Description

Succession Planning

Avoiding the Risks

 A Whitepaper

 Authored by:

Rich Jones, Founder/Principal

Leading2Leadership LLC

Rich@leading2leadership.com

720.256.4936

 

Introduction 

Succession planning, a proactive strategy, is vital for any organization. It involves identifying and developing individuals who can fill key leadership positions. This strategic approach prepares for the inevitable turnover of key personnel due to retirement, promotion, or unforeseen circumstances. By doing so, organizations can ensure a smooth transition of leadership and maintain the continuity of operations.

Failure to have a succession plan has dire consequences for the organization. Without a valid succession plan, leadership continuity is lost, the organization is at risk of becoming a merger target, there is a lack of trust in its long-term sustainability, strategic disruption, and often, infighting and unacceptable competition among the leadership team occur.

Effective succession planning is anchored on a comprehensive understanding of the organization’s mission, vision, and values. It involves a thorough assessment of the skills and potential of current employees and creating a plan outlining the steps to identify, develop, and promote individuals best suited to take on key leadership roles. With this clear understanding, organizations can build a strong leadership pipeline and ensure a bright future for their employees and stakeholders.

Succession planning is essential for any organization to ensure continuity and stability. However, even with a well-designed succession plan, risks can derail the process and impact the organization’s future success.

In this whitepaper, we will discuss the eleven common risks associated with succession planning, such as lack of clarity on leadership requirements, limited availability of suitable internal candidates, and over-reliance on internal candidates. We will also offer suggestions for how organizations can address these risks effectively.

Lack of clarity on leadership requirements:

One of the critical risks in succession planning is the need for transparency on the specific skills, qualities, and experience required for leadership roles within the organization. These include strategic thinking, effective communication, and the candidate’s ability to influence, inspire and motivate others. When there is a clear understanding of what is needed in a leader, it empowers all stakeholders. It ensures their active involvement in the process, fostering a sense of ownership and commitment.

Failure to address this risk can lead to a mismatch between the leader’s skills and the organization’s needs, potentially disrupting operations and causing stakeholder dissatisfaction. For instance, a leader lacking the necessary soft skills, such as a poor leadership style or low emotional intelligence, could decrease employee morale and productivity and, worse, lead to the exit of high-potential leaders seeking roles elsewhere.

To mitigate this risk, organizations must have a process to identify the operational skills and soft skills, like leadership style, EQ, and cultural fit, that are needed. Most succession plan failures have resulted from the need for more attention to soft skills and over-focus on operational skills. Operational and tactical skills can be taught, but a new leader’s soft skills dictate the successor’s long-term success. A cultural, leadership, and strategic alignment audit will help the organization identify the skills and attributes needed by a new leader.

Limited availability of suitable internal candidates

Another significant risk in succession planning is the need for d internal candidates who are more qualified. Sometimes, the organization may need more individuals with the necessary skills, experience, and leadership potential to fill critical positions. This risk may force the organization to look outside for talent, which can be time-consuming and expensive. This risk is especially significant for smaller organizations.

To mitigate this risk, organizations need to be brutally honest about the capabilities of their current staff and determine if the skill and experience needs of the successor are available internally or whether an external search is required. No room exists for relationship or proximity bias to creep into this evaluation process. A successful candidate’s values, leadership style, and purpose must align with the organization’s culture. This alignment evaluation is often best conducted by a consultant, who has a process to identify strategic, leadership, and values alignment.

Lack of diversity and inclusivity:

One of the most significant risks in succession planning is the potential for a need for more diversity and inclusivity in leadership positions. An inclusive organization should strive for a balanced leadership team from all backgrounds. It’s crucial to ensure that succession planning is inclusive and diverse, choosing candidates based on their skills and potential rather than their background or demographic.

If organizations only focus on developing and promoting employees who fit a specific mold, they risk perpetuating the same biases and inequalities in the current leadership team. This focus can lead to a lack of diverse perspectives and innovative ideas, hindering the organization’s ability to adapt to changing market conditions.

Organizations that lack a diverse pool of potential successors may have limited options when selecting a new leader. This lack of diversity can result in a diminished ability to adapt to changing market conditions and sustain that leadership does not represent the entire workforce, membership, and community. It’s essential to ensure that succession planning is inclusive and diverse, choosing candidates based on their skills and potential rather than their background or demographic. This emphasis on diversity and inclusion makes all potential candidates feel valued and respected and all potential candidates feel valued and respected.

To manage the risk of lack of diversity and inclusivity, the organization must have a clear mission for cultural diversity. A cultural audit should be conducted to identify the existing diversity gaps and a selection process that may unknowingly contain cultural biases. In addition, organizations should prioritize diversity in their succession planning. They should identify potential successors from a variety of backgrounds and ensure that they have equal opportunities for development and advancement. This emphasis on diversity and inclusion makes all potential candidates feel valued, respected, and appreciated.

Over-reliance on internal candidates:

Another risk of succession planning is over-reliance on internal candidates. While developing and promoting talent from within the organization is important, organizations should also consider external candidates who may bring fresh perspectives and new ideas. Including candidates who have met challenges and had experiences outside the organization can make the succession plan more dynamic and prepared for the future.

Over-reliance on internal candidates can lead to a lack of fresh perspectives and new ideas, potentially hindering the organization’s ability to adapt. This over-reliance can result in a lack of innovation and a failure to adapt to changing market conditions.

To minimize this over-reliance, organizations should look at what talent and skills they need, make a talent and skills wish list, and use this list to evaluate the capabilities of internal staff. It is possible that the existing siloes and departments may not be aligned with the strategic objectives. The succession plan should include identified future leadership and organization structure needs in these cases.

Failure to identify and develop potential candidates:

Another risk of succession planning is failing to identify and develop potential candidates early in their careers. To address this, organizations should start by identifying high-potential employees who demonstrate the skills and potential to fill future leadership roles.

Once identified, these candidates should be provided with a clear plan for training and development to prepare them for their future roles. This proactive approach ensures a continuous leadership pipeline and minimizes the time needed to prepare internal staff, making the organization more agile and responsive to leadership changes.

It is common for an organization to have high-potential employees who need to be developed. Ensuring internal candidates are developing starts with understanding the leadership needs and expectations identified in number one above. A development plan will help organizations tailor a leadership development roadmap for these high-potential employees.

Failure to identify the fitting successor:

Another risk associated with succession planning is the failure to determine the proper successor. Organizations may spend a lot of time and resources developing potential successors, only to find that they are unsuitable for the leadership role when the time comes.

To address this risk, organizations should clearly understand the skills and competencies required for leadership roles. Four important attributes are often overlooked. These attributes include EQ, strategic and cultural alignment, and leadership style. Including these four attributes in the identification process will ensure improved success in the chosen successor. Ignoring these four attributes results in a challenging or sometimes failed organizational transition. Assessing potential successors against these requirements will ensure the leader is given the necessary training and development.

Over-reliance on the individual:

Too often, succession planning involves identifying a single individual to assume a key leadership role. This over-reliance on one individual can be risky as it creates a significant dependence on that person, leaving the organization vulnerable if that individual becomes unavailable or leaves the organization.

In an effective succession plan, the final decision on a specific “who” is only made when the need to fill that position is imminent. Ideally, the organization needs to have a bench strength of strong contenders, and their ultimate selection will depend on the work they have completed to prepare themselves for advancement.

Lack of preparation:

One of the most significant risks associated with succession planning is looking at it as a short-term project. Succession planning is a long-term process that requires careful planning, identifying potential successors, and developing skills and competencies. Organizations that could have prepared for succession planning adequately may find themselves in a situation where they must scramble to find a replacement when a key leader leaves, resulting in instability and uncertainty. Inadequate training and development can promote individuals who need more skills to succeed in their new roles and, therefore, need help to achieve.

Succession planning should be based on thoroughly assessing candidates to ensure they have the necessary skills, experience, and potential for the leadership position. If the assessment process is inadequate, organizations can promote unprepared employees for the role, harming the organization’s performance and reputation.

To address this risk, organizations should start preparing for succession planning early. They should identify potential successors and start developing their skills and competencies as early as possible so that they are ready to step into leadership roles when the need arises.

Succession planning is a long-term process, but it is essential to remain flexible and adapt to changing circumstances. An organization’s needs may change, and the previously identified candidates may need further development to stay suitable for the organization’s evolving needs.

Loss of key talent:

Succession planning can also be risky because it may result in losing key talent. If potential successors are identified and developed, they may be attractive to other organizations and leave for better opportunities.

In addition, some key employees not identified in the succession plan may seek opportunities with other companies. This real risk can result in high-profile leadership gaps that need to be filled.

Transparent communication and retention plans should be implemented to avoid this risk. High-potential employees who may see themselves as successors will look for development plans to help them gain the experience or skills they lack.

Resistance to change:

Succession planning often involves a significant shift in the organization’s power structure. Some individuals may resist these changes, particularly if they feel their position or authority is threatened. This resistance can lead to conflicts, delays, and, ultimately, the failure of the succession plan.

Transparency is necessary to manage this risk, and the change resistors should be identified. Once identified, these resistors must be coached and mentored until they understand the succession plan. Sometimes, executives must help these resistors agree or have the tools to seek a position elsewhere.

Failure to communicate effectively:

Succession planning should be transparent and communicated to all employees. A lack of clarity and transparency in the process can lead to confusion and distrust among employees, ultimately harming the organization’s culture and productivity. This communication should include the selection criteria and the process to ensure that employees understand the organization’s approach to succession planning.

Communication is essential in any organizational change initiative, including succession planning. Failure to communicate the rationale for the succession plan, the selection criteria, and the expected outcomes can lead to misunderstandings, distrust, and resistance.

To minimize this risk, organizations need a communication plan to help all management cascade the rationale and criteria throughout the organization.

Inadequate assessment of candidates:

Mitigating succession planning risks requires a proactive and strategic approach. Organizations should prioritize diversity and inclusivity, consider internal and external candidates, communicate the process clearly, identify and develop potential candidates early on, and assess candidates thoroughly. By addressing these risks, organizations can ensure that their succession planning process is effective and beneficial for long-term success.

To address this risk, organizations should have retention strategies for key talent and ensure that potential successors are compensated fairly and given opportunities for career advancement within the organization.

In Conclusion

Succession planning is a vital process that enables organizations to proactively prepare for leadership changes, maintain operational continuity, ensure stability, and keep the focus on strategic needs. It involves identifying and developing individuals with the potential to fill key leadership positions in the future, which helps retain top talent and ensure a smooth leadership transition. By investing in succession planning, organizations can build a strong leadership pipeline and position themselves for long-term success.

However, effective succession planning requires a comprehensive understanding of the organization’s mission, vision, and values, as well as a thorough assessment of the skills and potential of current employees. It requires commitment and dedication from all levels of the organization, as well as ongoing monitoring and evaluation to ensure the plan remains relevant and practical. Addressing the risks identified in this white paper will make the succession plan a valuable investment, allowing an organization to navigate leadership transitions and achieve strategic success.

Additional Resources:

Here is a link to a succession planning facilitator engagement.

Here are two more articles on Succession Planning:

• No Succession Plan – What Could Go Wrong?
• 3-Step to Finding the Right CEO
• A Primer – Choosing Your Next CEO
• What the Credit Union Board Should Know Before Hiring a Bank Executive
• Feeling Pressure for a Hasty Executive Hiring Decision?
• 10 Reasons to Hire a CMO as the New CEO