Given the rapidly increasing risks associated with both planned and unexpected changes in key executive roles, what concrete steps can boards and executive teams take to establish formal, robust, and high-impact succession management capabilities? I believe there are proven, practical strategies that companies may execute to build the necessary capabilities and capacity for executive departures.
First, boards and CEOs must clearly articulate the alignment between the business strategy and succession planning activities. This process involves identifying strategic talent pools and elevating the strategic priority of succession planning. An important primary step is engaging an external consultant or subject matter expert to conduct a comprehensive audit of all existing succession planning and talent management practices. Often, this process involves benchmarking the company’s succession management practices with industry norms and best practices. The comprehensive audit or review process includes rigorous assessment of the company’s current and projected executive talent, leadership bench strength and diversity across executive roles. For many companies, an important diagnostic activity for jumpstarting the process is conducting an internal study that illustrates the retirement wave, workforce demographics, and the looming vacancies in critical executive roles.
Second, organizations seeking to develop high-impact succession management capabilities must substantively engage the board and executive teams across succession planning practices. This best practice is achieved by fully operationalizing succession planning across the company whereby the HR group provides process support and expertise, rather than ownership of executive succession. For example, board members (or select members such as the Chair and HR Committee of the Board) should be fully engaged in the annual assessment and development planning for the CEO and his/her direct reports. The board should have high visibility of the talent review process that includes comprehensive assessments of the potential successors to the CEO role and their respective development plans. Board members and top executive teams must also be actively engaged in the development of a succession management scorecard that establishes the primary metrics upon which progress and development will be assessed, including both talent-related metrics (percentage of vacant executive positions filled by internal talent, percentage of executive roles with at least one ‘ready now’ internal successor) and diversity-related metrics (percentage of executive roles occupied by women and non-white ethnicities). The development of a formal set of metrics or ‘scorecard’ that is annually reported to the board helps ensure commitment and accountability to succession outcomes across the organization.
Finally, boards and executive teams must commit to developing the building blocks of a high-impact succession management process, including the practical tools, assessments, and practices as well as the less-measurable cultural aspects. Working in tandem with the HR group, executive teams should help design an overarching succession management framework that outlines the mission, values, and assumptions of the process. For example, a critical value that emerges for many organizations involves the risk of ‘talent hoarding’ and general reluctance of executive team members to ‘release’ their most talented direct reports to other business units for targeted development. Executive teams should also be fully engaged in developing the core tools and processes of the succession management program, including annual talent reviews in which all direct reports to executive positions are rigorously assessed and calibrated, the development of robust high-potential leadership assessments, nine-box grid analyses, multi-source or 360-degree feedback, and a comprehensive portfolio of targeted leadership development programs. This critical step ensures that top executives and HR are co-owners of the succession management program’s design and execution.
If 2018 is to be known for anything, it will be the reckoning of ambiguous harassment norms with explicit policy. Overall, boards and CEOs that fully commit to developing succession management as an organizational capability—with the same discipline, formality, and intensity as strategic planning, budgeting, and other core business processes—will dramatically reduce the risks associated with both planned and unexpected executive departures.
Read more: How Boards Manage Risk During CEO Succession
