Inefficient Succession Planning Holds C-suites Back

Leadership StrategiesNext Generation BoardsSuccessionChief Executive OfficersBoard of DirectorsCEO SuccessionC-Suite Succession
Article Icon Article
Aimee Williamson
April 21, 2023
7 min read
Leadership StrategiesNext Generation BoardsSuccessionChief Executive OfficersBoard of DirectorsCEO SuccessionC-Suite Succession
EXECUTIVE SUMMARY
Critical shortfalls in succession planning practices create strategic risk for the organization.
rra-image-asset-8-22-employee (56).jpg

 

C-suite performance can make or break a business. The success of the C-suite is dependent upon collaboration, accountability and future focus. However, success is not purely dependent on the current C-suite. Building a deep, diverse, and engaged succession pipeline is crucial to ensuring the continued renewal and relevance of your organization’s leadership team.

Succession planning must be viewed as a key component of C-suite success and a focus for C-suite leaders, many of whom are being held accountable to ensure appropriate succession plans are in place. In addition, boards want to see robust succession plans. When done correctly, it underpins the organization’s strategy by developing and implementing capabilities that drive its long-term success.

Despite its importance, many organizations are not approaching succession planning with enough diligence. Organizations are 1.7x more likely to have an informal, reactionary approach to succession planning than a formal, proactive one. Via Russell Reynolds Associates’ Global Leadership Monitor, which surveyed 1,690 executives from around the world in Q4 2022, we identified three common failings in succession planning that create strategic risk for organizations: 

  • Succession planning misalignment creates risk. Board directors and executives have differing views on the sophistication of succession planning processes in their organizations.
  • Next generation leaders lack confidence in the succession process. Next generation leaders are concerned about the future focus of their organization’s succession practices and view the process as inequitable and not inclusive.
  • Organizations are missing successor growth and development opportunities. Few organizations report that development planning for successors is part of their process.

Succession planning misalignment creates risk

Board directors and the rest of the leadership team have differing opinions regarding the sophistication of succession planning. Proactive succession planning is created well in advance of need and follows a formal process and criteria to identify and develop potential successors long before that need arises. These plans are also continually updated as business needs change. Nearly half of board directors (48%) describe their organization’s succession planning as proactive, which is notably higher than the number of CxOs who agree (28%). The rosier view among board directors is concerning, as board directors need a clear view into what’s truly happening within an organization to alleviate risk.

Meanwhile, next generation leaders (9%) are unsure of their organization’s succession planning practices, emphasizing the need for C-suite leaders to better communicate with them. While many of these leaders might not be involved in the specifics of succession planning, the lack of visibility into the process is consequential for managing the risk of next generation leaders seeking external opportunities.

Succession planning sophistication

Which statement best describes succession practices at your organization?

Graph 1

Source: Russell Reynolds Associates Q4 2022 Global Leadership Monitor, n = 1,690 global CEOs, C-suite leaders, next generation leaders, and non-executive board directors

 

Next generation leaders lack confidence in the succession process

Almost half of next generation leaders (49%) don’t believe their organization’s succession plans are future focused. Most board directors (84%), on the other hand, believe their organization’s succession plans are focused on the future. CEOs need to urgently address the lack of confidence from the next generation leaders, who may struggle to see a future path in their organization and seek opportunities elsewhere.

Less than a quarter of all leaders agree that their organization’s succession planning practices are transparent and clearly understood, underscoring the urgent need for greater transparency in the process across all levels. While over two-thirds of board directors (68%) believe succession plans are equitable and inclusive, C-suite (38%) and next generation leaders (33%) are less likely to agree. As a result, there is material retention risk for next generation leaders that, in turn, threatens eroding the succession pipeline. When combined with the uncertainty among next generation leaders around transparency and lack of communication, the lack of trust in succession planning equity and inclusion is worrisome and merits reevaluation.

 

Succession Practices

My organization's succession practices… (% agreeing or strongly agreeing)

Graph 2

Source: Russell Reynolds Associates Q4 2022 Global Leadership Monitor, n = 1,690 global CEOs, C-suite leaders, next generation leaders, and non-executive board directors

 

Organizations are missing successor growth and development opportunities

Only 53% of C-suite leaders report development plans for succession candidates, revealing a missed opportunity to focus on successors’ growth and development. Benchmarking internal talent against external talent is a helpful exercise for calibrating the relative strengths and development opportunities. Even so, just 41% of leaders report taking this action. It's especially important to create a more integrated succession plan, whereby the external market can be used to reduce internal succession risk, and/or renew focus on internal talent if the external market will not provide good alternatives. Without the objectivity of market benchmarking, many succession plans are based on existing relationships and performance today—not necessarily the potential of leaders in the future—which opens opportunities for inherent bias.

While 51% of all leaders say that diversity reporting is routinely included in succession practices, we know that simply hiring more diverse talent won’t solve the documented imbalance at the top. Instead, organizations need to build equitable internal talent pipelines that fuel successive leadership plans at every level.

 

Succession Planning Practices

To the best of your knowledge, does your organization routinely include the following in its succession practices... (% selecting yes)

Graph 3

Source: Russell Reynolds Associates Q4 2022 Global Leadership Monitor, n = 1,690 global CEOs, C-suite leaders, next generation leaders, and non-executive board directors

 

Recommendations for effective C-suite succession planning

A key component of organizational success and stability is having a comprehensive C-suite succession plan. Yet too many organizations lack this critical component. Of those that have enacted succession plans, there’s still a meaningful divide within executive teams around process and goals.

To address these issues, organizations can:

  • Create alignment across C-suite and board: C-suite succession planning is a critical component of organizational strategy and, as such, the board needs a thorough understanding. Ensuring the board has an in-depth understanding of both the processes underpinning succession and the talent sitting within the pipeline is important. In addition to dedicated talent review sessions with the board, organizations should develop success profile(s) to ensure the succession plans reflect an accurate view of future business needs, rather than reflecting individual performance today. The success profiles should be refreshed annually in line with strategy and market shifts.

  • Build next-generation leader cohesion: Building trust with next generation leaders is crucial to their engagement and retention. While transparency about who is on the succession plan can be complex, transparency and clarity about the principles that underpin the broader succession strategy should not be. Organizations must clearly communicate strategy implications for the long-term leadership business needs, as well as how they are investing in next generation leadership development.

  • Focus on enabling success (not just selecting successors): Organizations need to ensure that succession is not viewed as a selection and appointment event, but rather a thoughtful process of developing and enabling leaders to grow in their skills and impact. Investments in assessment, coaching, and rigorous development planning for succession candidates is essential. To ensure that succession plans are active and ongoing, it is essential for organizations to establish regular rolling reviews to consider development and new talent, as well as the changing external environment.

 

 

Methodology

The Global Leadership Monitor (first launched in 2021) is an online survey of executives and non-executives that gathers the perspective of leaders on the impact of external trends on organizational health and their leadership implications. Russell Reynolds Associates surveyed its global network of executives using an online/mobile survey in October of 2022.

The 1,690 business leaders we surveyed in October 2022 represent: 46 countries in Africa, Asia, Americas, Europe, Middle East and Oceania. All data has been weighted by GDP to create a more representative share of the business contribution from each market.

 

 

Authors

  • Gabrielle Lieberman is a member of Russell Reynolds Associates’ Center for Leadership Insight. She is based in Chicago.
  • Tom Handcock leads Russell Reynolds Associates’ Center for Leadership Insight. He is based in London.

LEARN MORE ABOUT THE AUTHORS AND THE CENTER FOR LEADERSHIP INSIGHT

 

Acknowledgements

The authors would also like to thank their colleague, Aimee Williamson, whose perspective helped shape these findings:

  • Aimee Williamson leads Russell Reynolds Associates’ Assessment capability globally. She is based in Sydney.