Are succession plans masterpieces of abstract art?

Succession plans are not made to stay in filing cabinets, to be taken out once a year for the Human Resources Committee of the Board of Directors. Although most companies have a succession plan, they don’t all have a true picture of the situation in hand. There is a big difference between an emergency plan for temporary replacement of a CEO or executive and a succession plan that fits in the long term and is an integral part of the organization’s leadership development culture.

Here are the facts:

• A CEO or senior executive is rarely run over by a bus. Of course, some tragedies happen but they are rather exceptional. Although an emergency plan is needed, it can’t substitute for the succession planning exercise.
• Half the time, a CEO or senior executive that announces his departure is generally replaced by an external candidate despite the existing succession plan.
• According to a US/Canada study by Heidrick&Struggles in 2010 (http://rockcenter.law.stanford.edu/wp-content/uploads/2010/06/CEO-Survey-Brochure-Final2.pdf):

• 39% of companies admit that have no internal succession.
• Company boards spend an average of 2 hours per year on the question of the CEO’s succession.
• Only 50% of companies have a description of the skills and desired profile for the next CEO (QED: if the Board of Directors only spends 2 hours on the subject…).

Out of the 1000 largest companies in the United States in 2008, only 55% of new CEOs appointed were sourced internally. The same figures are valid today. It can therefore be said that half the time the succession plan was unsuccessful. However, according to a recent study by PWC, 85% of CEOs believe that they have an effective succession plan in place with multiple successors identified, 62% have leadership development plans in place and 38% even have mentoring programs for their executives. It seems that for 63% of Canadian CEOs the availability of skills and talents on the market is one of their greatest concerns and represents a threat to the business plan.

Yet the reality is something else. Behind the pious voices and good intentions there are people. That’s the problem. Changes always happen in times of crisis. A succession plan builds upstream and well before a crisis hits. What company director or human resources vice president will dare to bring the challenge of succession to the table when the CEO and management team in place are miraculous, when activity is at its historical peak and when the company is preparing to seize market share and make several acquisitions in the process? No one. Absolutely no one. Since there are many other priorities, no one wants to displease a CEO who is delivering the goods at the risk of unsettling him. In short, if the development of talents and leadership is not sufficiently rooted in the organization’s culture to be integrated into the succession plan, there is not a chance that there will be internal succession (only 50%, in fact).

Thinking about it, it’s clear that many upper management executives and the CEO are not very inclined to recruit talented people who could put them in the shade or prove to be their replacement in the short term. It takes a helluva leadership and total self confidence to agree hire a potential successor in the short term…  not a young potential successor for 10 years down the road…  Leadership development processes sometimes have this breadth or tendency to predict and plan a career rather than developing the talents of future leaders. With too much focus on skills and knowledge acquisition, skills for management, political acumen and leadership are more difficult to integrate into these famous development plans. Why? Because to develop leadership, political acumen and influence it is necessary to put them into practice in a role which requires that they are used. Back to square one. The organization must take a risk by naming a future leader-in-development in a role which he has never held before. Worse, the company must accept that he could fail (which, just between you and me, would even be desirable so that he could learn from his mistakes and not repeat them). What organization can afford to miss a financial target, lose a transaction or acquisition with the aim of training its future CEO? None. Absolutely none. 

Jack Welch (see one of his interviews on this subject http://youtu.be/ybwxH5W3r7c) has possibly implemented the best succession plan that has happened by naming Jeffrey R. Immelt. It took six years of continuous hard work to appoint the successor of the giant General Electric. All these years were spent to getting to know the potential candidates to replace J. Welch intimately. It requires knowing them on a personal level (their family, situation, style, personality) and on a professional level in many situations (including crisis management).

I have often had this quotation from Sir Winston Churchill in mind: “However beautiful the strategy, you should occasionally look at the results”. Although the human resources processes and mechanisms are, on paper, absolutely magnificent and appear to function marvellously, it seems that in real life these same mechanisms look like Abstract Art. Too sophisticated, complicated and difficult to apply, they are finally either bypassed or relegated to the status of works of art at the bottom of a filing cabinet with the Board of Directors. What succession plans should prioritize is knowing individuals. Putting them into situations, listening to them, observing them and analyzing them to guide and prepare them better. Members of the Board of Directors should be integrated into this process and a special committee should be formed for identifying and getting to know the individuals and preparing them. Bearing in mind that in the end there will only by one winner, there is a need to manage expectations as well. That takes courage.

A succession plan is certainly the most sensible and strategic exercise, going beyond projected organizational charts and coaching and development seminars and which deserves all the attention and engagement of both top management and its directors.

Illustration Musee d'art contemporain de Montreal by Isa Tousigna

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