Roughly 10,000 Boomers are expected to reach retirement age every day between now and 2030[i]. With 10,000 seats emptying each day, who will fill them?
When we ask the executives we work with about succession planning, we usually hear strong support. But while they emphasize its importance, the majority also confess that they’re not doing enough to prepare for their future leadership needs.
Our anecdotal experience is supported by research published in 2014 by The Institute of Executive Development and the Rock Center for Corporate Governance at Stanford University[ii]. The study concluded that most companies don’t connect the future competencies and experience demanded by evolving business and market conditions to their leadership succession and development efforts. The study found that companies use succession only to mitigate downside risk versus identifying strong and appropriate leadership for the future. Moreover, most companies fail to implement a disciplined process, and avoid altogether the uncomfortable conversations required for naming and transitioning the highest-potential leaders. Companies treat succession planning and talent development as distinct activities rather than taking an integrated approach – a big miss.
For all of the activity and billions of dollars[iii] invested annually on leadership development, the return remains pretty dismal. In our 10-year study of executive transitions (Rising to Power: The Journey of Exceptional Executives), we found that:
- 76% said that the formal development processes of their organization were at best only minimally helpful in preparing them for their executive role
- 55% said that they had little, if any, ongoing coaching and feedback to help them perform effectively in an executive role
- 61% said they were unprepared for the roles they assumed
- 50-60% of executives fail within the first 18 months of their appointment
So, succession-planning is happening, but the activities most organizations employ aren’t effective. So how can you know whether your organization is preparing fit-for-the-future leaders? Answer two simple questions: 1) Where does the process start, and 2) Where does it end?
Your strategy must underpin all leadership decisions
Most succession processes are merely form-filling exercises. It begins and ends with whatever grid or mechanics were chosen by HR, and usually lands far short of substantive conversations about must-have competencies for the future. We’re astonished at how many organizations don’t tie succession and leadership development to their strategies. They tout great growth aspirations (acquisitions, product introductions, new segments, channels, and geographies, etc.), but rarely do they identify the requisite leaders demanded by those aspirations. The closest they come is when HR identifies “critical jobs” to focus on. Still, digging deeper into the criteria used to identify those jobs, we find at best only weak connections to strategy. Typically the criteria focuses on the size of the role, the iconic status of the incumbent and the cost of the talent acquired underneath them, or an incumbent that is perceived as a “retention risk,” — all of which may, or may not, have anything to do with the organization’s most strategic aspirations and longer-term potential.
Your succession strategy must be translated into key roles with clear success profiles
If the first question is, “Which critical leadership competencies are demanded by our strategy (current and emerging), the next question is, “Which roles will contribute disproportionately to our success?” Frankly, key roles and the corresponding success profiles will be found scattered throughout the organization. The fact is that all work does not contribute equally to success. Some roles are more important to executing a strategy, and may have little to do with hierarchy.
So be holistic and inclusive when identifying key jobs and the employees who must be developed to drive growth. Be rigorous when defining and assessing the competencies they must possess to deliver the strategy, and be clear about the standards you will hold them accountable to. Armed with this shared understanding, you now have a solid foundation for succession discussions with teeth. Now you can develop comprehensive assessment tools to identify gaps. Now you can prioritize the development needs of your most promising leaders, while looking outside the organization where needed.
Once an assessment is made, you must commit and direct the use of resources to their best advantage
As stated earlier, development spending continues to increase but without justifiable returns to the business. For some, the challenge still lies in actually committing sufficient resources. But for most it is poorly targeted use of the development resources available to them. There is clearly too much development activity occurring that does little to prepare the business for future competition. Since all roles don’t contribute equally to business success, development should be prioritized disproportionately. Employees should be developed equitably, not equally. Development must focus on growth that will build true competitive muscle. Reduce programmatic “sheep dipping” development and reallocate your resources to roles and individuals who are expected to contribute disproportionately to the long-term competitiveness of the business.
Ultimately, succession planning should actually prepare leaders
One of our clients lost their company’s number-two leader in a sudden defection. This blindsided everyone despite warning signs, but in the face of this regrettable loss of talent executives boasted that their succession planning process worked because they “had a ready-now candidate, and were able to orchestrate a smooth transition of leadership.” Sadly six months after he assumed leadership, the business was in turmoil. They learned too late that their successor had demonstrated “control issues” in the past. While he was running a single-line $1.5B business it was less pronounced, but as he assumed a business 6X the size and with increased complexity his control issues shifted into overdrive. He quickly had the organization so hamstrung to act that critical bids were lost, product launches put at risk, and revenue targets missed. Of course, he had blame to share, excuses to make, and justifications for his actions, but the bottom line was that he clearly lacked the competence demanded by the job despite his “Ready Now” status. Candidly, he had potential, but little had been done to actually prepare him to assume a role of such a scale. Tragically, no one was surprised at what unfolded. Many who reported to him previously agreed, “We saw that coming!”
Now, with so much opportunity ahead to influence the future success of your business, how will you approach replacing your company’s share of the retiring Boomers? Remember that an effective succession process is only complete when roles that are critical to future execution of the strategy are identified, prioritized and success profiles are written, and finally when tangible investments to actually prepare leaders for future roles have been effectively executed. It’s insufficient to simply list leaders you believe could take on bigger jobs as potential successors. Aggressive, substantive investment must be made in that leader’s preparation to ensure they have what is required to succeed — not in the role as it is today, but as it will likely be when they assume it.
Active and ongoing work must be done to deepen and broaden targeted leaders’ abilities, and to surface and address any hidden pathologies that will most assuredly become more pronounced as responsibilities expand, complexity multiplies, and pressure and risk intensify. Short of that, there’s really little point to putting anyone’s name on any list unless you’re willing to simultaneously draft their severance agreement.