Succession planning is good for business says Terri Bresenham, Co-Founder, Forte Health Advisors Former, CEO, GE Healthcare, Sustainable Healthcare Solutions (Bangalore)
I’ve always believed a hallmark of an exceptional leader was the calibre of talent they’d attract, and how well their direct reports got developed, promoted and made an impact. A talent pipeline and succession strategy are not just a CEO’s obligation, it should be viewed by the CEO as the lifeblood of an organisation’s sustainability and agility; its fuel for the future. But there are many reasons organisations, and their leaders, don’t create a great bench and don’t invest in carefully thinking through their succession needs. Maybe succession planning is a low priority where you work since it’s beyond the quarterly pressures. Or perhaps it’s primarily an HR led concern where the process can overshadow succession’s strategic element. For some CEOs, maybe it’s their fear of being replaced that keeps the topic muffled. Whatever the reason, consider why embracing succession is good for your business and your career.
CEO succession is particularly critical to the overall success of the business, customers and investors. According to 2020 data, over 65 per cent of CEO successions came from internal candidates. Even in the disruption of a pandemic, internal talent is still preferred. The exception is in a distressed or turnaround situation. In these cases, an outsider’s perspective can be more advantageous. So, if most CEO successions are home-grown, what are some of the guiding principles to ensure success?
For me, there are many factors to consider, but here are two critical ones:
- Future Needs Assessment
- Succession Accountability
Future state
In today’s world of accelerated changes in markets and competition, CEO succession planning starts with thoughtful assessment and anticipation of what strengths the organisation needs to be ‘future-ready. Subject matter expertise, connections, and interactions change as the market and business models evolve. The adage, ‘what worked today, won’t tomorrow’ rings true. So searching or grooming someone to mirror the existing CEO may bring a measure of security, but it risks stagnating the business. To successfully compete in the future,
companies need to evolve and address needs that can be radically different from today’s scenario. While all CEO’s believe they’re adaptable and agile, CEO succession benefits from writing out a job description to capture the future needs (or the ‘small signals on the horizon’) and avoid emphasising what is immediately in front of the company.
CEO succession planning also needs to consider the cycle of the business. For example, it may be relevant to emphasise hyper-growth skill sets over excellence in operational systems and margins. Thinking ahead to what the business needs in the next 5-10 years should be a rolling review, led by the CEO, with the Board and HR team. Recruiting and talent development should also align around these needs. Attracting, coaching, and retaining talent that fits this ‘To Be’ model should be rewarded through incentives and recognition of leaders who do it well. An example of being future-ready is experience with data science and embedded automation of a company’s products and business models with machine learning (ML), even deep learning (DL). Percolating in
the rank and file today are many future CEO’s who will bring their intrinsic ML/ DL/AI experiences to bear. Likewise, someone who’s lived experience as an independent contractor or virtual employee is in a better position to shape the 21st-century workforce than someone who has spent 15+ years as a traditional, office-bound employee at a single company. Anticipating the future needs of an organiSation and business needs to be an explicit activity to have a clear-eyed view of preparing the business for the future and developing relevant talent for the business as well as a pool for selecting an optimal CEO successor.
Accountability
In my experience, an incumbent CEO should be the primary person accountable for leading the identification, planning and transitioning to a successor. Yes, the Board, Investors and HR team have important contributing roles, but the incumbent CEO is the most familiar with the needs of the job; customer relationship dynamics, mastery of the business, operations, culture, cadence, competition and frankly, appreciation of the inherent challenges. The exception to this rule is if the CEO is struggling. Then the Board and HR, often with external search help, should lead the blueprint of what the company needs in its next CEO.
Incentives should be aligned to emphasiSe the importance of leadership’s role in creating a robust pipeline. From my own experience, each time I had the opportunity to hire someone for my team, I would consider the candidate’s development potential. With good coaching, experiences and exposure, I’d ask myself, “How soon would they be ready to become the next CEO or be ready to take on a significant leadership role in another part of the business?” I often made hiring decisions based on someone’s potential. I also would measure myself on the impact people I hired would have across the organisation and on business results over time. Developing the reputation as someone who coached and developed leaders, became an advantage in attracting great talent,
both internally and externally. This reputation is something I believe paid massive dividends in being able to build successful businesses.
Conclusion
A CEO who emphasises understanding his/her company’s future talent needs, measures the effectiveness of a robust talent pipeline around those needs, and takes accountability for succession,
including their own, is capitalising on a great opportunity to attract the best talent, ensure continuity, and consequently, drive better, more sustainable, business outcomes.
