Identifying who will eventually fill vacancies in the top leadership positions of a company should be a critical priority. However, building a sustainable pipeline of talent starts by looking deep into the organization, specifically identifying talent at the middle level. After all, this group of individuals holds the fate of the company in their hands. In every case, early identification of these future leaders is a necessity as 87 percent of organizations prefer to promote internal talent versus relying on external hires for top key leadership positions.
So, the key question is: when the preference of the majority of organizations is promoting from within, are these organizations doing enough to identify, develop and prepare those with the highest potential?
The State of Succession Today
According to a recent survey, more than half of the respondents said their companies implement succession management processes at only the most senior executive level and do not include mid-level managers in the plan. More than half of HR executives use traditional succession planning methods, while only 12 percent say their efforts are integrated with other talent management efforts. An incredible 55 percent of HR executives surveyed said their company has no structured succession planning process!
While most of us can probably agree that having no strategy at all is not going to work in the long run, it seems there’s some disagreement whether it is a good strategy to look only at the top of the ladder for succession planning. While this is not necessarily an incorrect move, it is certainly an incomplete one, as the future of the company could be hiding in plain sight, overlooked and deep in the middle layers of the organization.
For companies that prefer hiring externally and organizations that only look to senior executives for succession, there is a missed opportunity to enjoy the significant benefits that come from hiring inside the company. Promoting leaders from within the organization gives the most ambitious and talented members of a company’s workforce something to aspire to, a path that will prevent stagnation causing them to look for opportunities elsewhere. Plus, when employee engagement and career development opportunities are improved, both the business and its employees benefit across the board in terms of productivity, safety, customer satisfaction, sales, turnover rates and profitability. It helps your organization become an employer of choice.
Organizations that expand succession planning into the middle levels are likely to achieve a crucial competitive differentiator and will be more prepared for turbulence in a rapidly changing economy especially when this turbulence includes the unplanned departure of senior leaders in the organization. Sustainable talent pipelines are created in the middle of the organization, not at the top. This begs the question then: why are so many organizations failing to create a robust talent pipeline that goes straight to the top? It’s time to change this talent management practice.
Closing the Leadership Gap
Even at the highest level of organizations, succession plans can be inaccurate, are rarely concrete and do not integrate a clear development path. The questions that continue to remain unanswered are often: why can’t the majority of companies make succession plans reality? And where are the practice and cultural gaps, and inefficiencies, that have limited the efficacy of the talent review process?
We often find that talent reviews produce flawed succession plans for the following reasons:
- There is no clear success profile defined for key positions, which clarify role expectations, resulting in lack of alignment of the senior leadership team.
- The focus is on the process rather than the link between business success, talent development and impactful experiences.
- There is often a lack of candid and transparent feedback regarding talent within the organization.
- The talent review process lacks integrated development.
- The tendency to focus on only senior leadership roles, neglecting the large pool of talent in the middle and lower levels of the organization.
- There is too much emphasis placed on the readiness factor. Requiring that the candidate be ready now, rather than evaluating their readiness in 2-4 years, 5+ years, etc.
It’s clear that there’s a need for high-potential leaders to be identified accurately and early, and that these individuals need to be provided with the right avenues for growth and development. So, how are organizations to close the gap? The first step is an integrated approach to succession planning that includes comprehensive talent pipeline planning, built on a foundation of accurate role success profiles. By developing formal strategies for identifying leaders with high potential across the entire organization and then developing and preparing these individuals for future roles, a true pipeline can be developed that delivers high-performance employees whenever the need arises.
Succession management should be used as a business strategy. It must be considered one element of a comprehensive and integrated talent management philosophy. Succession is not simply placing names in boxes. It is accurately identifying, developing and placing the right leaders in the right role and the right time. Ideally, this process should discard the secrecy of the past in favor of a more transparent model that encourages integrity and reduces politics. Organizations must also take an intentional approach to diversity and inclusion. That is why we recommend having a leadership team and a talent pipeline in place that represents the make-up of the organization and community that it serves.
Succession management is not only necessary to mitigate the risk that is carried when it is uncertain who can carry out the company’s objectives in the future, but it will also build better retention rates, improve branding efforts, and boost career development channels within the organization all of which helps reduce recruitment costs by developing talent internally.
Powerful Succession Planning in Practice
Succession planning cannot be a check-the-box activity, where each time a position becomes open you go through the succession short list and find that those on the list are not the best fit for the open roles. A prominent example of succession planning and management is the promotion of IBM‘s Virginia Rometty, who joined the company as a systems analyst in 1981. Her 30-year tenure prior to advancing to CEO included continuous support from IBM with development pathways and continual succession of promotions all the way up to senior vice president. The decision to promote Rometty was hardly a surprise and demonstrated to partners and shareholders IBM’s stability and well-defined business direction.
Another well-known example is the appointing of Tim Cook to take over as CEO of Apple as Steve Jobs began his separation. Jobs took the formal, systematic approach to succession management to an entirely new level with the development of Apple University. Along with the university’s curriculum, Cook was groomed by Jobs for over a decade to prepare him for his role as CEO. Job’s succession management approach was so successful that Cook recently said of his position: “I see my role as CEO to prepare as many people as I can to be CEO, and that’s what I’m doing. And then the board makes a decision at that point in time.”
A lower-profile, but well-documented example is the transition of Alan Wilson as CEO of McCormick & Co. in 2008 as Robert Lawless wound down his tenure. McCormick took years to develop a robust succession plan that included development strategies for all senior executive positions, not just the CEO slot. Younger team members were part of the planning process, and candidates were continually monitored and guided over the years to encourage growth and development in many areas. Lawless said of succession planning that it’s important for CEOs to avoid becoming too consumed with their work and to avoid letting egos prevent CEOs from seeing anyone else as capable of the job. He maintained that boards need to work together with CEOs and keep the succession process not only transparent, but also realistic for those involved. The McCormick succession plan has proven successful for the company; the model was used to produce the current CEO, Lawrence Kurzius, in 2016.
Prepare for the Future
Succession planning is a necessary component of any business plan. With a median tenure of just five years for large organizations and around ten years for most others, failing to have a pipeline in place means inevitable upheaval for most companies especially if the departure of a current CEO is a surprise. By incorporating succession management into the greater efforts of talent management to identify those with the most potential and develop their skills over time, companies are not only better prepared to replace a variety of top-level positions, but they will also be boosting engagement and job satisfaction for those waiting in the wings.
Regardless of where your organization stands in terms of succession planning, we’re here to help position you for success. If you have questions, or think your program could benefit from a review and assessment, please contact Michael Grubich at 262-786-9200 or via email.