We need to be more strategic about how we facilitate succession planning processes – and that includes keeping an eye on external talent.
As any HR leader and board can attest, a lack of a comprehensive succession plan can spell disaster. Get it wrong and you risk creating confusion, potential disagreements, conflicts and ultimately damaging business continuity, and the brand. That’s before you begin to digest the financial cost to the business.
Yet so often, companies are failing to properly plan for succession.
Often HR professionals feel they need to focus internally in order to build a robust pipeline of future-leaders, but why limit succession planning to just internal candidates?
In the New Year, the fourth potential CEO succession candidate in six years will leave Qantas when Jetstar Chief Executive Gareth Evans steps down from his role.
In his analysis Australian Financial Review journalist Lucas Baird asked a pertinent question – does Qantas have a succession problem?
What if the talent pool for the top job could be expanded, based on smart talent mapping of the external market to streamline the decision-making process and limit the possibility of an organisation having four leaders in just six years?
This requires HR leaders to create a juxtaposition between internal and external reviews of possible candidates as part of a strategic succession plan.
The cost of poor planning
A global study by Strategy& revealed that of the world’s 2500 largest public companies, those that poorly execute CEO succession planning forgo, on average, $US1.8 billion ($2.5 billion) in shareholder value, compared with companies that implement leadership changes through a planned succession process.
When it comes to mapping out career paths to the top job, it’s paramount for HR leaders to find a marriage between their company’s internal talent and homing in on what the external market is doing.
Leaders who fail to do this might find themselves in a sticky situation, or not placing the right person for the job – for now and in the future.
For instance, a sudden departure can result in a snap decision to recruit externally without developing internal talent in the context of the external market. Or a snap internal promotion is made without considering external talent, who could take the organisation in a new direction.
And while most of my experience has been working with major public or international companies, this planning is equally applicable for substantial SMEs where many are coming to the end of their founder’s reign at the top.
A point of comparison and measurement
Let’s say a company has identified two internal executives as possible candidates for the top job.
To ensure they manage the process effectively and appoint the right person for the right job, not just the right available person for right now, they decide to confidentially test their bench strength against likely external contenders prior to any recruitment process.
The organisation needs to look at:
- Talent mapping – of internal and external executives who could suit the job now and meet future requirements
- The capabilities the ideal leader would need
- How other companies within its peer group and other comparable sectors have structured their leadership ranks
This advice is critical for the Board and other key stakeholders, so they can benchmark internal candidates against external talent options.
An internal candidate may end up being the best option, without having to undergo an executive search process. Regardless of the ultimate appointment outcome, the organisation has done its due diligence and mapped out the optimal succession plan.
Solid pathway to succession
Succession planning needs to be treated as an ongoing program of work and not just considered at one point in time.
If you don’t consider the internal and external reviews of teams, you run the risk of not considering the best candidate for the role and being uninformed about what the external market is doing between times of recruitment.
Keep these key factors in mind when succession planning for the best chance at success:
- Treat succession planning as an ongoing program of work
- Use and connect insights from external and internal reviews
- Harness succession planning as a powerful intelligence and insight gathering tool
- Seek out and engage professional advice – it could be your best defence against the risks of inadequate succession planning.
Julian Doherty is the Managing Director of Yellow Folder Research.