Planning succession should not be contingent upon the occurrence of an event, but rather a process that begins several years in advance
We witnessed the succession plan for the most important monarch of the modern world being executed recently, and closer to home, the $128 billion Tata Group made two significant corporate changes that are said to be critical elements of their succession planning strategy. Considering these events of the recent past, whether relating to heads of state or business leaders, it is clear that planning succession should not be contingent upon the occurrence of an event, but rather a process that should start several years prior.
A global Korn Ferry survey found that less than 1 out of 4 organisations have a ‘ready-now’ talent pipeline, with 1 in 2 organisations not having a solid pipeline of ‘ready-now’ candidates. Further, even though 67% of the respondents who participated in the study believe in ‘Build’ vs. ‘Buy’ for talent proposition, almost 50% are more dependent on outside hires than internal promotions for key leadership positions, with the number of potential candidates identified for key roles in most companies being less than 10%. These numbers reflect some of the mistakes that companies are making in their succession planning strategies.
Five mistakes that organisations often make:
1. Building leaders for what good looks like TODAY and not tomorrow
Organisations continue to look for leaders who have skillsets to deliver on existing business models rather than individuals with future-oriented capabilities. The leaders focused on the present tend to stay the course too long and risk losing competitiveness and providing diminished value to customers. In need today are leaders who can envisage and work towards building the potential future of the organisation.
2. Building leaders who can SCALE an existing business, but cannot create a new one
Leaders that organisations need are not the ones who only excel in increasing their share in existing markets but who can master two, often-competing priorities — expanding and reinventing the enterprise — at the same time. Those who can look beyond the narrow spotlight on financial metrics and have the ability to envision and grow, create, and scale in new markets and ecosystems. In doing so, they also equip their team and the organisation to be more capable of adapting and pivoting through capability development — individually, collectively, and culturally.
3. Building leaders who can optimise for shareholders, but not for the community at large
Organisations often pick candidates who can create shareholder value, missing the opportunity to create a larger impact on the entire ecosystem. It is important to ask – What societal impact does the organisation desire to generate? We need leaders who can inspire purpose. The future is where leaders are able to think bigger, create synergies, drive enterprise collaboration, and create win-win not only for their employees, investors, or management, but also for other stakeholders like customers, partners and alliances from the industry, communities, and society as a whole.
Case in point, Microsoft’s approach towards reducing carbon-footprint is a classic example of how its leadership team looks beyond financial metrics as an indicator of success. Making hardware and operating servers uses a lot of energy and Microsoft started its efforts towards responsible operations early on, going carbon neutral as early as 2012, with the aim to be carbon negative by 2030.
Further, by 2050, it is working towards removing from the environment all the carbon the company has emitted either directly or by electrical consumption since it was founded in 1975. TATA Group is another fine example of how leaders have tried to keep community welfare and development as an important aspect of the business strategy.
4. Stuck with the ‘inside out’ perspective – benchmarking only internally – not acknowledging or valuing the talent that exists outside
The ‘Build’ or ‘Buy’ talent decisions depend on a company’s business strategy. However, when organisations get stuck in the ‘inside out’ approach and are not sufficiently aware of the quality of talent available in the market, they risk getting stagnant and are unable to do things differently. While there is no perfect ratio for a ‘Build vs Buy’ strategy, firms must invest in both the approaches.
Client Partner, Consulting Services, Korn Ferry
5. Starting succession planning too late and not going deep enough
Succession planning is not one-size-fits-all or a one-time event. Organisations need to look at the complete leadership pipeline to create a sustainable, consistent flow of leaders. Being proactive in doing this can help them avoid situations where suddenly they find themselves without a CEO or other top executives due to unforeseen circumstances. Irrespective of the stage of growth a company is in, planning succession as early as possible can mitigate business risks and help companies develop effective future leaders.
What is the way to get it right?
The following measures can enable organisations to get their succession plans right:
- Start early
- Ensure the Board and CEO are aligned on growth objectives
- Assess internal and external candidates against future success roles
- Become familiar with the leadership bench and their potential, develop a pipeline of ‘ready now’ leaders across several generations
- Have clarity on the right mix for ‘Build Vs Buy’ strategy
- Make succession planning a standing Board agenda item
Leadership changes can rock the boat. Succession planning makes for smooth sailing.
