What Does It Mean to Rethink Succession?
When we began our discussions about this issue of the journal, we wanted to take a hard look at how or if the turbulent span of 2020-21 had changed succession planning in organizations. In dozens of discussions with CHROs, board members, CEOs and heads of executive development, it became clear that the practical problem-set that succession planning needs to encompass has grown more complex, even as the discipline involved in the work has not, at the systems level, evolved to keep pace.
Succession planning practices, we found, have evolved little from the late 1990s. Yes, board liability, tightened stakeholder focus on the “G” in ESG and a few prominent failures have made it harder for CEOs to simply anoint successors. But judged solely by outputs, succession planning has produced a remarkably undifferentiated product over the past 30 years. To wit:
- The CEO finalist group remains—by a vast majority—predominantly male and white.
- Even in companies where the incumbent CEO has been in place for many years, the lack of a ready successor has too often prompted board members to step into the CEO role. As board members are often older, whiter and more male than most organizations’ C-suites, this has in turn reinforced the homogenous nature of chief executive ranks.
- The senior talent pipeline is also predominantly white—“diversity” in that pipe usually refers to gender. Deep-diving on the data shows that a limited number of diverse leaders are often cited in multiple potential succession slots, effectively double- or triple-counting their diversification impact.
- The succession discussion has remained narrowly focused on the top of the organization, meaning that a clear development strategy for grooming leaders and culture-carriers at the top of the organization is often disconnected from the daily work of identifying and developing the best managers and culture-carriers at the organization’s front lines.
- One sign of the weakness in traditional succession assessment processes is that, for many organizations, the potential successor lists in December 2019 have been upended by the actual performance of senior leaders in 2020-21.
According to original research conducted in July 2021 for this issue (see Data Watch), more than a quarter of large organizations (and nearly one-third of medium-sized companies) acknowledge not having a succession plan in place. Where plans do exist, HR professionals and line business leaders are disconnected on some fundamental points of view:
- HR professionals note that succession plans are adhered to only 63 percent of the time, while business leaders feel they stick to their plans 98 percent of the time.
- HR professionals cite business performance, organizational performance and knowledge of the culture as the top succession criteria, while business leaders cite DE&I goals as number one, followed by business performance and organization culture.
- Even the existence of a succession plan shows a gap: 97 percent of business leaders believe the organization has or is creating clarity on succession, while only 64 percent of HR leaders are likely to feel the same way.
So what problem-set are we solving for? We broke it down several ways:
What are we doing well today? This issue examines what success looks like for the candidates in the pipeline, for the board members making the decisions, and for the HR leaders managing the process.
How do you start the conversation when there is reluctance in the system? Dan Ciampa’s article, “The Art of Leaving,” is an utterly original and practical analysis of this topic. His dissection of the mistakes and impacts of both reluctant departures and well-intended hand-overs gone wrong offers multiple lessons for CEOs, boards and succession planners in HR.
How do you remove structural barriers to a diverse senior talent and board pipeline? In the article “Directors Failing to Act Is the Biggest Barrier to the Boardroom,” original research on this should prompt pragmatic discussions up and down the talent supply chain. While board service is a competing time demand, organizations have used external boards as a development tool for senior executives for a decade or more. But there’s often a catch—a leader has to achieve a level of seniority before being allowed to have an external board appointment. Those seniority levels remain heavily white and male. This creates a loop of mostly white boardrooms selecting successors from candidate pools wherein the white candidates are statistically more likely to have had external board experience, and therefore may be perceived as being more well-rounded coming into their first CEO role.
How do you best onboard a new senior leader in a hybrid or virtual world? Stephen Miles and Deb Bubb cover the waterfront on our new reality where any senior leader—no matter how well-selected—will have to rethink their ability to unite and impact the organization without the luxury and power of in-person connections.
How does executive compensation drive the right leadership culture to create the best senior talent pool? Compensation not only drives current executive behaviors and performance, but also is an under-used instrument for crafting the leadership pipeline of the future. Charles Tharp and Kenneth Freeman of Boston University’s Questrom School of Business offer structured approaches to making compensation’s impact deliberate.
What questions do boards need to ask differently of succession processes and candidates? Several contributors address aspects of this question, but I’ll call attention to the passage that stopped me in my tracks. Dambisa Moyo, director at 3M and Chevron, in a roundtable discussion with fellow directors about how best to evaluate a candidate’s X-factors, said, “There is much more emphasis on broadening the metrics by which we judge candidates. For many years, boards tended to focus on noncontroversial areas like financial acumen and operational experience. Those remain important, of course, but there is greater scrutiny of ethics and morality.” For instance, she continued, “Boards can also ask questions of candidates like, ‘What’s the worst thing you’ve done to another human being?’”
If we are going to shake up the complacency of traditional succession planning, questions like that are a hell of a place to begin.
This issue is a discussion-starter, not a discussion-ender. Succession planning as a discipline is stale, and its outputs are largely undifferentiated from those 30 years ago. But the world has shifted on its axis, and it is time for a different array of strategies, tactics—and results.