In many organizations, the pool of successors for the CEO and other top positions is quite shallow; in some, it is empty.
Most organizations don’t have great confidence in their successors for the top and other key roles in the organizations. Research from The Institute of Executive Development (IED) shows that boards do not agree with the statement, “there is an adequate pool of ready successor candidates for the CEO position,” ranking it No. 42 out of a list of 52 practices. The board has only slightly more confidence in the successor pool for other C-suite roles.
As a top executive, you may feel there are many great candidates both in your organization, as well as on the outside, and that you should be on that coveted short list yourself. The reality is that CEO succession planning, despite universal recognition as a critically important process for any organization, is actually quite challenging.
In fact, most research demonstrates that less than half of organizations (including large public companies) believe they have robust succession planning practices. And when the rubber hits the road as they say, and a board is faced with an unexpected succession emergency for a newly departed CEO, they often ignore any plans that may be sitting on the shelves, and scramble to recruit an outsider (at great expense to the organization).
Why is this the case? First of all, it is quite difficult in this rapidly changing global economy to identify the requirements that the next CEO should possess, which goes well beyond analyzing what has made the current CEO successful. Equally challenging is identifying who from the current ranks either has, or can develop the required capabilities.
The greatest challenge occurs when boards face a lack of suitable internal candidates, and must try to identify successors from the outside. Consider that in 2012, more than 25 percent of the companies that replaced their CEO hired from outside the firm, which is up from 19 percent in 2011, according to The Conference Board‘s Governance Center.
Additionally, in cases where internal successors are identified and on the short list, it is challenging for the organization to provide them with high impact, relevant development. Much leadership training coming out of organizations focuses on “hard skills” such as finance and operations. Yet what top leaders need much more of is “soft skill” training in areas such as leadership and public speaking, and in more amorphous concepts such as managing diverse stakeholders and driving organizational change. These are very hard capabilities to develop in leaders, and the typical corporate university simply will not have the expertise to do so.
A current study on “CEO Succession Planning” produced by IED and Stanford Graduate School of Business is investigating what organizations actually do as part of their CEO succession planning activities, and which of them drive the most value. (To learn more about or to participate in this study, please visit here.)
Most organizations choose to keep the successor lists semi-private; those who are clearly on the successor path are likely to know, however, those potential candidates may not have the open and honest dialogue with the board, incumbent CEO or HR leadership to know where they stand. At a minimum, any top executive should proactively seek as much feedback as possible regarding their own developmental opportunities, and work diligently to expand their strengths and address their weaknesses; all of which increases their odds for promotion.
Those who want to go above and beyond and take a leadership role in influencing the succession process—both for the benefit of the organization and also to strengthen one’s candidacy—might even volunteer to support the succession process however it might be needed. Taking on the challenge of improving CEO succession planning, recognized by most boards as critical yet under developed, might just help you get on that short list after all.
About the C-Suite Succession Planning Study
IED and Stanford University’s Center for Leadership Development and Research (CLDR) are collaborating on the benchmark study, “C-Suite Succession Planning” which is focused on both the need for succession planning for an organization’s top executives, as well as the most effective practices organizations are utilizing. For more information or to participate, please contact Scott Saslow, Founder & CEO of IED at email@example.com.