Management Succession Planning: Why It’s Hard, How to Fix It
Management succession planning is a challenge for boards. We know because they tell us. In Boardspan's 2023 Board Performance Benchmark Report, we ask boards to rate their performance in nearly 60 board governance topics. Every year that we’ve collected benchmarks, succession planning has been the Number One challenge for boards. It consistently tops a list full of challenging, meaty topics. Why? And more importantly, how do you get past the inherent difficulties and create a robust management succession plan? First, we need to take a closer look at the dynamics around succession planning.
Why it’s hard
Every company has its own set of circumstances that contribute to the challenge of succession planning. If a board isn’t making progress on a plan, there can be a few reasons behind that:
Succession planning can be a sensitive process
Succession planning is about people. When discussing a CEO’s departure, or another person’s capabilities (or lack thereof) to step into the top spot, it can create a natural tension. Succession planning brings up emotions and often requires uncomfortable conversations, so conflict-avoidant boards may be reluctant to start the process.
It also takes time and effort
Succession planning is a time-consuming endeavor – it’s not something that slides easily into a busy board calendar. It involves multiple stakeholders, including the board, the CEO, and possibly the CHRO and other advisors. Quarterly board agendas and Nominating & Governance Committee meetings are already filled with important business. Carving out the necessary time for succession planning is challenging during an already packed year of governance.
Other, more urgent matters take priority
After the pandemic, boards and leadership teams faced a series of existential issues that left them focused on significant business challenges or embarking on transformative strategies seen as critical to success and sustainability. As a result, boards will move succession planning further down on the To-Do list.
There may be no obvious successor
Some companies have an internal candidate who is a clear choice to succeed the CEO. Often the talent bench beneath the CEO isn’t as strong or as deep as it could be. Or, in the age-old “war for talent,” a company’s best prospects for succession have been recruited away to become CEO elsewhere. The lack of a clear successor is an additional mental blocker to starting a process – no head start! Not only does that serve as another strong argument for succession planning sooner rather than later, but it also underscores the need. The absence of a future CEO in the C-suite should align the board and current CEO around the need to identify and prepare internal talent as possible successors.
The enterprise lacks a defined approach to succession planning
There are organizations that have a formal succession planning process to identify and support talent development throughout the organization. But it’s less common than it should be. It takes clear messaging from the board and a savvy Human Capital Management team to create and uphold a robust process that allows for visibility into talent and intentional planning for advancement and retention.
The CEO isn’t planning to exit and/or doesn’t want to talk about it
This can be the elephant in the room. Any CEO can get comfortable in the role, especially if they are doing a good (or good enough) job. It’s clear why CEOs may see themselves as uniquely fitted to the role, and they certainly aren’t planning on going anywhere. Boards struggle to create a comfortable dynamic around succession planning in this case. But the board still has a responsibility to ensure a viable succession plan for the long-term health of the company.
For any of these reasons, it’s hard to jump into succession planning. However, boards owe it to their constituents to look ahead at possible changes to the team. How do boards get past these barriers to succession planning?
How to fix it
A lot of the hard work of succession planning takes place before you even start. Being intentional about how you set the stage for planned succession will make all the difference. We recommend that boards take the following steps before creating a plan.
Get to the heart of the matter
If your board is putting off succession planning, self-awareness is the first step to positive change. Approaching the challenge requires board alignment around priorities, goals, and the process. Sometimes alignment comes as the result of an objective assessment, sometimes it’s just having a frank conversation. Often, it’s both. Boards who struggle with succession planning already know it. Embrace the importance of stepping back and looking at what’s preventing your board from getting it done.
Make the time
Resist the urge to put off succession planning because it doesn’t fit into a standing board meeting schedule. Maybe that means making time during the year for a separate strategic session devoted to planned succession. Or perhaps it becomes a specific deliverable of the Nominating & Governance Committee. Proactive, holistic governance planning helps boards understand how to find time for succession planning. Enlisting a search firm to identify potential successors and setting explicit goals for their work also helps keep succession planning on schedule.
Set clear expectations and deadlines
The board needs to set clear expectations for the CEO and other stakeholders and stick to them. In many organizations, the CEO delivers recommendations for potential successors to the board on an agreed-upon schedule. If that’s the expectation, the Nominating & Governance committee must set an objective for the CEO and be clear on what’s required: for example, recommendations, well-reasoned rationale, and high-level development plans for recommended candidates.
Be honest and have the hard conversations
Despite setting clear expectations, often stakeholders don’t meet deadlines or requirements set by the board. Or the board may disagree with recommendations. Or the CEO may not want to address succession planning at all. If any of these things are the case, be transparent. Meet with the CEO or any other stakeholders as soon as possible. Talk through the challenges, even if it’s uncomfortable. Radical candor–the caring but direct approach–can be a very useful tool here. Also, listen: There may be a convincing argument or a different perspective about a candidate or the CEO may want to air concerns about stepping aside.
Include the CHRO in planning
Having the CHRO involved in succession planning is valuable for several reasons. A savvy CHRO can help the board navigate difficult situations and ensure that the process and decisions are objective and align with their goals as well as the company’s ethics and culture. The CHRO typically will have insight into the state of talent development and ideas of how to prepare internal successors. That person may even be involved in follow-up and readiness evaluations. Conversations surrounding succession planning help inform a more robust talent development program, ensuring that internal candidates are always in the pipeline.
Cover both emergency and planned succession
Succession planning must include emergency succession: What internal prospects can immediately step in for the CEO on a temporary basis? What is your emergency communications plan? What support is needed during an interim period? Under what circumstances and how do you activate a more thorough planned succession process? A side benefit of emergency succession planning is that it might surface candidates for planned succession, helping the board identify (or disqualify) people who should be on the radar screen for the long term.
Look outside the organization—even if you have strong internal candidates
There may be one or more strong internal candidates. The board still needs to look outside the organization. Looking externally may surface some interesting candidates, and there’s another important reason to do it. External candidates are critical to benchmarking the strength of internal ones. It behooves a board to put its head into the market to see what talent is out there, what exceptional performance looks like, and the compensation norms.
Don’t look at succession planning as one-and-done
Even once you have a solid succession plan, don’t put it away and forget about it. Unless there has just been a CEO transition, succession planning is “always on.” Things constantly change–in the organization, in the market, in the world. At least yearly, review the plan with the CEO and CHRO and adjust it as needed.
No doubt your board will continue to have priorities and urgent matters for the year. That list won’t get shorter. But by taking the steps above, it’s entirely possible to make space for succession planning and get the most challenging aspects of it out of the way.
What else are boards thinking about?
If you want to learn more about what boards think about Management Succession Planning and a host of other important governance topics–ESG, Ethics & Values, and more–download the 2023 Board Performance Assessment Benchmark Report. It’s full of insight on dozens of topics and ideas about elevating your board’s performance.
(Photo by Valery Fedotov at Unsplash)