Finding a successor to take over a business is an underestimated challenge, according to a recent study on succession planning by Stanford University’s Graduate School of Business.
While most businesses know that having a succession plan is important, few are doing enough to prepare.
The study found that companies tend to plan for succession to “reduce risk” rather than to “find the best successor.” Succession plans are not typically connected with coaching and internal development programs, which put many organizations at risk of having unstable future leadership.
To prepare the leaders of tomorrow, Stanford professor David Larcker and Scott Saslow, founder of The Institute of Executive Development, recommend the following:
1. Map skills required of executive positions and benchmark executives to these skills. Evaluate executives on their abilities to assume larger roles in the organization. Where deficiencies exist, plans should be put in place to rectify them, such as job rotation or development activities.
2. Cast a wide net. Evaluate talent for skills that will be needed in the future, not the past or present. Compare internal executives to the external market for talent.
3. Be comprehensive and continuous. Succession preparations should be continuous, not episodic, and should be conducted throughout the organization, not just in the CEO’s office. Succession is much riskier after a departure.
4. Assign ownership and roles. An independent chairman or experienced outsider should be assigned responsibility for the succession process. Other board members and executives should be assigned specific roles and held accountable. Not assigning accountability is one of the main reasons succession plans fail.
5. Connect succession with coaching and internal talent development. Map succession to a pipeline of internal executive talent. Identify deficiencies in internal talent, and design development plans to overcome these.
6. Assign coaches and mentors. Outside coaches, as well as mentors from the board, can give executives new perspective and the opportunity to grow outside the organization’s normal chain of command.
7. Get strategic assistance when necessary. Study the practices of other organizations, and integrate the ones best suited for your organization.