Avoiding the “Contribution Deficit”

Succession management has always belonged on the Board’s agenda. Today’s leader shoulders a great responsibility for identifying and raising successors. Yet succession planning can appear, because it shapes the organisation’s mid-term future, to be a little ethereal. Just how wrong that view really is can be underscored by a rapid scan of the four year period from 2012 to 2015. In that span of years, 74 percent of the new CEOs appointed to Standard & Poor’s 500 companies were promoted from within. No surprise there because, since Jim Collins and Jerry I. Porras published “Built to Last”, it has become widely (though not universally) accepted that there is absolutely no inconsistency between promoting from within and stimulating significant change. What might be surprising is that the 74 percent of internally promoted CEOs represents an increase from 63 percent during the 2004-2007 period. And 91 percent of those internally promoted CEOs had no prior CEO experience.

Succession planning is vital and must be done well. The risks of doing it badly are too well known to discuss: let’s take an overview, realistically, of a major challenge and a related calculated risk that organisations need to contemplate today.

Avoiding the “Contribution Deficit”

Over promotion is a well-known phenomenon with its own dangers but promoting a functional specialist into a senior leadership role before they are ready can create different risks. Many of these risks are directly connected to the “contribution deficit”. This is often seen in the new leader’s lack of confidence when engaging in debate about critical issues or their inability to hold competing options in dynamic tension. The results: significant limitations on the newly promoted leader’s ability to be a compelling adviser to the Board, CEO and wider leadership teams. Frequently, what’s missing is a combination of sufficiently broad knowledge about business drivers, understanding the actual and potential contributions of other functional areas, limited influencing skills or a failure to build and empower a strong team.

Taking Early Action: Whilst the Window’s Open

cropped-Window.pngThose organisations most skilled at developing succession-ready leaders identify high potentials early, so they have the most options for crafting developmentally focused assignments across the business. A failure to do so delivers problems that are often compounded by other features of organisational life.

A progressive narrowing of the window of opportunity typically plays an increasing part. The time to qualification and establishment in many professions has progressively lengthened as the need for a first degree plus a professional qualification has frequently been replaced by the requirement for a postgraduate qualification, plus a professional accreditation and, possibly, an MBA. Naturally, the accredited professional then needs time to soundly establish their performance within their function. Significant life choices are made at about this time, creating future responsibilities that will factor into mobility decisions later. Reduced employee willingness to accept global movements at the invitation of their employer also serve to restrict the organisation’s scope for manoeuvre, whilst familial senior care responsibilities can limit options in the last decade of working life.

Taken together, these – and related – pressures conspire to quite narrowly define the individual’s and the organisation’s opportunity to identify, assess and work with together to prepare for future organisational leadership. The calculated risk is critical, the quality of the evidence base available frequently needs to be significantly enhanced, but doing nothing is usually the worst possible option.

Need to plan, implement or evaluate succession planning and talent management? Contact √itas Consult.