Who’s Up Next? Most Companies Fail to Plan for Leadership Succession

This article reviews a sample of small, medium, large, for-profit, and not-for-profit organizations to determine the strategy used, internal or external, to fill leadership roles and assess the efficacy of these strategies to meet future leadership transitions.

Why succession planning is a challenge

Succession planning will increase paranoia for the current leader and create an expectation for the individual identified as the successor.

Most organizations do not have a deep bench that can make it both easy and difficult to identify a successor.

The majority of organizations have no stated commitment or goal for filling positions internally or externally.

Developing a succession plan takes time, and executives are focused on the short term. A succession plan has many to-dos, forms, charts, meetings, due dates, and checklists.

A review of succession strategies of a diverse sampling of organizations

The findings for hiring source reveal at least 50 percent of the organizations, regardless of size, and for-profit or nonprofit status, are internal.

The results for tenure show approximately 50 percent of the organizations, regardless of size, and for-profit or nonprofit status, have CEOs with less than five years of tenure.

A CEO who remains in that position longer than the average tenure affects the development or lack of development of other successors.

Organizations will face increasing pressure to plan for succession

Because there are only two choices in sources of succession candidates—from within the organization or outside of it—this statistic reveals that companies have not made even the basic decision of where their leadership successors will come from.

Most experts describe an effective CEO succession process as a partnership between the board of directors and the CEO, and, in some instances, HR.

According to Stephen Miles, there are five trends that will significantly influence succession planning for the next ten years.

• Shareholders will demand transparency in the organization’s succession planning.
• HR will play a critical role in “operationalizing” the organization’s succession plans.
• There will be a demand for more qualified board members to provide advice and counsel on succession planning.
• Changing market conditions will usher in a new era of CEOs
• The trend will generate more internal candidates and require organizations to build a leadership pipeline by developing people.