Leadership and succession

“A person who does not worry about the future will shortly start to worry about the present” is an ancient Chinese proverb.

leadership successionUnfortunately, still rare occurrence is leadership succession which is and should be too important to ignore.

A company CEO is irrevocably gone. Who will take his position? Or, the top executive is attracted by your competition. Is there anyone new ready to fill the role? What would you do: you may end up with an empty C-suite or, even worse, get an under qualified person to fill the job because simply there is no one better to take it over.

Transition period in the top management position may present quite hazardous times for companies. If the previous CEO has had significant and sound results a worry about his successor’s ability to maintain the same momentum will inevitably arise. To avoid a future crisis in leadership succession there should be developed and implemented plan for leadership succession beforehand. This should cover planned process of leadership transition but also the unplanned ones. Important functions will thusly in large amount continue uninterrupted.

Increasingly large and globally integrated companies take leadership development and CEO succession extremely seriously. In one study of more than 200 CEO successions the researchers found out that in contender succession turnover among senior executives has a positive effect on a company’s profitability but in an outsider succession it has a negative impact. So, companies face two ways to fill the empty position: with internal process of development of a specific candidate or hire externally and choose the best free one on the market.

leadership developmentDeveloping leaders internally takes time and effort from current CEO and as well from human resource department. A study from five years ago, published in FORBES, shows that by revenue largest American companies hired eighty new CEOs from outside and only half of them were promoted from within. On the other hand studies show that these homegrown candidates are more likely to be successful than external candidates. According to a 2012 study by professor Bidwell at the University of Pennsylvania's Wharton School, external hires are 61 percent more likely to be laid off or fired and 21 percent more likely than internal hires to leave a job on their own accord. The outside hires also get paid better, but get lower scores in performance reviews during their first two years on the job.

If the above data are to be taken seriously, why do so many boards wind up looking for new a leader outside the company?

Is it because CEOs love their job so much that they identify themselves with the role, in it they engage their personality traits, their ego, their power? And therefore they are not able to see a possible candidate succeeding them, is this at the heart of (nonexistent) succession plan  they should help to prepare. In this way of thinking, an outsider seems to be less “dangerous” than an internal one.

The choice of hiring the best candidate for top management position(s) will definitively depend also on the team surrounding the current CEO and the way all their skill sets complement one another. And what skills a CEO should have?
leadership strategic thinking

In the CEO Magazine survey, the top five characteristics valued in leaders were presented as:
  • Strategic thinking – cited by 50 percent of respondents,
  • Execution – cited by 40 percent of respondents,
  • Decision Making – cited by 33 percent of respondents,
  • Technical Competence/Expertise – cited by 33 percent of respondents,
  • Team Work – cited by 30 percent of respondents.
The above characteristics are not so unique that can be acquired only outside the company. Very able candidates may exist inside a company or organization. And those candidates (may) present much less of a risk than an outsider. Therefore, a good succession plan that will cover all those issues should be a must!

1 comment:

  1. Eweryone makes beforeplans,but" life is life",and we are forced to do our second or third planes,most of them!


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