Heads in the sand on succession planning

Jul 16 2008 by Nic Paton Print This Article

Barely half of US firms regularly update their management succession plans, meaning that when valued high-flyers depart for greener pastures, it is more than likely that their only option will be to throw money at the problem.

A survey of more than 2,500 senior HR executives by consultancy Novations Group has found that, nominally, succession planning among North American firms seems to be in relatively good shape, with just seven per cent of firms admitting to having no succession planning in place at all.

But peel back the figures and a more worrying picture emerges, it reported. More than a fifth said that, even though they had succession planning in place, it was valueless because, as often as not, they ended up recruiting someone externally anyway.

Another quarter admitted that, while there was work done on succession planning, it was only done in "fits and starts".

And barely half Ė 46 per cent Ė said that they updated their succession plans regularly, an absolutely critical requirement in a fast-changing, fluctuating business environment.

The Novations study adds weight to the perception that, for many US leaders, succession planning remains something of a blind spot.

In December last year, a study by consultancy Mercer and The Center for Board Leadership, the research arm of the National Association of Corporate Directors, found that half the boards of public, private and nonprofit corporations considered their efforts around CEO succession to be less-than effective.

A similar proportion admitted they had no succession plan in place, while a quarter acknowledged that their boards fell into "below acceptable" levels of CEO succession planning, despite directors identifying it as among their leading concerns.

Succession planning is increasingly recognised as a top corporate responsibility, agreed Novations executive consultant Michelle Knox, which made it all the more worrying that so many were not engaging with the issue.

"Many companies find themselves in a never-ending cycle of recruiting, which costs a great deal in terms of dollars, engagement and productivity," she pointed out.

Managers needed to move beyond the notion of succession planning, with its connotation of being a distant event, to the more immediate task of "succession management", she argued.

"Companies think that because they have a plan they're all set, but the challenge is broader and needs to fit into a process that supports ongoing talent development, not only the need to quickly fill an empty slot," she said.

In organisations that did succession management well, the entire process was owned by the executive team and executed by HR, she continued.

"And it's aligned with corporate strategy and all human capital systems. Instead of a single individual slotted to fill a particular position, talent pools are created, and members are given access to the tools and resources to be responsible for their own continuing development," Knox said.

Another element of best practice, which had the bonus of bringing greater transparency to the process, was allowing individuals to nominate themselves, she advised.

"Their development needs may then be evaluated, a development plan created, and they both give and get feedback on progress made," Knox said.

"Of course, this means senior leaders are checking that progress throughout the year," she added.

Yet at the majority of companies' succession management barely made it to the table, let alone forcing its way on to the agenda, Knox noted.

"When the plan is seldom updated, it's a symptom of a more fundamental problem," she said.