Still ignoring succession planning

2008

You might have thought that having a succession plan in place should your CEO suddenly depart would be common sense. But an astonishing proportion of companies – particularly those who have the most to lose – don't seem to agree.

A study by the Institute for Corporate Productivity (i4cp) found that more than two-thirds of the organizations they surveyed would not be able to immediately fill a leadership position if it was necessary, while just a third have identified an internal interim successor should their CEO suddenly depart.

What's more, fewer than half (45 percent) said they have a formal succession plan in place, or conduct regular talent reviews to gauge the readiness of employees who could step up into a leadership roles in short order.

"It's somewhat surprising to me that more attention isn't being paid to succession planning issues," said i4cp's Jim Thomas.

"Having the right people prepared to fill key positions is an essential business strategy in this time of fierce competition for talent. The defining moments in a company's ability to stay competitive may rest in the focus it places on filling key positions with assimilated and capable replacements."

What also emerges from the survey is that smaller companies are far less likely to have succession plans in place than their larger counterparts – despite being more vulnerable to a leadership vacuum in the event of their CEO departing suddenly.

When broken down by company size, two-thirds of companies with more than 10,000 employees said they are prepared or very prepared to immediately fill a leadership role, while three-quarters have identified an interim CEO successor.

Nearly nine out of 10 of these large firms also said they have a succession plan in place and seven out of 10 carry out regular talent reviews.

Of the companies surveyed that do have succession plans, nearly half (45 percent) have a specific group (HR or other department) overseeing the plan, a figure that jumps to three-quarters in companies with more than 10,000 employees.

But crucially, just four out of 10 review their plans regularly (a minimum of every two years) meaning that if valued high-flyers depart for greener pastures, it is more than likely that their only option will be to throw money at the problem and recruit externally.

"I have held executive-level HR positions with several large companies, and the importance placed on succession planning was extremely high," Jim Thomas said.

"It just makes sense. The future successful management of the company depends on the strategic initiative it places on having an integrated succession plan - specifically one that is consistently reviewed and used to fill key positions within the company."

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