Unprepared for the unexpected

2011

It seems obvious. If your CEO suddenly departs for some reason, there's a plan in place to replace him or her, even if that means a temporary appointment. But that's not so. In fact according to a new survey, only around one out of every seven U.S. organizations would be well prepared for such an eventuality while one in five would be left with no plan in place at all.

How far companies are prepared – or unprepared - for the unexpected is the focus of new research by American Management Association Corporate Learning Solutions. Their survey of more than 1,000 senior managers has found that only 14 percent feel that their organization is well prepared, with a further six out of 10 (61 percent) "somewhat prepared".

That leaves fully one in five organizations unlikely to be able to deal with the sudden loss of its key leaders.

"Just a small minority of organizations seem ready to manage a top-level succession in an emergency, which means most companies are taking a huge risk by failing to address their bench strength issues," said Sandi Edwards, senior vice president for AMA Corporate Learning Solutions.

What's more, she said, the findings mirror what people really think because they are not based on an official response from corporate leadership. And the respondents were not hesitant to share their opinions, with the survey also revealing widespread criticism of organizations' leadership pipeline.

"Again, the respondents weren't shy about their viewpoint." Edwards said. "Scarcely half believe their company's bench strength is even adequate, and merely 10 percent think it's robust."

The survey mirrors a 2008 study by the Institute for Corporate Productivity (i4cp) which revealed that more than two-thirds of US organizations would not be able to immediately fill a leadership position if it was necessary, while just a third had identified an internal interim successor should their CEO suddenly depart.

The same survey found that just45 percent of firms had 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.

But as the AMA findings suggest, planning for a smooth management succession is more important than ever before. "A big majority, 71 percent, say it's more important; 27 percent that it's about the same as in the past; and less than one percent think it's less important; yet organizations neglect to sufficiently plan for such unhappy contingencies," Edwards pointed out.

For the past two years, Edwards said, senior management has been focused on cost cutting and survival.

"But now it's time for investment in sustainability and competitive advantage, which must be based on talent. Having the best people in pivotal leadership roles, prepared to step in at any time, is essential for future success."

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