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Internal Succession Plans

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In the recent explosive growth of talent management, performance and recruiting always seemed to be the drivers, but compensation administration and succession planning always seemed close behind.  I’ve always thought that recruiting and performance would level off as most organizations purchased and implemented modules and moved onto comp and succession.  Unfortunately, it seems I’ve been wrong.  Certainly performance sales don’t seem to have stagnated, and while compensation is increasing in adoption, people don’t really implement succession or workforce planning.  Succession plans are all the talk, but it looks like succession is still gathering momentum.

I’m a bit surprised that HBR says 60% of HR directors don’t think their CEO’s have planned successors.  I wonder if asking HR Directors is simply the wrong level to be asking… after all, HR directors should know about division succession, but CEO succession would more likely be handled at the VP or corporate level.  I don’t doubt thought that there is a gap in leadership succession, which might mean that there is a larger problem in weak leadership development in these same organizations.  If you don’t have a succession plan, does that mean you also don’t have a CEO development plan or your top candidates?  The answer to this should be an obvious “no” since if you don’t have a succession plan, you obviously don’t have top candidates that you are applying targeted development to.

I was appalled to learn recently that 60% of the respondents to a poll of 1,380 HR directors of large U.S. companies said their firms have no CEO succession plans in place. As this finding suggests, too many companies have over the past two decades ignored the hard work of building future leaders while senior executives have focused increasingly on meeting the next quarter’s earnings target. When the time comes to name a new CEO, more firms look outside. Yet strong evidence supports the notion that a well-groomed insider is a key to sustained company performance. In my analysis of 1,800 successions, for instance, I found that company performance was significantly better when insiders succeeded to the job of CEO. Other researchers, including Jim Collins in Good to Great, have come to similar conclusions working from different data sets.  ((

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5 responses to “Internal Succession Plans”

  1. Martin Haworth Avatar

    My concern would also be that lower level teams don’t succession plan much either. The sharp end is where the money gets made and when there are no cultivated successors for key roles like customer service; logistics; marketing and brand development, this can have a significant effect on bottom line.

    Especially when it’s rife amongst the organization

  2. Sean Rehder Avatar

    I would advise any medium to large size company to baby step their way into succession planning…but start today.

    Step 1: Identify the position you to want build a succession plan for (not the person).

    Step 2: Identify those people who you want to train/build to move into that position.

    Step 3: Take simple actions and track them.

    Once you have those in place, you can then start to “do more” and start reporting and doing more strategic planning. It goes hand in hand with any diversity projects you company might be doing.

    However, if you can’t do those first three steps… succession planning won’t work at your company and you are wasting your time.

    I’m working with an internal succession planning team at a major company that involves hundreds of executives. Word to the wise, keep it simple and have a “flow” to it.

    We are using (a CRM) and customizing it and have started our second year with it.

  3. systematicHR Avatar

    Sean: I agree. It almost does not matter what steps you take today, but you need to start today.

    I also think that succession planning (from the baby steps point of view) is really the top of the organization. It does makesense from develpoment planning to be able to understand where your fills are going to come from for lower level positions, but I think that is mostly going to be developing talent pools both internally and externally.

  4. James Harvey Avatar
    James Harvey

    This is an interesting post (and comment trail) that started me thinking about how a CEO might respond.

    Just to play devils advocate (as many CEO’s love to do), I wonder how many business leaders will de-emphasize succession planning due the current economic climate? Is it a fair business assessment, given that many folks have seen their retirement savings suffer 40-50% losses, to expect leadership loss is much less risky?

    I would think there is a general observation among CEO’s and their Boards that people feel lucky to have a job, and are probably planning to work in their current job a lot longer than previously planned. Most of us that are close to talent management recognize the flaws of this logic, but nonetheless it still exists.

    My point is not that succession initiatives should be shelved in today’s economy. Rather, there is likely a big need to educate as to why succession is even more important in a down economy. How might a CEO or Board of Directors respond to proposed Succession Planning project today? As well, how should the business value be cast in light of the existing climate.

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