Thank You, Next: 10 Questions for Proper Succession Planning

Last month, I cited the results of a recent global study involving over 1,200 C-suite executives and directors in which the “talent and labor” theme continues to dominate the enterprise risk profile. The commentary pointed to several realities of the 21st century — scarce talent, fleeting employee loyalty, more employment options for coveted skill sets, greater transparency into available employment opportunities and the effects of AI and other technologies on the nature of work and the workplace itself.

These realities are driving trends that cannot be ignored:

• Intense competition for talent.
• The importance of organizational culture and shared values.
• The need for learning and development.
• The effects of a transient, mobile, multigenerational workforce on expectations for meaningful work.

Then there is the importance of work/life balance, flexibility, and health and wellness, especially for younger generations.

These realities warrant inclusion on the crowded agendas of C-suites and boardrooms. The rapid pace of change, driven by technological advancements and shifting global market dynamics, requires agile and adaptable leaders. As we pointed out last month, success now and in the future hinges on creating, implementing and communicating a talent strategy that aligns with the business strategy — and successfully preparing for the future means addressing succession planning. 

Address succession planning and leadership development

At the top of the list of reasons why succession planning is so essential is the need to preserve leadership continuity in a world that won’t pause for an executive search. Effective succession planning facilitates smooth leadership transitions, minimal disruptions to operations and the stability needed to ensure consistent execution of complex strategies toward achieving organizational goals. It helps to preserve and reinforce the organization’s culture and values by ensuring that future leaders are aligned with the company’s vision and mission.

The challenge with succession planning is that it is largely regarded as an important but not urgent activity. Accordingly, it often takes a backseat to more urgent matters. For sure, the importance of succession planning becomes clear when there is an unexpected departure or loss of a key member of the leadership team. Retirements, we see coming; an abrupt resignation or unforeseen circumstances, we don’t. But we can be prepared.

A global survey of over 240 organizations by the Association for Talent Development found that half are engaged in succession planning, with 60% of the rest planning to implement it. The main challenges include limited C-suite bandwidth, insufficient resources and a lack of knowledge and expertise. Here is where the lack of urgency rears its ugly head. It is a significant issue because the idea that “we can hire someone else” is not necessarily realistic. 

Today’s leaders face different challenges than leaders of the past. Older generations focused on hustle, while younger generations prioritize purpose, values and alignment. The new employee value proposition is shaped by data-driven research, talent shortages, technological advancements and changing societal norms.

This is further complicated by changing demographics and a declining talent pool. Projections show a decline in high school graduates in the US after 2025 due to fewer children being born during the Great Recession. Other recent research asserts that global fertility rates continue to decline due to lifestyle and socioeconomic factors that have led to couples delaying having children. If this pattern is not reversed, by 2050, over three-quarters (155 of 204) of countries will not have high enough fertility rates to sustain their population size over time; this will increase to 97% of countries (198 of 204) by 2100.

The sheer magnitude of change suggests the competencies leading to up-the-ladder success in the past are not the same combination of qualities needed in the future, nor are the processes by which organizations identify and nurture future leaders. So how do organizations modernize their succession planning capabilities? 

Here are five high-impact actions for companies to consider:

Establish transparency and awareness

With all the talk about pay transparency, relatively little sunlight shines on succession plans. Rising leaders often do not know they’ve been identified as a future candidate for senior leadership. Lack of awareness about advancement opportunities may be higher among some employee segments vs. others, as research about female managers indicates. 

Clarify who must stay

To address flight risk, leaders should identify high-potential individuals in the organization with the critical skills needed to drive the business in the future. This is important, as the youngest Baby Boomers, a generation often filling leadership roles, will reach retirement age near the start of the next decade. The process of identifying the organization’s next generation of leaders should be developed based on analyses of future business challenges and opportunities, assessments of the skills and organizational knowledge required to address those needs and related evaluations of rising stars.

Have the right conversations

It’s not enough to be transparent. In many cases, current leaders cannot identify a specific promotion date, and that is understandable so long as this information, the reasons behind it and its repercussions are communicated clearly in candid conversations with the rising leader. It helps make the plan as actionable as possible with emphasis on the need for flexibility and the organization’s commitment to invest in the individual. The organization should avoid making promises it can’t keep.

Ladder up

Leading organizations strengthen succession planning by extending their focus deeper into their hierarchies, to the manager level. While high-potential professionals at these levels do not require the same intensity of development as an SVP knocking on the C-suite door, attention to these cohorts is crucial to sustaining executive bench strength and leadership continuity throughout the enterprise. Lower — and often younger — rungs on the leadership ladder may have expectations of shorter promotion time frames as well as different employee value propositions and leadership priorities.

Measure up

KPIs apply to succession plans as well. According to a report by the National Association of Corporate Directors, following are examples of possible metrics:

• Number of designated successors for key positions considered to be “ready now” and “ready in two to three years.”
• Number and percentage of employees in high-growth-potential and high-performance categories, along with their rates of retention.
• Changes in employee turnover (including regretted and nonregretted departures), vacancy rates and median recruitment time for key positions.
• Changes in demographic profile of the current workforce and candidate pool.
• Changes in results of employee engagement surveys (particularly during periods of transition — for example, following major strategy changes and acquisitions/divestitures).

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Questions for executive management and the board

Following are relevant questions for executive management and the board to consider when evaluating whether the company’s approach to managing succession is sufficiently comprehensive and effective:

• Are we satisfied with our strategy for sustaining our talent pipeline of capable leaders considering the following factors?
  • The health of our executive bench strength at two to three levels below the C-suite.
  • The critical roles within our organization that require succession plans and the skills and competencies essential for success in these key positions.
  • The identification, development, mentoring, nurturing and retention of our “A players” and rising stars who have high potential as future leaders.
  • The extent of our investment of time and money in modernizing our succession planning and leadership development capabilities.
  • Our consideration of the generational imperative as millennials fill out key roles in the workplace.
  • Our preparedness to handle a leadership crisis effectively, thus reducing the potential negative impact on business continuity.
  • The frequency with which we review our succession planning process.
• Is the CEO involved in leadership development? Is the board involved, particularly in terms of plan oversight and approval as well as direct ownership of CEO succession?
• Is our succession planning aligned with our long-term strategy and objectives? For example:
  • Do we adapt our succession planning process to changing business needs and evolving market conditions?
  • Does our succession planning ensure that we have leaders who can drive innovation and lead transformational initiatives to enable our organization to remain competitive?
  • Do leadership development activities support and advance our corporate vision and values? What steps are we taking to ensure that the future leaders we’re grooming are aligned with our values and culture? 
• Have we considered financial incentives tied to succession planning and leadership development? 
• Are the opportunities for career advancement and the pathway for growth within the organization clear enough to our employees to keep them engaged and motivated?
• How do we ensure that succession planning is integrated into our overall strategic planning? How are we communicating our succession plans to reassure employees and stakeholders about leadership continuity?
• Does our succession planning promote inclusion in our talent pipeline by intentionally identifying and developing leaders from diverse backgrounds, ensuring a broader range of perspectives in decision-making and a continued outside-in focus on understanding and addressing the needs of a diverse customer base and workforce?
• How are we tracking the progress of identified successors and their development? What metrics are we using to assess the effectiveness of our succession planning efforts?
• Does our track record with respect to succession engender investor confidence? In other words, have we demonstrated that the organization is well-prepared for future leadership transitions?
• Is the organization fostering leadership networks for its high-potential personnel, including alumni, to create advocates for the organization as an employer of choice as well as build lifelong relationships with current and future leaders, even after they leave the organization?  

Sharpen the focus on succession

In today’s optics, a robust succession planning process is vital to sustaining leadership continuity, supporting effective talent management, facilitating change readiness, promoting diversity and inclusion, maintaining organizational culture and aligning talent management with the organization’s strategy. By proactively planning for leadership transitions, organizations can ensure long-term success and resilience in an ever-evolving marketplace. A proactive approach not only prepares the organization for future challenges but also fosters a culture of transparency, resilience and growth.

As we stated last month, the CEO and the board should ascertain that the chief human resources officer and the HR function are adapting as talent markets and economic conditions change. Today’s talent challenges cannot be addressed with yesterday’s thinking. Over time, the need for more sophisticated talent strategies will only increase, as will the risks triggered by relying on reactive strategies for managing succession. The above discussion and related 10 questions offer leaders an opportunity to send a clear message to the organization as to what they are looking for in terms of a comprehensive succession plan.

Depending on the risks inherent in the company’s operations, senior management and directors should include succession planning KPIs on the C-suite and boardroom dashboard linked to the overall strategy to facilitate monitoring of execution and progress. In addition, sufficient agenda time should be allocated to review the talent pipeline and succession plans on a periodic basis.