Succession Success

By Elizabeth Wasserman  |  Posted 03-01-2004

To succeed, succession planning shouldn't just be about leadership development, or just another way to prod managers to perform their jobs better. Succession planning needs to get to the core of a company's business strategy, according to David Bliss, vice chairman of Mercer Delta Consulting LLC, in New York, who counsels companies on executive succession. Succession planning should consider what type of leadership is needed to address the current—and future—goals of the company.

"Many industries are going through significant change," Bliss says. "Their ways of running the business need to change to remain viable. They need to be open to shedding things that they used to do, and they need to learn to do new things well. Given this strategy, they should ask themselves what are the critical leadership criteria they need."

A recent survey conducted by the Human Resource Institute found that, of 115 large corporations, 69 percent had put together formal succession plans. That percentage hasn't changed much since the group's last survey, in 1999, despite the wave of corporate scandals that has rocked the business world, says Jay Jamrog, executive director of HRI, a nonprofit research organization based at the University of Tampa, in St. Petersburg, Fla. One reason given for undertaking succession planning was to ensure business continuity, but respondents also cited such critical factors as leadership development, creating job-advancement opportunities and encouraging staff retention. Surprisingly, only 66 percent of the companies said they had succession plans in place for the chief executive, Jamrog says. More respondents—87 percent—said they had plans in place for the succession of vice presidents. And 76 percent said they had such plans in place for the next CIOs.

Experts say that while companies may differ in their approach to succession planning based upon needs, time invested and the people involved, well-oiled succession plans should be based upon certain key factors:

  • Start by focusing on company strategy, both short term and long term.

  • Identify any leadership gaps. Include provisions in your plan to overcome or address those gaps—either by recruiting outside executives or by training current employees. Among the biggest mistakes companies make is identifying these gaps and then simply ignoring them, Jamrog says.

  • Define a set of skills that the company's leadership needs in order to carry out its business strategy over time. For a position such as CIO, Bliss says, those criteria might include not only knowledge of information technology but also experience managing difficult projects, as well as good communications skills, so that the CIO can easily exchange ideas with others on the executive leadership team.

  • When planning for succession of C-level positions in the company, make sure the board of directors and the executive team are directly engaged so that they see themselves as owners of the process, Bliss says.

  • In addition to succession planning for the top tier of a company, put in place processes to identify people at lower levels who have the talent and skills to jump a few rungs up the ladder.

    Jamrog says that respondents to HRI's survey were split nearly 50-50 when it came to whether the company should inform candidates that they have been identified for inclusion in a succession plan. Naysayers argue that such information could cause ill will among those who are not selected. "I believe you should tell people," Jamrog says. "If it's hidden, people will think the person is succeeding because of the old-boy network. If it's out in the open, it lays out the bars that people need to meet in order to be promoted. It's an open and honest communication."