The Importance of Succession Planning
"Having succession planning and a management development process is the training of people, giving them assignments so they can build new strengths, and having very candid discussions about their performance. When you have that, you are building the most effective leaders possible."
Less than 15 percent of companies address the need for a top leadership succession plan. When disaster strikes, such as a plane crash, an earthquake or violence in the workplace, there is no time for the board of directors to meet and select new top executives or establish a new chain of command. Such decisions must be determined before the need arises so that the company can be skillfully guided through the critical periods following extreme circumstances. The goal is to allow the company to transition as smoothly as possible, using successors developed from within, rather than having to resort to outside management help.
The death or resignation of a company's senior officer tears a hole in the "organizational fabric," creating a leadership vacuum that has to be filled. If the company is not prepared, then invariably the board has to step in and take control over the company. That's a temporary bandage. The executive group needs to know exactly what kind of steps they have to take, move in as a crisis management team and take over seamlessly. That gets a company through crisis faster and more productively.
Why don't more companies install succession plans? For the same reason most people avoid writing their wills: death and disaster are uncomfortable subjects that resonate to the very human fear of mortality. Also, high level executives may prefer not to have strong successors standing in the wings to replace them should they get in trouble with their board of directors. Avoidance of the succession plan is subtly reinforced by simple human nature. Facing and dealing with this essential element of corporate strategy is vital to taking the proactive steps necessary to assuring organizational preservation.
Other Benefits of Succession Planning
Good leaders look to the future. Companies lose top people because there is no clearly defined pathway of progression for them. They may feel a lack of opportunity to rise to the top position or positions. Succession planning provides a clear message as to an executive's real potential within a company.
Planning prevents chaos. When President Ronald Reagan was shot, General Alexander Haig strode to the podium in the White House and announced, "Don't worry, I'm in control here. The country doesn't have anything to worry about." Since the United States has had a succession plan installed in the constitution since its inception, the chaos he induced by that statement was temporary. Such an event could be devastating to a country, or company, that had made no such contingency plan.
The grieving process takes time. When a Norwegian shipping firm's top executives were all killed in a plane crash, the firm was forced to bring in an outside executive. Change Management Group later interviewed the executive, who stated it took six months just to get through the grieving period, and another two years before he could get the company turned around, because he had to replace the entire top executive staff. This severely impacted the company's business.
Corporate downsizing depletes the ranks. Downsizing usually means cutting beyond the fat and into the muscle and bone of a company. Quite often the candidates for a top position are stripped out and department functions tend to be very, very lean. There is no "bench" in most companies, no back up for any of the key people, leaving the company vulnerable. If the chief financial officer exits and only C-level players are left to replace him or her, it can take 12 to 18 months for an executive search firm to replace the CFO. Such a long term opening can be disastrous for a company, yet this scenario is very common.
Who Is Responsible for a Company Succession Plan?
The board of directors drives the process for developing management development and succession plans in tandem. One program supports the other. If a key officer at the top is replaced, either through attrition or disaster, a domino effect ripples down through the organizational structure of the company, where ideally executives have been groomed to assume key positions. For example, a candidate with only domestic experience would have been given an international assignment to round out his background while things were going well. The company at a time of crisis won't be forced to install someone who hasn't been properly developed for that position.
A Team Approach
Different kinds of crises require different kinds of responses. A good management development/succession plan encompasses such potential occurrences such as violence in the workplace, natural catastrophes, i.e., hurricanes or earthquakes, or even a virus that could crash the company's entire computer system. Most companies have not identified individual teams able to respond to specific situations. A natural augmentation to the executive succession plan would implement the development of such teams targeted for specific eventualities.
Effective Succession Planning: Ensuring Leadership Continuity and Building Talent From Within, by William J. Rothwell
The Change Management Group  specializes in organizational assessment and restructuring, strategic planning, merger and acquisition integration, new product development, executive coach counseling and staffing evaluations.
We are an international management consulting firm staffed by Industrial & Organizational Psychologists and MBAs. We introduce and guide organizations through complex and difficult changes.
John C. Bruckman, Ph.D.
Change Management Group
1625 Hillcrest Drive
Laguna Beach, CA 92651