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In this month’s feature article, CarterBaldwin reveals how today's leading companies are using succession strategies to grow leaders and ensure continuous development within a shifting global economy.
Currently one in five executives is eligible for retirement. In fact, according to Development Dimensions International, a significant number of companies will see 40-50% of their executives leave their positions over the next five years.
What will you do when half of your workforce retires? Who will you get to replace these valuable, experienced employees? Recent downsizing has reduced the pool of internal candidates, and when you consider normal attrition rates and a tight labor market, you may realize that a proactive approach to leadership management needs to be one of your top strategic initiatives.
So what exactly constitutes a proactive approach to leadership management? In our view its succession planning, a process by which one or more successors are identified for key posts and career moves and/or development activities are planned for these successors. We’re certainly not alone on this point of view. In fact, in his book, “Built to Last: Successful Habits of Visionary Companies”, Jim Collins identifies 18 companies that have been at the forefront of their industries for at least 50 years. He explains that one of the key reasons behind the success of these organizations is their history of placing a strong focus on succession and leadership planning, which enables them to ensure leadership excellence and continuity.
Yet, despite this conclusive research, a recent article in Business Week (October 10, 2005) revealed that more than 40% of companies don’t have a CEO succession plan in place today.
A survey by the Canadian Federation of Independent Business (CFIB) indicates that business leaders with no succession plans in place state the following as the primary reasons:
- They feel it is too early to plan (60%)
- They lack the time to deal with the issue (28%)
- They cannot find adequate advice or tools to start the process (17%)
In our professional opinion, it really never is too early to start your succession planning efforts. In fact effective succession planning requires years, not days or months. So once you commit to making succession planning a strategic imperative for your company, what basic criteria should be considered to ensure the success of your efforts?
- Be sure you succession plan covers short-term and long-term successors for all of the most senior positions in your organization (usually the top two or three tiers).
- Be sure your succession plan is a “flexible system oriented toward developmental activities, not a rigid list of high-potential employees and the slots they might fill. By marrying succession planning and leadership development, you get the best of both: attention to the skills required for senior management positions along with an educational system that can help managers develop those skills.” 1
- Management succession should be perceived as a process rather than an event. The view and structure of your succession plan should not be confined to matters dealing with the moment at which the reins are handed over to a successor. Your plan should take into account that it will take time for the successor to transition to his or her new role and your organization needs to be prepared to support this transition.
Today, a succession plan is more than simply “a back up plan for qualified successors.” A succession strategy is valuable tool being used by leading companies to grow leaders and ensure continuous development within a shifting global economy.
1: Harvard Business School: Bench Strength: Grooming Your Next CEO / January 19, 2004
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