Planning
for succession
The fundamental point of succession planning is that you
have to work out what objectives you want to achieve through the succession.
Selection is mostly driven by a focus on the ‘who' rather than the ‘what'. If
the organisation has done well in the past, it is all too easy to say: We want
another one of those, a clone. If the organisation has not been travelling well,
then the selection committee may well react by saying that it wants someone
entirely different.[29]
Succession planning also may not take priority if the CEO is
apparently fit and performing well. Or if it does not have the incumbent CEO's
support. The CEO may not want to contribute his or her views about what an ideal
successor might look like for fear of losing power or control, or being seen as
not perfect.
Indeed, forcing the CEO into succession planning can lead to what
has been called ‘The Successor's Dilemma'. The incumbent CEO is so troubled by
the process that the designated potential successors become frustrated-unable to
push too hard for fear of alienating the CEO, but worried that not pushing hard
enough will be seen as a failure to warrant promotion to the top job.[30] The end result:
they leave.
This should not deter the board. The planning should continue. It
could take the form of regularly assessing, say every six months, the challenges
and scenarios facing the organisation at that point and over the next three
years. Then determining the skills and attributes of a chief executive, if one
had to be selected in the near future, necessary to formulate and implement
strategies to deal with those challenges.
The approach of ‘what, not who' is essential because the CEO is an
important component of organisational performance, but not the only one. Given
the known impact of not addressing cultural issues, for example in merger and
acquisition activity, the board must have a clear sense of what the existing
culture is and what needs to change if they are to properly exercise their
governance responsibilities.
The essence of the succession plan is that strategies are in place
to know, at any point in time, what the next CEO will have to achieve and who
might be potential internal and external candidates.
If there are no suitable internal candidates, or if the
organisation is too small to develop a pool of internal candidates, it is even
more critical to develop a succession strategy. It may be worth considering
retaining a firm that could keep a watching brief. However, if directors have
succession planning as a regular item on the board agenda, they too will be on
the lookout for potential senior executive talent that might match the
organisation's current and future needs.
My preference is that succession planning should have both an
internal and external focus. It is true that the external CEO market is more
limited than most other executive markets. Many candidates are employed
elsewhere and may not be easily identifiable. Even if they were, it will almost
certainly take time to lure them away from their current position. The
recruitment process will be lengthy and expensive. However, it is not always
necessary to bring people in from outside straight to the top job. For example,
the position of CFO was created for Bill Wavish, an external appointment, as
part of the succession planning process at Woolworths. Chip Goodyear, now CEO of
BHP Billiton, was also brought in from outside to fill the position of CFO.
In my view, succession planning is all about preparation ‘preview'
and thoughtful assessment, whether the candidates are internal or external.
Realistically, an externally appointed CEO is going to take 3-6
months to get to know and understand the culture and the politics of the
organisation they are now leading. As organisations navigate the pressure of
shorter timeframes to deliver results, it is essential that they maintain the
discipline of succession planning even as the new CEO takes the reins-regularly
evaluating potential candidates, not against each other but against the
requirements of the position. This approach might also help to minimise the
inevitable power-plays that will go on between potential candidates and/or their
supporters.
The comfort of a pool of internal talent might also give the board
and other stakeholders more confidence to allow the CEO sufficient time to
produce the results they are looking for. It also could be a useful platform
from which to withstand short-term market pressure.
Unplanned
openings
Research suggests that many boards do not embrace succession
planning, let alone take culture and cultural change skills into account in the
selection of a chief executive.[31] In those organisations, succession planning
is not a ‘plan' at all. It is a reactionary event, approached with a ‘crisis'
mentality. As a result an expedient appointment is made, often without proper
consideration of the opportunities that a change in the top might offer.
My own view is that, even in an unexpected or unplanned-for
opening, it is always preferable to take full advantage of the opportunity. In
the absence of a considered succession strategy, the organisation can use this
chance to make sure that the needs of the business going forward are fully
identified before beginning the search for the new CEO.
Time is always critical, but so is timing. As a temporary
measure, the chair of the board can step into the role as acting CEO,
maintaining cultural continuity and strategic focus. Alternatively, the board
could appoint an interim CEO on a contract basis.
Developing the
leadership pool
The examples presented throughout this chapter illustrate
that succession planning, or indeed the lack of it, can be inherently messy and
a very costly exercise. Nonetheless, in the future there will be an even greater
emphasis (if that is possible) on a leader's ability to motivate people to give
maximum performance, withstand changes and create success for customers,
shareholders, governments and other stakeholders. If this is not part of the
prevailing culture, then challenges lie ahead for senior executives and for
their organisations.
Competition will intensify to attract those people who are capable
of leading organisations in times of uncertainty, pressure and complexity.
Attracting, developing and retaining these potential leaders will be a major
risk management strategy . . . and for those employees, financial motivators
will not be enough.
One of the most common ways to retain potential leaders is to
provide some form of leadership development that goes beyond technical
skill-based training. Leadership programs should include an in-depth study of
culture and the specific cultural aspects of their organisation, and how to
maintain, preserve or change them if necessary.
The critical next step is to link the leadership development
programs with specific succession planning strategies that take into account
anticipated cultural attributes, not simply generic leadership skills or
achievement against performance goals.
A further vital element of an overall succession planning strategy
is to ensure that the performance management strategy of the organisation
includes an assessment of commitment to the culture as well as goal achievement.
This can be confronting.
The first time I experienced this was when, as a human resources
director, I was faced with the following situation.
A member of a sales team, who always met
or exceeded his budget, was regarded as a ‘star' by the head of the division and
to be his most likely successor. The problem was that this ‘star' had no
interest or concern about how he or his work methods destructively affected
others. The head of division either did not see this, or refused to because of
the financial goals this employee kicked.
At the same time, the executive team had
embarked upon a major effort to change the culture of the company, which had
been individualistic and closed. A new way of working had been developed and
agreed with all staff through a lengthy and inclusive process. Everyone signed
up to the behaviours (values) of respect and teamwork.
The head of division argued strenuously to
keep the difficult employee, saying that the divisional budget depended on his
performance. Eventually we let the employee go and, perhaps not surprisingly,
the other team members' performance improved dramatically and the division
easily reached its targets.
What was the basis of the decision? There are four potential
combinations of performance and culture:
-
great performer, lives the values
-
poor performer, doesn't live the values
-
great performer but doesn't live the values
-
poor performer but lives the values.
In similar circumstances, Larry Bossidy, former CEO of Allied
Signal, did not think this was a difficult choice-keep employee ‘a' and make every effort with employee ‘d', but say goodbye to employees ‘b' and ‘c'. In other words, the
values and behaviours that underpin companies that are built to last are more
important to long-term success than short-term financial performance.[32] This appears to
be consistent with the strategy of the BRW ‘most-admired' companies mentioned
earlier.
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