At first glance, succession planning may not seem Hollywood material, but it has a long history on the silver and small screens. From Citizen Kane to Dallas, Game of Thrones to Succession, people have been fascinated by the intrigue and backstabbing that supposedly accompanies a corporate transition of power.
The reality is rather less glamorous, but no less consequential. According to research published in the Harvard Business Review in 2021, poor leadership succession in America’s S&P 1500 Index costs around $1tn of lost stock market value a year.
It largely presents in one or more of three scenarios: an internal successor is badly prepared or just not up to the job; an external hire is a bad fit for the role, leading to ‘organ rejection’; or the exiting CEO takes critical knowledge or relationships with them.
Each is damaging, distracting, often traumatic and generally avoidable. Leaders may not want to think about what happens after they leave – a bit like making a will or planning the songs for your funeral – but doing so strategically and early is one of the most important things they can do to ensure their company thrives in the long term.
Here are five actions you can take to ensure consistently smooth succession.
1 – Audit your current leadership
What are your key leadership positions? Where can you simply not afford to be left short-staffed? Who are the leaders really making an impact on driving effective strategy forward?
Be objective, but also tactfully involve them and their teams in identifying their core skills and strengths, so that you know you’re looking for in future leaders if any should leave.
2 – Make a succession plan
Identify key steps and actions for your succession plan. Be specific, outlining tasks, dates and resources needed, including HR budgets where possible.
Link your strategic plan and business objectives to each position. How does each role shape the business, and how does it influence the overarching strategy? Leaders ought to be pivotal cogs in the business wheel, so ensure this is crystal clear.
3 – Develop an internal talent strategy
Look inwards at your existing employees. Consider who else in your business has the potential to fill the shoes of other leaders. Nurturing the potential already in your business is good sense – and crucial in boosting retention.
If you’ve identified skills gaps, fill them. Evaluate the internal candidates’ capabilities, coach them, and help them develop new skills to meet any gaps they may have before they’re needed.
4 – Be realistic and be prepared
Senior leaders can leave abruptly for all sorts of reasons, from sudden death and scandal to being poached by a competitor. Some of these are unavoidable, but there are some things you can do to make it less likely and to mitigate the impact.
Develop a transition timeline and knowledge transfer process. Be realistic about how long it’s likely to take to find a replacement, and come up with ways of handing over crucial knowledge to ensure it isn’t lost.
Most importantly recognise that whilst succession plans are great, they often serve to sharpen the overall health of the organisation rather than ultimately delivering.
5 – Make succession an ongoing priority
Succession plans are evergreen and need constant maintenance. Document your progress, and keep records of changes to your leadership team and the skills development of those in the running to potentially replace leaders.
Similarly, evaluate the effectiveness of the plan when successions do occur. It’s essential to do this regularly, and to recognise what’s working – or not working.
Approaching succession correctly reduces the chances of your business being known more for its boardroom drama than commercial performance, or being only as good as its last leadership team.
It’s also a good discipline to go well beyond the C-suite. After all, the problem of poor succession can occur each time a good manager or executive leaves, at any level. By being systematic about it, you can turn a threat into an opportunity, and give your business a better chance of truly sustainable success.
To find out more about how ORESA can help with your succession plan and talent strategy, click here.