I wonder how many companies today can identify a likely successor to their CEO or key executive positions.
Deloitte’s recent research revealed that many companies do not have a succession plan, and a large number of CEOs and executives ranked succession planning as one of their highest priorities. The Wall Street Journal, just a few weeks ago, mentioned that the current head of a well-known multinational financial services corporation has been called by his colleagues the “accidental CEO”, and emphasised that the corporation in question has now realised the importance of succession planning.
Given that this is such a hot issue, I would like to discuss the importance of succession planning and share a summary of best practices as a starting guide to launching an effective succession plan.
Succession planning is a process of identifying, assessing and developing high-potential employees to ensure that they will be ready to assume important managerial and executive roles when they are called upon. As replacing high-profile CEOs or individuals is not a straightforward process, organisations need an effective and structured succession plan to identify and train high-potential employees.
The benefits of having such a plan in place are obvious and immediate.
First, by identifying and training high-potential employees, their motivation level and skills in the workplace will be enhanced. Recognition from the executives and managers will promote a healthy relationship between the management and employees. Succession planning implies that the organisation supports “hiring from within”, which has been proved to enhance employee’s motivation significantly. Skilled and motivated employees often mean a high-performance organisation as a whole.
Second, planning aids a smooth hand-over of the business from incumbents to successors. Once the successors are called upon to take the roles, they will be well-prepared from after years of training and development. They will have a good understanding of the company’s strategic directions, business responsibilities and will already be absorbed in the company’s values and culture. Moreover, the overall business and operational risk will be reduced as a result of succession planning. A good succession plan can help cope with crisis situations such as downturn in company performance, scandal and upset shareholders – highly relevant in today’s crisis-prone environment. When companies are faced with unexpected situations, a succession plan can quickly stabilise the leadership, remove uncertainty and steer the organisation back to the right path.
After outlining its benefits to employee’s motivation level, business continuity and risk strategy, I would like to offer a few essential elements in effective and successful succession planning:
1 Never let your talents stay hidden. Understand your “talent landscape” to identify your high-potential employees.
2 Effective succession management requires the close involvement of top management to ensure employees are trained by experts, learning straight from the primary source.
3 Develop a clear successor selection criteria, covering competencies and critical skills that are aligned with the corporate vision and strategy.
4 Grooming and cultivating high-potential employees requires a training and development plan that can be focused on the strengths and weaknesses of each individual high-potential employee.
5 Transparency is the key throughout the succession planning process. Employees want to know why their leaders were selected, where they are doing well, where they can improve, and to understand the best means by which they can gain the needed skills and experience. Transparency also signals to external parties that executive continuity is receiving high priority.
Some organisations may feel that succession planning is time-consuming and cumbersome. In reality, the benefits it yields in motivation enhancement, seamless hand-over of management and risk reduction far outweigh its potential downside.
Kessara Sakmaneevongsa is a partner in Consulting Services at Deloitte Touche Tohmatsu Jaiyos.