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Is Lack of Succession Planning Negatively Impacting Your Business?
November 18, 2008
AchieveGlobal study finds majority of companies lack succession plans, especially for the C-suite (Edited by Stacy Straczynski)
With an unstable economy and record-setting employee turnover rates, companies should be on track with tailoring their employees to move up the ranks and fill those empty management seats. However, recent research finds that today's organizations are overly unprepared for the talent gap, and many currently lack a succession plan for the C-suite.
In a new study, released yesterday by Tampa-based AchieveGlobal, a global workforce management firm, 144 respondents with the title of vice president or higher shared their insights on their organization’s succession strategy. Results show that the majority (51%) currently do not have a succession plan in place for C-suite executives—positions that include chief executive officers, chief financial officers, chief operating officers, etc. This is particularly troubling for American businesses, as 16 percent of respondents also indicate that they have an existing vacancy in their C-suite and another 37 percent indicate that they anticipate a vacancy within the next year.
"The challenge of today's troubled economy and daily fluctuations in business environments are vital points for consideration as companies prepare for the unexpected," says AchieveGlobal CEO Sharon Daniels. "Changes in C-suite personnel have a significant impact on employee retention, leadership and business plans. Having a supporting cast of groomed and vetted candidates will not only improve the company's pool of talent but will also ensure that an organization is change capable and ready for the unexpected."
The benefits to succession planning are clear. The AchieveGlobal study found that 48 percent of respondents believe that continuity and ease of transition was the top benefit. The development of the C-Suite (16 percent) and an established talent pool (13 percent) are also cited as major benefits. Despite the benefits of succession planning, a large percentage of respondents say that their company lacks a plan because the need did not seem urgent (31 percent), the time investment was a roadblock (26 percent) and the complexity of the process deterred initiation (24 percent).
While the urgency of a transitioning C-suite is often ignored by some companies, its necessity cannot be denied. In fact, CEO turnover spiked in the first quarter of 2008, reaching its highest rate in two years. And, according to a report by consulting firm Challenger, this year alone there have been 1,132 CEO departures, meaning 2008 is likely to break 2006’s record of 1, 478 turnovers.
"Whether realized or not, there is a real urgency for companies to develop comprehensive succession plans," Daniels says. "Conventional wisdom will tell you that long-term success requires a steady flow of skilled leaders at all levels, especially in the C-Suite. Interruptions at the executive level result in diminished customer and employee retention and missed business opportunities—problems that companies can not afford to face in today's economic climate."
C-Suite succession planning is often a task designated to the Board of Directors and the C-Suite itself. Corporations must expand this responsibility and make it a priority for others in the organization to fill the succession pipeline. The research provides insights into the succession planning process and investigates several primary activities necessary for effective planning, which include:
• Analyzing pipeline gaps
• Identifying talent pools
• Developing succession strategy
• Implementing succession strategy
• Monitoring and evaluating the process
• Continuous coaching
• Transitioning into new roles
Of these primary activities, respondents believe that their organizations are most effective in analyzing pipeline gaps, identifying talent pools and monitoring and evaluating executives. Organizations were reported to be less effective in developing C-Suite candidates, transitioning candidates into their new roles and implementing succession strategies. In response to the lack of effectiveness in developing candidates, the report presents some key leadership skills necessary for senior leaders.
A full study overview can be found at www.achieveglobal.com/report/c-suite.
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