Succession Management Shortcomings

Succession Management Shortcomings

Charles Goretsky Charles Goretsky
15 minute read

Succession management is a crucial planning capability that is designed to drive strategic and results sustainability for an organization over time and across leaders and leadership teams. While it involves a well-defined set of processes (e.g., talent reviews) and tools (e.g., nine-box matrix), stories abound of companies where a new CEO or heralded C-suite new hire flames out and is replaced after an initial 12-to-24-month tenure. Are these due to succession management shortcomings that can be foreseen and overcome?   

In fact, the research and stories abound with data supporting this notion. In two separate studies reported in Harvard Business Review researchers found in 2017 that within the first 18 months, there’s a 50% chance a new executive will leave the organization, and in 2018, that 60% of executives fail within the first 18 months of being promoted or hired. Further data showed that at least 30 percent of newly hired executives failed in their first 18 months. The National Association of Corporate Directors (NACD) reported that the average tenure of CEOs has dropped significantly from 8.5 years to 3.7 years in the 13-year period ending in 2020. 

So why all the negative data? Are the succession management shortcomings due to a perceived lack of criticality or relevance to the strategic management of a company? Apparently not, as 86% of leaders believe that succession planning holds the highest importance relative to strategic value (although only 14% think their organization does it well). 

A primary issue is the shocking commonality of a lack of succession processes. The Association for Talent Development (ATD) reported that only 35% of organizations have a formalized succession planning process. And SHRM found that 56% of companies reported that their organization didn’t have a succession plan in place. Of those who said they did, only 21% had a formal plan, while another 24% said their organization had an “informal” plan. 

Clearly, too many companies are struggling with the motivation and/or ability to strategically plan for the inevitability of talent failures or departures in the most critical roles. Maybe the majority of companies know something the human resources experts don’t. Or is it that they simply don’t see the value in investing the time and effort needed to develop long-term plans and leadership resources? Let's look into the context around succession management shortcomings.

The Value of Succession Planning

What is the value of succession planning to an organization? There are numerous advantages to developing and using this capability as a strategic lever. At its core, the value proposition lies in business continuity and flow, which is most often interrupted by changes in leadership. The key benefits and values associated with succession planning include:

1. Leadership Continuity.

Succession planning allows organizations to identify and groom potential leaders from within their own ranks. By developing a pool of talented individuals who can step into key roles, the organization can maintain a smooth transition of leadership when positions become vacant due to retirement, promotion, or unforeseen circumstances. When promoting from within the ranks, the risk of hiring a cultural mismatch is lowered considerably. Depending on its use of leading-edge practices, it also creates the capability of producing higher-quality managers and leaders.

2. Talent Development.

Succession planning focuses on identifying and nurturing high-potential employees, providing them with opportunities for growth and development. This process helps in building a strong talent pipeline and ensures that the organization has a pool of skilled individuals who are ready to step into critical positions. It promotes a culture of continuous learning and advancement, increasing employee engagement and retention, and develops managers and leaders along their way up through the ranks.

3. Risk Mitigation.

Without a succession plan in place, organizations may face significant risks when key employees leave abruptly or retire unexpectedly. Succession planning helps minimize these risks by identifying and preparing potential successors in advance. By having a structured plan in place, organizations can mitigate the negative impact of sudden departures and maintain operational efficiency. With average leadership tenures now counted in the low single digits, this risk looms large for organizations.

4. Knowledge Transfer.

An effective succession planning process includes knowledge transfer from experienced employees to their successors. It ensures that critical institutional knowledge, connections/networks, expertise, and best practices are passed on to the next generation of leaders. This transfer of knowledge helps in preserving organizational memory, preventing knowledge gaps, and maintaining continuity in decision-making and strategic direction.

5. Employee Engagement and Retention.

Succession planning demonstrates a commitment to employee development, growth, and advancement. By providing clear career paths and opportunities for internal promotion, organizations can enhance employee engagement, job satisfaction, and loyalty among their most valued and valuable employees. Employees are more likely to stay with an organization that invests in their professional development and recognizes their potential.

6. Business Stability and Momentum.

A well-executed succession plan gives organizations a seamless transition of leadership and minimizes disruptions, allowing the business to maintain stability and momentum. It establishes and maintains critical networks between succession candidates and the board of directors, top leaders, industry associations, and regulatory bodies that will be leveraged and relied upon in the future.  A strong talent pipeline also enables organizations to respond quickly to market changes, take advantage of new opportunities, and adapt to evolving industry trends.

7. Company Culture and Values.

The proactive management of a comprehensive succession management process identifies and develops future leaders who embody and act upon the core values of the organization.  It reinforces certain messages about how the business will engage with its stakeholders, including its customers, employees, community(s), shareholders, and regulators.  This leads to a culture that is capable of consistently managing itself in a manner that is true to its core beliefs about how it conducts its business.   

Overall, it is a proactive approach to securing the future success and sustainability of the organization.

Why do succession planning processes fall short of expectations?

Succession planning processes can stall for various reasons. Here are some common factors that contribute to succession management shortcomings:

  • Lack of clarity and alignment: If the organization's leadership does not have a clear understanding of the organization's long-term goals and the skills and qualities required in future leaders, it becomes challenging to identify and develop suitable successors. A lack of alignment between the succession planning process and the organization's strategic objectives can lead to ineffective outcomes.

  • Inadequate talent assessment: A successful succession planning process requires a thorough assessment of potential candidates' skills, competencies, and potential. And poorly articulated selection criteria (competencies, skills, critical experiences) of each targeted position can lead to difficulties in finding the right candidate. If the assessment is not conducted rigorously or relies on biased or incomplete information, it can lead to the selection of unsuitable successors. The most common issue here is the over-reliance on single manager’s recommendation of an individual’s potential without vetting their candidacy and seeking observations and performance data from other sources.

  • Insufficient development opportunities: Effective succession planning involves providing developmental opportunities to potential successors to prepare them for future leadership roles. If organizations fail to invest in training, mentoring, developmental assignments, and the like with their potential successors, they may not be adequately prepared to assume higher positions. Likewise, the lack of programs for the early identification and continuing development of high potentials can render the long-term replacement strategies moot when no replacements are identified for successors who have moved into a new position.
  • Lack of commitment and engagement: For succession planning to succeed, it requires the commitment and engagement of top leadership and key stakeholders. If leaders do not prioritize succession planning or fail to actively participate in the process, it can hinder the identification and development of suitable successors. Leaders often fail to consider the longer-term implications of not planning, assuming that their career paths (and replacements) will become clear as their tenure in the role increases.

  • Lack of Integration: Failing to leverage other talent processes that can reinforce, support, and strengthen the ongoing assessment, development, mobility, and growth of targeted individuals weakens the outcomes. Without regularly monitoring successor and high-potential’s performance evaluations, creation of and completion of development plans, continuing aspiration to more challenging roles, and motivation to put in the time and effort for accelerated development, the planned outcomes of succession can fall apart.

  • Resistance to change: Succession planning often involves organizational changes, such as promoting new leaders, reshuffling responsibilities, or implementing new talent management practices. Resistance to change from employees, particularly those who may feel threatened or overlooked, can impede the smooth implementation of succession plans. Leaders’ reluctance to accept staffing recommendations from a formal planning effort can erode confidence in the process.

  • Inadequate communication and transparency: If organizations do not communicate the purpose, objectives, and process of succession planning effectively, it can create misunderstandings, skepticism, and resistance. Lack of transparency in decision-making and selection criteria can also erode trust and lead to dissatisfaction among potential successors.

  • Unforeseen events: Sometimes, unplanned factors such as unexpected departures of key leaders, economic downturns, or changes in industry dynamics can disrupt succession plans. Organizations need to be adaptable and flexible in their approach to succession planning to account for unforeseen circumstances.

  • Relying on too few replacement candidates: It is an all-to-common occurrence to have a single named successor for a key role (or having one person listed as successor to multiple positions). A paucity of candidates who are being developed for future consideration is a common fault and leads to poor results.

  • Poor results: If an annual succession process fails to produce the desired results, top leadership will lose faith in its promise. Failure to regularly produce a slate of qualified candidates for open positions in top or senior management roles, the frequent need to hire external candidates (who were not identified in a formal plan) and named successors or high potentials declining to take a role for which they were slated can each cause leaders to work outside of the process.

  • Lack of diversity and inclusion: Traditional succession management practices often focus on identifying and grooming successors from within the organization's existing talent pool. This approach can perpetuate existing biases and limit diversity in leadership positions. It may overlook talented individuals from underrepresented groups or those with different backgrounds and perspectives, leading to a lack of diversity and inclusion in leadership roles.

  • Overemphasis on hierarchical progression: Traditional succession management practices often prioritize a linear progression up the hierarchical ladder. This approach may overlook individuals who possess valuable skills or unique perspectives but may not fit the traditional mold of advancement. It can hinder innovation and limit opportunities for non-traditional career paths or lateral moves within the organization. A lack of planning for lateral moves can also deny the critical experiences that create the needed development of otherwise qualified successors.

  • Unwillingness to use a plan to select replacements: This looms as a primary concern about formal succession plans.  They are developed (often at great expense of time and effort) and then not used for developing candidate slates for jobs below the CEO or President level.  Such a lack of process discipline and a commitment to making the plans useful are all-too-common shortcomings of succession processes.

  • Insufficient focus on future competencies: Succession management practices often rely on assessing current performance and readiness for the next level. However, in a rapidly changing business landscape, the skills and competencies required for future leadership roles may differ significantly from those that are currently valued. Failing to consider future competencies can result in selecting successors who may not be adequately prepared for the evolving demands of leadership.

  • Lack of agility and adaptability: Traditional succession management practices often follow a rigid and long-term planning approach. While having a plan is important, it can become obsolete or ineffective in dynamic and unpredictable environments. Succession plans need to be adaptable and flexible, considering changing business needs and unforeseen events. Failure to adjust succession plans as circumstances change can lead to ineffective outcomes.

  • Limited employee engagement and ownership: In some cases, traditional succession management practices are perceived as top-down processes driven solely by senior leadership. This can result in limited employee engagement and ownership of their own development and career aspirations. When employees do not feel involved or invested in the succession planning process (or are even aware that they are considered as having potential), it can lead to decreased motivation and a lack of commitment to organizational goals.

  • Inadequate evaluation of external talent: Traditional succession management practices often focus primarily on internal talent, overlooking the potential benefits of considering external candidates for leadership roles. External talent may bring fresh perspectives, new skills, and industry expertise that can contribute to organizational growth. Ignoring external talent pools can limit the organization's ability to access the best candidates for succession.

To address these weaknesses, organizations can adopt more inclusive and forward-thinking approaches to succession management. This includes embracing diversity and inclusion, focusing on future competencies, fostering agility and adaptability, encouraging employee engagement, and considering a broader range of talent sources, both internal and external. By addressing these weaknesses, organizations can enhance their succession management practices and develop a more robust and effective pipeline of future leaders.

What to do to overcome succession management shortcomings?

1. Start with the basics.  

Wowledge’s Core and Advanced Succession Management practices offer a process maturity-based approach to creating, managing, and evolving a robust succession process. These practices start with the most basic elements that can be used to start building a process, with critical steps outlined including identifying key roles, standardized selection criteria, identifying talent gaps, and creating development plans for selected candidates. Given the percentage of companies with a formalized process focused on multiple positions, starting small can put a company in great position relative to its competitors.

2. Build plans for the key and most critical jobs.

Strategically select a handful of roles that can serve as anchors for the process.  These will typically include the CEO/President, direct reports to that position (e.g., C-Suite), and other roles that are considered critical for the ongoing growth and development of the company’s product and services.  Review the job descriptions and create success profiles that outline not only skills and competencies but critical experiences that can mold and shape role incumbents into success stories.  Starting small creates a capability that can grow to cover many different types and levels of roles.

3. Identify talent pools for each role.  

Avoid the temptation to find only one or two potential successors who will be ready in the next year or two.  Go down two levels below the key or critical role and create a process to identify (either through recommendations or performance observations) a group of candidates who can be developed, coached/mentored, and observed for growth in the targeted skills and competencies required for future success. A cohort of 5-12 potential replacements for a given role can offer a tremendous impact on critical employee retention and motivation.

4. Validate all candidates.

Here’s another temptation to resist - relying on a single manager’s recommendation of a candidate’s future potential.  Leverage clear criteria for selection, using multi-source input and assessments to better and more objectively validate an employee’s inclusion in the talent pool for more demanding and responsible positions.  Gather managers of similar employees together and have them, share their observations, assessments, and comments on each of the proposed candidates.  Leverage potential assessments widely available in the marketplace. Observe and evaluate targeted employees’ behavior, contributions, and performance in professional or management development programs as indicators of learning agility, openness to new or innovative ideas, and quality of interpersonal skills.

5. Go deep into the organization.  

Identify high potentials earlier in their tenure, especially if they are considered flight risks. High performers who display leadership capabilities, coaching behaviors, advanced or innovative thinking, problem-solving skills, resourcefulness, high emotional intelligence, and the like can be future star people or technical leaders. Such behaviors and capabilities can be seen in performance reviews, project team performance, learning program participation, employee committee or community volunteering activities, etc.  Even college hires who were active in social or student-based organizations while in school or participate in company-sponsored events and groups can be viewed positively as future potential leaders and contributors.

6. Document the plan and put it to work.

Develop plan documentation that can serve as future references when development plans are being developed, candidate slates for an open position are developed, and interviews are being conducted.  Capture employee profiles, manager comments and observations during vetting sessions, decisions made related to employee skill gaps, development plans, and mobility options for the next roles. All of these can be useful when an unexpected opening becomes available, annual employee development plans are being created, and when managers are preparing for career planning discussions.  

Succession management should be viewed as more than just an annual administrative “paper chase” that is a sign of a creeping bureaucracy.  It is instead a legitimate and powerful strategic exercise that moves well beyond the HR space into corporate strategy and operational planning.  It represents a necessary step towards maintaining a sustainable corporate presence, operational integrity, cultural durability, and the ability to execute smooth transitions as people naturally move in and out, and up and across the organization.

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