Why Succession Plans Rarely Succeed

Oct 13, 2015 | Commerce, English, Ideas, Ideas for Organisation, Organisation, TheColumnist

Most succession plans are too idealistic, burdened by unrealistic expectations thus designed to fail. Here is how you can avoid this approach.

Imagine if your purpose thus far has been defined by making decisions that affect thousands or even millions; that the passion for your organisation has been your life’s work. Will it be easy for you to end simply and walk away from it all? What will you do?

Taking too long will derail the chances for success

The answer is obvious and this is the number one dilemma facing Founder CEOs or influential CEOs who have served so long that they become uniquely linked with the companies that they serve. This struggle by the current guy in the driver’s seat is also what causes the delay for succession plans to kick in. Plus, no one likes to have the incoming leader already in place and be perceived as a lame duck. So this part is seldom easy.

Uncertain future role for the incumbent

When organisations discuss succession plans, they seldom talk about the future of the current CEO. What is he/she going to do? The role of the Founder or influential CEO is extremely important especially if he/she is going to stay on in the organisation. Having a seemingly non-executive title of Chairman does not cut it. The current CEO may command significant goodwill and sometimes a statement or gesture can go a long way to signal a lack of confidence in the new leader.

Not just the CEO, how about his/her core team

The other group of people who tend to be forgotten are the core set of leaders who have built up the organisation with the incumbent. Very often – in Asia at least – this group who have built up the organisation are also looking to retire and step aside. And if an organisation has never implemented a systemic approach to succession then this presents a serious problem as 50% of the bench may need to be replaced, increasing the risks of instability.

A messianic role for the new CEO?

Finally, let us talk about the new guy. Before even meeting the person, the board will paint the kind of leader they need in order to bring the organisation to the next level. Eventually, the list of aspirations and concerns grow so long; you soon feel that the Messiah is coming. Though, in truth, no one can meet those expectations, even the best executive search teams cannot promise to find the super-candidate since this process is not about one person but an entire organisation. The critical element here is to make sure the person can build a new mandate with the existing set of leaders and sustain the support of the board.

In our work to help organisations redesign their business models and organisations for sustained growth, succession planning takes up 50% of our work in Asia. This tends to happen when we work with organisations whose leaders are Founder-CEOs in their late 60s and are looking to pass on the baton to the next generation.

From our work thus far, the following three Ps have served us well in the process of designing effective succession programmes:

First: Predictability

When it comes to succession planning, it is best to go with as little fanfare as possible then it will not add pressure to the incumbent and the incoming executive. A long process is preferred and familiarity is often best. Many organisations have this delusion about bringing in an outside executive to shake everyone up. But the truth is, the outsider will take two years to find his/her way around, then build up a trusted core team before he/she can shake things up effectively. Without any sufficient understanding, the risk is always high if the shakeup happens too early.

From what we have experienced, capable insiders are still the best persons to replace the incumbent. They know the organisation long enough, have been part of the core team, knows who to turn to, to make things happen. It is not a coincidence that many of the world’s best companies such as P&G, Apple, IBM tend to select insiders for the top job.

But if early on, the board is unable to identify a suitable candidate then it is best to recruit the person in early to serve as either head of operations, finance or a business unit. These roles will test the incoming leader’s ability to interact with the organisation and allow the incumbent time to build trust with the incoming CEO. It is also best to do this under the radar and not declare that the candidate is being groomed to be the next CEO. In this way, if the process does not go well, the board will have a lot more options open to them. The ideal time frame for the incoming to serve in the organisation is at least four years; this provides the minimum amount of time for him/her to understand the organisation and make an effective contribution.

Second: Personality

The personality of the CEO matters a lot more today especially if the incumbent has a huge personal brand then the incoming better be confident enough to stand up to the scrutiny and establish his/her style. The incumbent CEO’s personality has often shaped the culture of the organisation and so it is important to be clear that the style will certainly be different when a new leader comes along.

When organisations do not have the practice of succession planning, it is important for the incoming to communicate clearly about the different approaches and the implication for corporate practices. At the same time, it is necessary to assure existing team members about the commitment to build on the founder’s legacy or the incumbent’s good work. Comparisons will be made, so it is important to have frequent communication in small or large setting and  sustain such conversations over a year while a transition is taking place. A longer process of at least 3-4 years then becomes useful as it will give time for the incoming executive to blend in with the incumbent and his/her leaders before he assumes office.

Third: Plan

The most effective transition that we have seen so far is whenever the incumbent and the incoming both develop and commit to the same strategic plan. This approach increases predictability since all plans will require some adjustments after implementation. Such a strategic plan must not simply focus on succession at the top but identify key leaders who will soon be stepping aside and how to prepare the next line to take over from them too.

Succession planning should not be the focus of any transformation exercise but is an essential component. Therefore, the strategic plan should focus on how to take the business forward and what kind of skills will be needed. When this is clear, then the job scope for the new CEO will be easier to define. But when the focus is excessively on the new leader then it becomes a form of distraction. One person can only do so much and for any large organisation, it takes the sum of all parts to make it work. And don’t forget, you are not selecting a celebrity CEO for marketing purposes because this type of ‘Stardust’ will soon fade. You are trying to select someone who can calmly execute and lead the team with confidence in the face of uncertainty over a sustained period of time.

Finally, it is important for any organisation to have succession planning as part and parcel of their strategic planning and operations. It is best to make it normal and not raise the stakes unnecessarily high since, by default it is already a significant risk. What you want to do is to create a system that is ready for change, is always ready to evolve the leadership by building a deep bench of talent who are ready to rise and lead. The gold standard for succession planning is one that is a constant and not a last minute endeavour.

This article was also published on LinkedIn Pulse.

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