Succession planning

There was a time when succession planning was something only companies large enough to employ thousands of people did as part of an overall management development strategy. Since then screeds have been written on the evolution of succession planning, most of which points to the need for organisations to plan for the inevitable loss of key staff, irrespective of their seniority.

Yet succession planning as a discipline needs to evolve beyond aiming to ensure continuity in management. It needs to be regularly reviewed as company cultures and economic climes vary. Those organisations who believe succession planning is something which is undertaken when all other management issues are in hand and the business is booming are setting themselves up for a hard time ahead.

In their recently published book Jumping the S-Curve, authors Paul Nunes and Tim Breene discuss a different reason why some companies use succession planning. After studying more than 6000 companies from a wide range of industries around the world, their research shows that high performers (take Adobe Systems as an example) use succession planning to continually renew their top management as a precursor to renewing the company. They define high performance companies as those that consistently outperform competitors in both growth and profitability.

Nunes and Breene claim that by using succession planning in this way, these companies tend to change their CEOs and other senior executives according to a timetable that implicitly or explicitly recognises the need for company transitions along what they call the capabilities S-curve. By this, they mean that senior managers and boards don't wait for a crisis or other event to happen before they act; instead, they follow a strategy that proactively leads to changes in the company’s top management in order to drive organisational transformations ahead of this curve.

Whatever objectives senior management and boards have for succession planning, the principal purpose of a succession plan is continually to evolve management, not just at the senior level but also at junior levels, creating the talent necessary for the time when it is required. The emphasis should not just be on having the right people in place to fill a vacancy created by a key person leaving the company but on having the right person in place to undertake the role which will ensure continued success.

Evolving internal management is not dissimilar to evolving the non-executive directors on the board. The right people today may not necessarily be the right people for tomorrow so management evolution takes into account the time when new leadership may, or will, be required. It is more than just having a pipeline of appropriate talent. Particularly at CEO level, successor development should be based on the creation of more than one candidate. Although these people will be prepared and trained on the basis of the company's unique circumstances at that time, selection of the most suitable candidate is then made based on the environment in which the company is operating when a successor is required, and the direction it is taking.

Succession planning can also be mistaken for cloning, which is neither functionally appropriate nor desirable. Yet without sound expertise and an external overview of the company in question, it is easy to see how a successor assumes the role and leadership style of the predecessor, mimicking their behaviours. This leads to the role played by the CEO in leadership development and succession. Whilst their intentions to groom an appropriate successor are no doubt honourable, mistakes have been made where the CEO has been given too much control and the process ends up with their moulding the successor after themselves.

One method of achieving total transparency in the development and selection process is a competency framework. This provides senior management (and the board where appropriate) with the opportunity to consider the evolution of corporate capabilities. It is not uncommon to find that individuals will mould their jobs to suit their motivations and experience. A competency framework provides those responsible for the management of human resources to consider how a role should evolve as the company’s commercial and management strategies evolve.

Even though prospective internal candidates may receive appropriate training and be groomed for significantly more senior roles in the company, they may not end up being the best person for the circumstances in which the company finds itself at the time a successor is required. A competency framework can be useful in these instances when the search for the right candidate needs to be widened to external sources. It provides greater clarity of the competencies and other attributes required and aids the recruitment consultant in the search for the most appropriate individual. The competency framework is also useful in ensuring that the succession planning process is legally compliant and not simply a method to discriminate based on issues such as gender or age.

Whilst there may not be a critical shortage of key talent today, that situation will be short-lived, just as it has been following every other recession. Clearly, it is crucial to identify the human capital demands that will be placed on companies as the global economy recovers, and ensure that the expertise required for the future of the organisation has been fully addressed.

An obvious solution is to retain and develop existing talent. Another solution is to develop a good working relationship with a reputable executive search consultant. Whilst some companies use search consultants only when a hire is essential, others develop a long-term, more generic relationship using the headhunter as their “eyes and ears” in the talent marketplace. The new war for talent won‘t begin once the economy recovers—it has already commenced. Only a few companies are aware of it and have the right strategies in place to capitalise on the return to more profitable times. No doubt much more will be written on the topic over the years, but right now the time is for action.


David Chancellor

Partner, Tyzack Partners

<!--paging_filter--><p>David Chancellor is a partner in executive search firm Tyzack Partners. He leads Tyzack&rsquo;s Financial Officer practice which crosses all industry sectors and focuses on all aspects of Finance including Audit, Tax and Treasury as well as Chief Financial Officers and Divisional Finance Directors.</p> <p> <a href=""></a></p>