The Need For C-level Succession Planning And How To Do It Right

Replacing C-Level staff can be critical. Do it wrong, and the handover process can cause internal conflicts and have catastrophic consequences. Do it right, and the move can inspire confidence in investors, business partners, employees and customers alike, leading to greater growth and profits. But what makes for a good handover, and how can a company prepare?

What Is Succession Planning, And What Are The Benefits?

Succession planning is a business process often spoken of, but rarely implemented. It covers the period of time before a staff member leaves, in which they have identified their replacement and take measures to train them up to fill the position.

It brings with it countless benefits. Firstly, by identifying potential replacements early on, and introducing them to duties and responsibilities of the role, they have exposure to all aspects of the position, and the guidance of someone with experience in it. Incumbents can pass on their knowledge and provide training on how to manage the role’s duties effectively, making for significantly lower stress levels during the transition.

Another major advantage is that it gives the current board member, through an ongoing analysis of the job requirements, the opportunity to tweak their role in light of changing business conditions and strategic imperatives; succession planning provides a framework that drives senior executive development, aligning leadership at the top of the enterprise with the strategic needs of the firm.

Why Succession Planning Is So Important

Looking at CEOs specifically, every year 10-15% of companies need to appoint a new CEO, either as a result of retirement, resignation or dismissal. This percentage has risen quite drastically, with the turnover of global CEOs hitting a 15 year high in 2015, as more companies are choosing to take action and force out leaders who are underperforming.

Yet, surveys by the Rock Center for Corporate Governance at Stanford University unveiled that only 54% of boards were putting measures in place to prepare for a new successor, and that 39% of businesses had no internal candidates already considered viable for the role if the need arose. Most boards remain unprepared to replace their chief executives.

What’s more, the same surveys show an equal dissatisfaction with replacements themselves, with 40% of new CEOs reportedly failing to meet performance expectations in the first 18 months. It seems, with no other choice, boards are forced into a quick hire over a thoughtful one.

How Do You Go About Making A Succession Plan?

The moment any board member mentions their mid-term plans to move on, is the moment the rest of the board needs to make succession planning a priority, even in the face of more immediate, tangible issues.

Whilst it’s difficult to compose a one-size-fits-all process to follow, as a succession plan is likely to be affected by the role’s unique requirements and general company culture, there are several main features every succession plan should contain:

1. A Written Succession Plan: Committing plans to writing increases the likelihood that they will be carried out. Plans should be written consultatively, with the board’s full input, and years in advance - the more, the better.
2. Regular, In-Depth Reviews: The entire board, alongside a senior HR executive, should review the succession plan twice a year. This meeting should review each role’s baseline requirements, so that the job description can be amended where necessary. At the same time, it may help to examine the profiles of those leading successful competitor companies, both inside and outside the relevant industry.
3. Narrow The Field To Two or Three Finalists: Boards need to identify a shortlist of potential replacements, and begin to inspect their performances more closely. If an external candidate is identified, bring them in at middle-executive level and allow time to see whether the cultural fit is right.
4. Assess The Candidates: About a year before a planned transition, the board should start to put the shortlisted candidates through internal assessments. These could be competency-based interviews, 360-degree references from superiors and colleagues, or direct reports. A successful hire will also assess candidates against similar figures in competitor firms.

Although it seems like an arduous process, and, in most ways, a lower priority than other pressing business issues, a well-thought-out succession plan - like a good appointment - will pay dividends in the long run. The more democratic you can make your process, with buy-in from every member of the board, the smoother the transition will be.

Whilst in certain circumstances succession planning isn’t feasible, where possible, it can be a huge boost to a business; good hires increase bottom line performance as well as the trust and faith of shareholders, employees, board members and customers.

CSG have helped countless clients with succession and leadership planning. From small, start-up companies to major, multi-national firms, we have worked with a vast array of businesses, and have a wealth of successful case studies that we can draw from to ensure that you have a succession plan suitable for you.

If you’d like any further advice on succession planning, or if we can help with any other recruitment services – talent mapping or headhunt searches – please get in touch. We can be reached on 0333 323 2000, or at clients@csgtalent.com.