Succession Planning: Effective Strategies for Transitioning Corporate Leadership

Leadership selection is key to corporate success. Without an ongoing effort to prepare for regime changes at the executive level, companies are putting their organizational stability and long-term growth potential at risk.

With the recent trials and tribulations of corporate executives in the United States, succession planning has taken on a significant position in the public consciousness. The high-profile successes and failures of a number of big-name companies over the past several years exemplify the importance of the leadership selection process.

Succession Planning Poorly Implemented
A recent study revealed that companies such as American Express, Hewlett-Packard, McDonalds, Motorola, and Pfizer match sound succession planning with consistently executed processes to forge their companies into leadership academies. However, the study also found that most small-to-midsize companies have no succession planning strategies in place, while very few large firms have systems formal enough to methodically build new leaders. Corporate rationale for neglect in regard to succession planning ranged from a focus on short-term measures day-to-day impact on revenues and costs to simple procrastination.

In fact, a survey of 300 organizations from all major business sectors by Arthur Andersen and Schoonover Associates showed that approximately 67 percent of organizations do not actively use competency-based human resource initiatives, a key component of succession planning. Furthermore, only about 11 percent of surveyed companies considered themselves very experienced or sophisticated users of these initiatives. Yet, of the companies that were found to use sophisticated competency measures, 80 to 90 percent said they have seen measurable results.

Basic Steps in Building Your Succession Plan
Building a top-flight succession plan takes both outstanding planning and committed execution. Two major steps in building a succession plan are:

• Alignment with corporate strategy Succession priorities must be aligned with both corporate strategy and corporate culture to be successful. Good and bad leaders alike flounder when their performances are at odds with corporate objectives. Companies must clearly articulate and communicate core competencies throughout the organization when designing their succession plans.

• Development of competency profiles for each management position Key competencies for each position are the backbone of any succession planning initiative. They serve as a roadmap for building successful individuals for each job, which in turn helps build the organization as a whole. No one group can identify all traits for a company, department, or individual. Successful companies rely on a mixture of opinions from past and current position holders, divisional and corporate human resources personnel, and management.