Editorial
From Howard Schultz at Starbucks to Bob Iger at Disney, the business world is littered with tales of failed succession plans. Mismanaging C-suite succession can lead to a series of challenges, from earnings or productivity decline to reputational damage and even a deterioration of culture. Alarmingly, 62% of executives believe their organization lacks a successful strategy for C-suite succession.
Why Is Succession Planning Important?
Business risk mitigation: By definition, succession planning is an endeavor in future-proofing organizations. The business and reputational risk associated with C-suite appointments is high, and proper planning can reduce, if not eliminate, such risks.
Reduced business disruption and uncertainty: Vacancies in the C-suite can lead to substantial revenue and productivity losses as well as uncertainty and disengagement among employees. Effective succession planning minimizes disruption by providing employees, customers, and other stakeholders with the much-needed stability and clarity in a world riddled with uncertainty and rocky macroeconomic conditions. Appointing internal successors can further increase the likelihood of a seamless leadership transition. Not only is it faster and less expensive to promote from within, but internal candidates carry the added benefit of precious legacy knowledge and relationships both in and outside the company.
Identification and development of high-potential talent: Few processes are as effective in surfacing high-potential talent as succession planning. Because succession planning and talent development are inextricably linked, succession conversations can highlight the rising stars of a business, thereby accelerating their development.
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Why Succession Plans Fail
Even when leaders develop seemingly thoughtful succession plans, they can make some common execution mistakes. Let’s examine some reasons why succession plans fail and what to do instead:
Engaging Too Narrow or Too Wide a Selection Committee
Leaving succession decisions solely up to the incumbent can derail the process. They have too much skin in the game, they can be too close to the business and therefore susceptible to biases, and it may even be a conflict of interest for them to appoint their own successor. For instance, the incumbent may appoint someone similar to themselves (familiarity bias) or seek information to confirm what they already know about the candidate (confirmation bias). ’s tenure at Disney was short-lived, in part, due to the lack of involvement from the board in the appointment and job design process.
Conversely, attempting to gain consensus from every stakeholder is equally unfeasible. A balanced approach entails forming a selection committee appointed by the current incumbent and the board’s talent committee, with each candidate interviewed by all committee members. While not every board member needs to interview each candidate for an executive position, the board must align on the role’s rationale, key accountabilities, job specifications and search strategy.
Using Outdated or Narrow Competency Models
Relying on outdated competency models can result in the selection of unsuitable candidates and weaken the talent pipeline. When successors are evaluated exclusively based on prior experience and the historical needs of the business, qualities like learning agility and a growth mindset are undervalued. For example, leveraging AI is no longer a nice-to-have in technology, and sustainability is a key business imperative in most consumer goods organizations. The best executives have adapted to this ever-changing business landscape. Coca-Cola is a best-in-class example of a company that continues to renew its competency models from the CEO role to the frontlines.
Competency models have their own limitations, however, so organizational culture must be carefully considered. With the rise of stakeholder capitalism, employees expect their voice to be considered in key business decisions. Neglecting culture and employee needs amplifies the risk of organ rejection, setting new executives up for failure. Leading organizations understand that assessing potential successors’ soft skills to ensure they will inspire and engage employees is more important than ever given rapidly changing employee expectations.
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Underestimating the Importance of Board Support
Often the single biggest point of failure, the importance of board support cannot be overstated. Sponsorship (or lack thereof) from the board can make or break an executive’s success in their role, and in turn, their career. The board’s role extends beyond candidate selection to designing optimal conditions for new executives to thrive.
Once identified, potential C-suite successors must be given opportunities to interact with board members to build the necessary influencing and diplomacy skills required in executive roles. Deliberately planning these interactions allows the board to get to know high-potential talent below the C-suite level which is increasingly necessary given the expanding role of boards in advancing the talent agenda. Upon appointment, and within the first 30 days on the job, new executives should meet with board members and build relationships outside of formal board meetings. While these measures may seem obvious, a surprising number of organizations fail to take these steps, resulting in tumultuous and costly executive transitions.
Under-Investing in Leadership Development
A robust leadership development strategy strengthens the talent bench and improves employee engagement and retention. In the case of internal candidates in particular, CEOs and boards should ask not whether the person is ready for a bigger role, but how they can get the person ready through the right mix of experiences, exposure and coaching. Senior roles require the ability to influence and tactfully resolve dissenting viewpoints at the executive and board level. These skills are rarely developed in roles below the C-suite, which may necessitate additional investments in leadership development for those in the succession pipeline. The selection committee must carefully craft a thoughtful onboarding plan for new executives and consider offering executive coaching which can be especially beneficial for executives navigating C-suite and board-level interactions for the first time in their career.
Executive competencies are perennially changing, which requires a forward-looking approach to leadership development. In addition to closing the skills gaps of today, businesses must ensure that potential successors are keeping up with the evolving skills needed to be a successful executive in the future. Being static today means falling behind tomorrow.
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Treating Succession Planning as a One-Time Event
One of the most common succession planning mistakes is assuming the job is done when a successor is appointed. CEO tenure has been declining (from six years in 2013 to 4.8 years in 2023, representing a 20% decline) and CEO departures inevitably lead to turnover in other C-suite roles. Planning early and often is prudent. Succession planning should start as soon as a new executive is appointed.
Effective succession planning can take years. At times organizations are surprised by unplanned departures, disability or even the sudden death of an executive. Until a long-term plan is developed, boards and CEOs must, at minimum, develop a business continuity plan. This includes identifying an “emergency backfill” (different from a permanent successor) for all key roles in case of unforeseen circumstances. Expecting the unexpected can prevent panic during uncertain times.
The Increasing Importance of Succession Planning
Contrary to popular belief, succession planning should not be limited to C-suite roles. Succession planning is a mindset that, if not permeated throughout the organization, can result in missed opportunities to identify and develop future leaders. In a world where 26% of CEOs cite talent shortages as the top damaging factor to business outlook, and 74% of Gen Z and Millennials are ready to quit their jobs due to a lack of career development and internal mobility opportunities, businesses can no longer afford to let talent development, and in turn, succession planning, fall to the bottom of the talent agenda.
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