Succession Planning Is Back in the Spotlight

​The U.S. House of Representatives took three weeks to elect a new Speaker of the House—halting their work to fund the government and blocking a $100 billion aid package that includes funding to help Israel and Ukraine in their fights against Hamas and Russia, respectively. Now representatives must race to put forward a budget by Nov. 17 that will ensure government services keep running through the end of the year.

The House's struggle is a clear example of how the absence of a key leader and the inability to fill that role quickly can destabilize an organization.  

In the private sector, companies are still struggling to build an effective workforce after the fallout from the COVID-19 pandemic, the Great Resignation, the increase in remote and hybrid work, inflation, higher interest rates, wage increases, and the push toward digital transformation.

One would think that company executives would embrace succession planning after so many disruptions. Think again.

In the 2023 Gartner Board of Directors Talent Survey, only 51 percent of surveyed board directors said their company has a written plan for the current CEO's succession.

The poll, published in January, relied on responses from 200 board directors with representation across various countries and industries.

The survey also shows that at companies where written CEO succession plans are in place, 60 percent of board directors said they are very confident in their organization's ability to navigate CEO succession. That's in sharp contrast to companies without a written plan, where 18 percent of board directors say they are confident about how they'll manage CEO succession.

However, written CEO succession plans only go so far.

Recent levels of CEO turnover make CEO succession planning more difficult. The latest data from Chicago-based global outplacement and career transition firm Challenger Gray and Christmas Inc. shows that 1,261 CEOs have left their posts so far this year—a 41 percent increase from the 895 CEO changes during the same period in 2022.

The CEO quit rate for the first eight months of the year is the highest since Challenger, Gray and Christmas began tracking CEO departures in 2002.  

Another report published last year from Deloitte and Workplace Intelligence found that nearly 70 percent of C-suite executives said they are seriously considering quitting their jobs for one that better supports their well-being. 

Making a Succession Plan

As company stakeholders think about how the last three years brought into sharper focus the need to have the right skilled employees in critical positions, Alexander Kirss, senior principal, research for the Gartner HR practice, said organizations at the very least need some standardized process for succession planning to work.

Kirss added that getting the chief human resource officer, the chief executive officer, board directors and other stakeholders together to agree upon a process and then documenting that process so everyone has a shared understanding of how a succession plan should operate "is a crucial first step toward ensuring succession planning is successful."

However, succession planning will take much more than documenting names on a spreadsheet or adding them to an automated system, said Sharon Brand, chief people officer at PlanSource, a technology company that provides a benefits engagement platform to automate clients' employee benefits administration programs. 

"Without impactful development planning and a retention strategy for those that have been identified as potential succession candidates, the plan will not be effective," Brand said.

She added that succession planning is a strategic talent initiative that should be evaluated throughout the year, and, when done right, involves making sure that you have the right talent in the right place and at the right time.

Brand said succession planning requires assessing critical roles needed in an organization and identifying talent and skills gaps that may exist. It also involves mapping high-performing talent with potential to fill these roles and creating development and readiness plans for those identified. The process should be viewed as good business planning.

"I sit with my CEO every quarter and we look at succession plans for the C-suite," Brand said. "We discuss critical roles to the business where we may have succession gaps. These discussions have a direct impact on the talent priorities for the company."

Meanwhile, at SIGMA Assessment Systems Inc., a London, Ontario-based consulting company that provides talent assessment, succession planning and leadership consulting services, vice president Glen Harrison said his company won't work on succession planning with any organization where the CEO isn't involved.

"The CEO absolutely has to be on board, and this has to be an executive team-driven thing," Harrison said. "I would say the HR role is generally the facilitator, but I would also say the one that keeps folks accountable."

He said there should be an objective measure of talent to breathe fairness and transparency into the process while reducing favoritism.

"An objective assessment sets a really nice path for the development of the employee," Harrison explained. "If I am an employee, having a very clear way of understanding where my strengths are, where my opportunities of development are and how I can close those gaps is invaluable."

Be Ready for Change

There are several reasons why succession plans cannot be a static process, Brand said. For starters, the evaluation of talent is an ongoing process. Additionally, the demands that come with changing job roles and the readiness of individuals to take on new tasks, as well as employee attrition, add pressure on employers to find the right people to fill key positions quickly when vacancies arise. 

To avoid scrambling should a key leader leave the company, Brand said succession planning is a good business practice that helps mitigate risks and business disruptions that result when critical talent is lost.

"When done effectively, it can lead to developing and promoting talent from within, which further enhances engagement and culture in the organization," Brand said. 

Since she became PlanSource's chief people officer in 2021, Brand said, there have been considerable changes to the workplace and workforce, particularly during the period of the Great Resignation and when remote hiring was at its highest.

She noted that in the tech market people were being hired from any location to work remotely and lured with considerable increases in compensation plus perks.

"This made it challenging to retain critical talent and, in some cases, created gaps in the succession candidate pool," Brand said. "Retaining our top talent is a key initiative and KPI [key performance indicator] at PlanSource, requiring a thoughtful retention strategy, transparent development plans and increased exposure to senior leaders." 

She added that companies need to know what will happen if C-suite executives and other employees in critical roles beyond the C-suite leave. These talent gaps can be disruptive to the business and have a costly impact both in lack of coverage as well as very high recruiting and hiring costs should the need to backfill externally exist.

"When companies lose key leaders that are critical to driving business success, the fallout can have a direct impact on the company's revenue, lower engagement and lead to further talent attrition," Brand said. 

As companies prepare for executive turnover, Gartner's Kirss said CHROs need to ensure that succession planning is collaborative and forward-looking, rather than a particularly retrospective or retributive activity.

"The CHRO has this broad view of an organization's executive talent that no other senior leader has," Kirss said. "They are well positioned to brief the CEO, board of directors or other stakeholders and advanced talent reviews, as well as ask the tough questions about the strength of the leadership bench."

Nicole Lewis is a freelance writer based in Miami.