The Need for a Succession Plan is Greater than Ever
On paper, a well-structured business strategy includes a succession plan in the event that an executive member were to leave. For a company to avoid major setbacks due to this unexpected vacancy, your executive team must have well-groomed successors ready to step in and provide the necessary leadership and expertise to help meet the organizational goals.
If you’re one of these executives, do you have a succession plan in place? What about your peers on your leadership team — have they appointed their successors?
According to research by Dominic Barton of McKinsey & Company, “two-thirds of companies had no formal succession plan in place”.
I compare this to a football team without a backup quarterback. If your starter gets badly injured and carted off halfway through the game, you can’t just pull in a defensive lineman and expect him to have the same skills and run the right plays. You need someone who has the experience and has been practicing the drills on a consistent basis.
But an abrupt resignation, whether voluntary or not, is not a new dilemma that organizations must overcome. Recent CEO changes — Adam Neumann stepped down at WeWork, Kevin Burns at Juul and over 1,000 other CEOs since the beginning of the year — have been somewhat shocking to the public. To broaden the scope, the CEO position isn’t the only critical loss to consider — each executive leader plays a significant role in the company. Spotify’s chief accounting officer, Lyft’s chief operating officer, Facebook’s chief product officer and head of WhatsAapp, and many more losses have all sparked a bit of a knee-jerk reaction among other companies to rethink their own strategy.
As they should.
So, how do executive teams prepare for this unknown?
It starts with integrating the succession plan into strategy conversation from a long-term perspective. The NACD suggests succession planning as an overall responsibility for organizations and board of directors, which requires continuous discussion and realignment as to how the organization may evolve over time. This means succession planning cannot be a one-and-done conversation — it must be ongoing and reassessed as needed.
Some companies set the schedule to review their succession plans once or twice a year and others on a quarterly cadence. From there, executives must continue to assess the potential individuals in the pipeline and have conversations with each of them.
The NACD also pointed out how building and maintaining an internal pipeline of potential successors was reported to be the biggest challenge when putting the succession plan in place. It’s recommended to “pressure-test” the succession pipelines, which includes evaluating those capable and flexible to fit the needs and changes of the organization.
Your internal pipeline could also be more of a lateral move. Some employees are motivated by new challenges and look to broaden their skills outside of the traditional linear career track. If an internal employee is an especially great fit for your executive team and company, create a development plan and avoid losing a valued and respected leader.
Sometimes an executive can be more mindful with their unexpected resignation, meaning: they may announce their departure, but they’ve also worked out a plan to bring their successor up-to-speed. Pampered Chef’s CEO for the last five years Tracy Britt Cool, announced she is stepping down but will remain with the company until March of 2020 to support a smooth transition for her internal successor.
The external option should not be overlooked — not all success exists within your current organization. Every member of the leadership team should be aware of shallow internal benches, and everyone should be networking to discover new external sources.
Many dynamics of your company are changing, as are the market and industry. Oftentimes, to align with the changes, a fresh face and perspective are what can help move the company in a better direction. Regardless of the size of your organization, you’re bound to have a need to scale up or transform areas of the business. This includes inclusivity of gender, age, sexuality, etc. to not just open the doors of opportunity, but to bring on the outside-the-box innovators that your company can benefit from.
Companies also look to executive search firms to support the external successor pipeline. Since these firms have a constant pulse on the talent market, they’re better equipped to find qualified individuals with the right background and insight to your organization if/when a major shift occurs within your leadership team. Search firms are now seen as strategic advisors to provide counsel on succession planning, as well as leadership team assessment and culture shaping.
Of course, we do not wish for anyone to get hit by the proverbial bus, but we must still plan accordingly. As a company leader, it is your responsibility to strike up a conversation with your colleagues and begin the discussion of the possible next-in-line candidates and areas of opportunity.