevated to be of significant strategic importance. There is a need to be an intermediary to the board chair, CEO and board members. HR executives must strive to ensure succession planning is a standing item on board agendas and incorporate executive emergency succession plans; ongoing succession development including alignment to the changing strategic plan; and consideration of the latest corporate governance updates pertaining to succession planning (Schepker et al, 2018).
In researching this topic, we have reviewed the current state of play in the succession arena, setting out the context, identifying critical insights and developing a strategic framework and a tactical process with a related route-map designed to achieve successful succession planning. We hope these insights will add value to board and executive discussions and actions relating to the succession planning agenda.
Research indicates there is a lack of clarity, focus and prioritisation around the challenge of succession resulting in insufficient rigour, process and innovation in policies, systems and practices.
