The Lack of Success In Succession Planning

by Thomas Casey, Managing Principal

The most recent edition of the Harvard Business Review was devoted to Talent.

Several data points were contained in the article on CEO Succession are forcefully aligned with Discussion Partner Collaborative client experience:

  • The median tenure of a Fortune 500 CEO is now 3.5 years
  • 50% of Fortune 500 Board Members are dissatisfied with the their companies Succession Planning process
  • Succession Planning is an insular process usually achieving a level of “seriousness” approximately 18 months before transition

The above focuses on CEO’s….one can speculate without likelihood of contradiction that the comprehensiveness of the process is even more deficient below the level of CEO.

Recently a client called and said “can you come to Florida I think I have a problem”?

This executive had recently assumed their role as Director of Strategy for a very large organization and as part of their on boarding had reviewed the organizations Succession Plan.  He was struck, as was I when I reviewed the oppressively large document that every key executive and/or those in critical roles were planning on retiring at 65!

The good news was that the enterprise had an approach….as research would indicate that only about 36% of companies actually create a Succession Plan.

The bad news was that it was mathematically driven not only by the anticipated retirement age: but also determination of readiness based upon Performance and Competency “scores”.

This awareness led us to ask an important question….has anyone asked the executive about their retirement plans?

The answer was “no, not as part of this process”?

My colleagues and I were asked to do some interviews with key executives and incumbents in essential positions, and we learned the following:

Age 65 is arbitrary….some folks were planning on leaving sooner, some later based on circumstances

  1. They were reluctant to be specific as to retirement age as a) they did not want to be a “lame duck” and/or b) “what happens if I change my mind”
  2. Their ideas as to position replenishment were filled with words such as “maybe this person”, “I think they are the most likely”, or most frequently articulated “we will have to go outside to find the replacement”
  3. All executives were open to phasing down over a period of years…..and extending their tenure with the organization in the current or alternative capacity
  4. Most had a Financial Plan yet seemed to be a little vague on the details
  5. Few had a clear idea as to their life plan beyond a) playing golf, b) spending time with the family, c) sitting on Boards, d) traveling, e) getting involved with Church or Charity
  6. Most felt unprepared and desirous of the enterprise to assist more in the Life Planning

Our conclusion with this company, and later otherclients was although there was a “plan” its usefulness as an accurate characterization of options and opportunities was suspect.

There were additional observations on the above client which were borne out in subsequent assignments with other companies.

The existing Life Planning resources that can be accessed are somewhat limited first and foremost as they are offered as an employee benefit vs. integrated with the enterprise Succession Plan.

  1. For the most part Vendor services are Outplacement methodologies reverse engineered for potential retirees.  Although not a condemnation of the approaches our research has found that the more seasoned or specialized the executive they feel the effort is an attempt to put them out to pasture and in some cases appears premature
  2. The other modality of Life Coach using a military metaphor is similar to the Army slogan, “isbe all you can be”.  Or back in the 80’s “what color is my parachute”.  Extending the military metaphor to executive sentimentthere is more concern that the parachute opens than its color.
  3. Executives want to plan their “life” like they would their business endeavors with options, risk assessments, tactics, and success metrics

Augmentation of Lessons Learned

Based upon our involvement with the above client and later others, Discussion Partner Collaborative expanded our Leadership Effectiveness and Human Capital Strategy advisory to work on a service we refer to as Enterprise Transitions.

 Through our subsidiary Next Generation Advisory Services LLC which focuses on Enterprise Sustainability we have derived the following principles reinforced by the research by Tammy Erickson and Bob Morrison in their HBR article, It is Time to Retire Retirement:

  • Succession Planning cannot be realistic unless those whom are deemed “inclusions” (executives and those in key roles) are consulted in respect to their contemplated retirement timing “without prejudice”.
  • A foundational element for Executives is the efficacy of their Financial Planning….has sufficiency been ascertained
  • Life Planning support is highly desired and appreciated by this constituency provided the service is delivered well in advance of retirement and executed in “business” terms
  • The principle of flexibility is a Succession Planning “must have” to maximize leverage and create the most options for the enterprise, executive, and potential replacements

The biggest obstacle we have found to date is the reluctance of the enterprise to redefine work to embed flexibility.  The strongest example is the willingness to incorporate gradual phase down into career stage management.

One case in point is a CFO where the a) Succession Plan had them leaving at 65 with no “ready now” replacement on the depth chart,  b) the incumbents unexpressed desire was to leave at 63, BUT c) she would be willing to stay until 67 provided she could phase down to 50% of time during the four year period.

In this case we were told by HR that the CEO and Board would never agree to a Phase down yet when we met with the CEO and ventured the company would have the services of the CFO for an additional 4 years and have a more likely successor, they were all for it.

Given the fastest growing segment of the domestic workforce is over the age of 55 it is incumbent upon all of us to challenge our assumptions regarding the nature of work to be done, time spent doing it and by who…..

Our position is that without this point of view Succession Plans will be more fictional than a powerful leadership effectiveness tool.

The principle of Retiring Retirement as espoused by Erickson and Morrison has to be a key Workforce Planning strategy moving forward.

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