In the last few years, I have focused a bit more of my work on executive succession planning, and through that, I have crystalized a perspective on some of the biggest things that get in the way of impactful succession plans.
This is an important issue to me because the cost of avoiding your succession plan or getting it wrong can be potentially catastrophic to a business. Pwc reported, “Companies that have to fire their CEO forgo an average of $1.8 billion in shareholder value compared with companies that plan, regardless of whether the replacement is an insider or outsider. There is a far greater payoff to getting CEO succession right than current succession practices and investments would imply.”
So obviously, this is a big deal, and still, so many of my clients struggle to initiate, keep up with, or proactively plan for succession.
What is the first big mistake organizations make?
#1. Not thinking far enough out.
Succession planning demands a multi-year set of plans and actions, and my experience has been consistent with the research that shows that it takes between 18 months to three years to get already highly qualified candidates ready for the job.
So why are people struggling to look farther into the future?
There are a few practical reasons: time, day-to-day business management, etc.
What we see as the big reason organizations struggle is that predicting the future in a dynamic business environment is hard to do. This is not an easy task and a long-term view is required to accurately assess where your organization is, where it needs to go, and who is the right person to lead it. The space for these conversations doesn’t naturally happen; it requires us to create/initiate it.
#2. NOT SEEING TALENT AS A COMPETITIVE ADVANTAGE
One of the biggest mistakes organizations make regarding executive succession planning is that they think about it too narrowly. When organizations view succession planning as a process and event instead of a pathway to creating a competitive advantage in the marketplace, they are inadvertently leaving untapped value on the table.
The truth is, succession planning is so much more than finding a worthy replacement; succession planning is about building an organizational capability that creates value for multiple stakeholders now and in the future.
When you look at succession planning as an organizational capability, you are able to look at your talent more holistically, and as a result, you are on the path to building a stable pool of future leaders that have the capacities necessary to meet tomorrow’s business challenges.
This type of forethought is essential to running an organization that sees its talent as a competitive advantage.
#3. Avoiding talking about it for fear of upsetting incumbents
Most companies avoid talking about succession planning because they are worried that it will ruffle too many important feathers.
This anxiety can be around a number of different things.
One is that leaders are concerned about creating a sense of entitlement within their culture.
Another is how to manage a leader who feels like they are ready to move up before they really are.
This leads to the biggest reason leaders are afraid of succession planning: retention. If a leader hears that they are not yet ready, are they going to leave? Additionally, how do you retain those important leaders who were not selected and are still essential and valuable in your organization?
These big anxieties often result in companies delaying any kind of process which means when an executive is ready to leave, not only is the organization unprepared to fill the role, but they don’t have a clear sense of who may be ready for the job.
This is also one of the reasons that succession planning often happens in secret, though that presents its own challenges as well.
#4. Avoiding succession planning because you think you already have a replacement
This one is incredibly common, and it is also something that organizations don’t see as having the potential to cause harm.
Many organizations fall into the trap of believing that they do not need succession planning because they have already identified a replacement. Having a successor does not mean that you have a succession plan.
When organizations feel that they have one (or multiple) readily available candidates, it can let the organization off the hook and makes it easier to avoid serious conversations about their leadership pipeline and avoid engaging seriously in building the organizational capability to develop a succession planning process.
This sense of urgency goes away when a replacement is identified, but the lack of process will be felt in other areas of the organization.
#5. Getting paralyzed by complexity
Organizations often don’t engage in succession planning because they become paralyzed by its complexity and do not see a way to start small.
This is not an unrealistic problem! As I’ve addressed in my previous posts, there are a lot of legitimate reasons that companies find succession planning difficult. By nature, it is a complex endeavor.
This is not a reason to not do it.
It is important to take the first step, even if you don’t know what the steps after look like yet.
Creating a requirement that the first step be taken opens the door and creates momentum which in turn, creates requirements for future steps.
If you aren’t sure what that first step looks like, I’d love to chat. Take a look at our information on succession planning and reach out.
