Rising CEO turnover. Increased expected retirements. Lack of leadership-ready talent. These forces, combined with many organizations just starting to implement the disciplines of development and succession planning, may cause you to rethink your practices. Will your organization have stable, quality leadership at all levels five years from now? What about in 10? How about next year?
If you excel at succession planning, you’re among a special few companies. If you are in this group, you know that it is a time and effort-intensive process and, when done well, totally lacking in surprises while surpassing expectations for return-on-investment. These are good things when you consider the four vital company needs served by effective succession planning:
The Achilles Heel of succession planning is its speculative and long-term nature. You must know what you need from each role. This demands detailed and accurate measurement of factors that are difficult to measure, such as potential, leadership, and fit with your company’s culture. In light of challenges like these and the relentless pressure for short-term results, it’s easy to see how developing an effective succession plan can slide down the list of leader priorities until it is too late to plan, but succession happens anyway.
How late is too late? In my experience, preparing for the replacement of a C-level leader with anything less than twelve months lead time or a team leader with anything less than a two month head start is too late. But it happens all the time and with the same consequences: inadequate attention to the cultural requirements of these roles, strategic understanding, culture-fit, and rationalizations for not having planned, such as “We need new blood from the outside,” or “They’ll grow into the job.” The risk of this approach to success is less often a mismatch of skills than it is a mismatch of values.
Succession planning is one of those things that seems so common that no definition is needed, except that it is not as common as you might think, and the available definitions vary a great deal. It may seem picky to zero in on the need for definition and precision until you throw a few facts into the mix:
When you consider factors such as the cost of recruiting, severance (especially for senior positions), and lost productivity, the need to develop and act on a useful definition of succession planning becomes obvious. Less obvious is the need to speculate on the reason why succession plans are so often ignored and what to do about it.
Managed succession is the outcome of a succession plan: a process that identifies, assesses, develops, and positions internal candidates for success. In a very real sense, it is an insurance policy on your company’s future. The best plans start with an in-depth understanding of the evolving business needs of the organization and then define the skills, values, experiences, and talents needed to consistently meet those needs. Having said that, most succession plans turn out to be a weak input to succession management – contributing to the need for external hires and justified as a desire to add “a revitalizing force to a management team” or to “bring in a different perspective.” In way too many instances, these are excuses for not having paid the price of ensuring a company’s future. Without going into the details, a succession plan should include the following characteristics:
Fit the company’s culture. It is unlikely that what will work for Boeing Aircraft will also work for Amazon – or your enterprise.
Align with your company’s strategy. Economic environments and consumer preferences change like the seasons. A company’s succession plan should reflect the anticipated changes in the nature of the leadership required to make the changes.
Flow from the top. No succession plan will be used or survive absent the support and accountability of the CEO.
Involve frequent and open communication. Employees should be aware of opportunities, how they will be evaluated, and have clear and direct communication with leaders about their status and potential.
Leverage cutting-edge performance metrics and data. The metrics used to assess candidates and place them in the line of succession should be a mix of performance results and methods, development potential, and, to the extent possible, objective (i.e., verifiable). Data relating to turnover rates by position, gaps in skill and experience, expected dates of retirement, and demographics can be applied to identify potential talent shortfalls in sufficient time.
Drive bench strength. Rather than being pleased that there are one or two qualified candidates, owners of the succession planning process should grow a talent pool from which internal hires can be selected. Done right, each of these characteristics requires considerable work and a watchmaker’s attention to detail. Even then, most of the processes that I am familiar with leave out an important characteristic: An employee perspective. While employers want a large pool of high potential employees who stay and get very good at their jobs, by considering employee needs first, a marginal succession planning process can be transformed into a home run. Employees want answers to four questions:
These questions are asked by employees at all levels, but are often only clearly answered for the more senior level positions. Waffle House is a pleasant exception to this practice as the company clearly answers the questions for the first four levels of management (go to WHCareers.com for an example). The company’s explanation for this practice is that it believes in “Homegrown Management” and “Ownership.” These are not hollow promises as the company’s privately traded stock has increased in value for each of the last 57 years.
Waffle House’s approach to succession reflects the reality of a strong and healthy culture: They are build from the inside out by maintaining a core of culture advocates. Hence, a primary objective of succession planning is to sustain the continuity and strength of your culture. In light of a common definition of culture as “the shared beliefs about success and how it is achieved that guide employee behavior”, this objective is of overriding importance.
In addition, the higher the position is in a company’s hierarchy of jobs, the more important culture fit and culture preservation becomes. It is rarely a lack of skill that determines the failure of senior level new hires, but lack of fit with the company’s culture. In the absence of shared beliefs, even the new hires with the best of intentions will do things that are considered “bad” by the culture they are trying to be part of.