How to build a robust succession planning program that aligns current talent development with future leadership needs.
If your CEO has a sudden heart attack, do you know
who will take the chief executive's place? What if your top executives are
wooed away to another firm? Do you have the next generation of leaders ready to
fill those roles? If not, you may end up with an empty C-suite—or worse, under-qualified
people moving into leadership roles because there is no one better to take
over.
The only way to reduce the effect of lost leadership
is through a strong succession planning program that identifies and fosters the
next generation of leaders through mentoring, training and stretch assignments,
so they are ready to take the helm when the time comes. Research supports sound
succession planning. A study some years ago from consulting firm Booz Allen
Hamilton concluded that "over their entire tenures, CEOs appointed from
the inside tend to outperform outsiders" when it comes to returns to
shareholders. Yet many organizations struggle to take their succession planning
programs beyond a static list of names slotted for a few top spots.
"Every company has a succession planning
document," says David Larcker, a professor in the graduate school of
business at Stanford University . "The question you have to ask is, 'Will it be operational?"
This Roadmap offers human resources leaders a
framework and advice on how to create a robust succession planning program that
aligns talent management with the vision of the company, ensures employees have
development opportunities to hone their leadership skills, and guarantees that
the organization has a leadership plan in place for success in the future.
Jim Skinner, former CEO of McDonald's Corp., was
known to tell managers:
"Give me the names of two people who could
succeed you." It was just one way the CEO continued the culture of
succession planning at McDonald's.
It was an understandable priority considering Skinner
only landed in the role in 2005 after two other CEO's died suddenly over the
course of just two years. And when he retired in 2012, Skinner was confident
that his successor, Chief Operating Officer Don Thompson, was ready to take
over, because he spent much of his seven years mentoring him.
"I basically felt the responsibility to the
board of directors to be sure I provided them with someone who could run the
company when I'm gone," Skinner told Fortune a year before his retirement.
"Until I was capable of doing that, I would not have left."
This kind of leadership level commitment to training
and mentoring the next generation is a vital component of succession planning.
And while most executives understand the importance of succession planning
efforts, few of them believe their organization excels in this category.
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