Losing senior leadership — or any important personnel member — without adequate succession planning can leave organizations in a vulnerable position.
Yet few organizations are prepared for such a moment. Our Talent Intelligence and Management Report reveals that 80 percent of companies do not have adequate succession plans in place, even though most say they believe succession planning is beneficial.
Additionally, organizations that do have succession plans in place tend to limit discussion and decision-making to the C-suite.
We recommend having succession plans for everyone in the organization, as this helps to inform internal mobility, improve retention, and show all employees that there is a clear path forward in their careers.
Why succession plans are important
Turnover is inevitable. People leaving critical roles can affect your business operationally and your team emotionally, so planning is vital. This is the advice from Trish Hall, CEO of Star Business Solutions.
There is good planning and bad planning, however. When succession decisions are made poorly, the possibility of resentment, resistance, and hostility can arise. Those are always unwelcome, but especially during seismic internal shifts.
Hall says companies should focus succession planning on where they’re going or where they want to go, not where they are presently. Succession is focused on the future, and so succession is largely about identifying and encouraging tomorrow’s leaders.
Case in point: New Jersey-based BioAegis Therapeutics faced a moment of crisis in 2019 when co-founder and chief scientific officer Thomas Stossel died suddenly at age 78. He was healthy and his death came as a shock, author and speaker Scott Steinberg writes at CNBC. Stossel’s death also happened when the company was in the middle of important fundraising initiatives for clinical research into severe pneumonia.
COO Valerie Ceva tells Steinberg the company, while shocked, was prepared. Internal policy and culture celebrated continuous, internal learning; overlapping experience; and knowledge across all staff. The company did not need to hesitate while making a decision about succession.
Ceva explains: “We found out about Tom’s passing late on Sunday night. By 8 a.m. Monday morning the management team was on the phone and revising its strategic and communications plans. An hour later employees knew what was happening, and we started reaching out to our support network of advisors and experts. Within a week numerous individuals had stepped up to help take on Tom’s different responsibilities and fill in any strategic gaps. Shortly thereafter, we were back to going full steam ahead.”
Shadow boards and succession planning
Shadow boards, while not originally set up for succession planning, help companies develop the mentoring mindset and identify changing market requirements. Succession planning could well be a byproduct of the two.
A shadow board consists of a group of non-executive (junior) employees working with senior executives to develop strategy. Such an arrangement helps keep younger workers engaged, and senior leadership can tap into a diversity of perspectives, social psychologist Jennifer Jordan explains.
Jordan points to Gucci CEO Mario Bizzarri, whose company has maintained a shadow board of millennial employees since 2015 to address the company’s falling market share. Bizzarri says the shadow board has “served as a wakeup call for the executives.” Gucci’s sales grew 136 percent between 2014 and 2018 while key rival Prada saw sales numbers fall.
Succession starts from within
There is a tendency among some organizations to seek external talent to replace senior leadership. This is particularly true of smaller and mid-market organizations that lack the internal candidates to promote internally.
However, company leaders will benefit from spending time assessing the qualities of internal colleagues rather than racing to put a succession plan in place that may not be the best for the company, says Shaun O’Callaghan, a partner at Grant Thornton. His advice to those looking for successors: “Seek out people with a complementary yet diverse set of capabilities to give you more candidates to choose from.”
Perry D. Wiggins CFO, secretary and treasurer for Texas-based non-profit research organization APQC, notes how he focuses on people under him in roles such as controller or assistant CFO. This lets him build out a great team and prepare his organization for the future, when someone else will need to step into his role.
Key to both senior leadership and operational roles is the sharing of knowledge. Rather than losing vital expertise, planned succession ensures the business retains organizational knowledge.
Of course, smaller organizations may face additional resource challenges to implement successful succession plans. These smaller companies will need to be more creative and access digital tools to maximize their time and resources to ensure important roles are filled quickly.
Reflect and seek help
Before rushing into a succession plan, take a moment to reflect. We’ve mentioned how appointing a successor can take the company toward its future, but succession planning also provides an opportunity to consider what the business is doing well and how it can improve, writes Charles Massimo, founder and CEO of CJM Wealth Management.
Massimo says most business owners haven’t drawn up a succession plan because they love running their companies. The problem with that approach, however, is that the company could lose sight of important goals or misappraise risk.
Plan in advance and seek help while doing it. Massimo suggests enlisting help from other professionals. Lawyers, for example, are vital for securing the legal aspects of succession planning, but also important are business strategists and even wealth managers or insurance professionals.
We’ve mentioned how digital tools can help to manage talent internally to provide employees with a clear internal career progression. This approach is an effective means of shoring up strengths and helping to overcome any challenges employees may have so they can grow into the ideal candidates to take over.
Link succession planning to strategy
Match succession planning to strategy, and the business will prosper. This approach helps you identify what skills your business needs and gets those in alignment with bigger goals, Tim McElgunn at HRMorning says.
Focusing on strategy means succession planning can be linked to specific outcomes. McElgunn suggests focusing on the mission-critical positions:
- What are your company’s talent gaps, and how can filling these gaps give an organization a competitive edge?
- Does that talent exist within the company already, or does an upskilling and reskilling program need to be implemented?
Assessing existing talent also allows HR to identify junior employees who could be destined for greater responsibility. Once identified, leaders need to nurture this talent to ensure they stay with the company.
Get succession planning right, and the company will be able to endure the sudden departure of any team member.
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