Building a Pipeline to Successful Leadership Succession

Building a Pipeline to Successful Leadership Succession

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Among all the competing critical challenges faced by CEOs on a daily basis it can be all too easy to manage with myopia – to only see what, and equally importantly, who, is directly in view. But failure to look further into the future can be costly and that includes neglecting to build a pipeline of future leaders who will ensure seamless transitions and continuous, dynamic organisational transformation. Direct costs associated with unplanned succession have been estimated at over ten times the price of an executive’s salary.

In the UK, almost half of businesses lack a formal succession plan even though by 2030, nearly a million businesses are expected to change hands due to retirement.  A fascinating Harvard Business Review study estimated that poor succession planning costs the S&P 1500 companies an eye-watering $1 trillion per year while, conversely, good planning could increase valuations of the biggest companies by up to 25%.

Prepare for handover: If the preferred successors have been identified and invested from within the organisation, they should work alongside the incumbent in the months before the transition and undergo assessment alongside the executive and HR to identify any gaps in skills, training and experience which must be filled before they take up the new position.

They should have been introduced to key stakeholders to establish working relationships and trust to ensure partnerships and teams are aware of the coming transition and confident in and familiar with the incoming leader.

If the organisation is looking for continuity and stability, the anointed successor should be fully briefed and working with HR and the board to gain full sight of all projects and responsibilities.

If the new appointee is coming in from outside of the organisation, there should ideally be a well-timed crossover where the successor joins the organisation, shadows the outgoing leader who will introduce their successor to relevant staff and partners. This period should not go on too long, or it will diminish the new appointee’s capacity to assert their own personal style and culture.

Of course, the board may be looking for a change of direction, which may come as a shock to key stakeholders. In such cases, the groundwork must be laid to prepare the workforce, customers, partners and if relevant, regulators.

Hopefully, the handover will be cordial, however there may be times when the situation is more hostile, for example if the incumbent has been fired or is going to a direct competitor, in which case key members of the teams around the outgoing leader will be key in helping smooth the transition while the CEO, other senior executives and comms teams will need to communicate with stakeholders to minimise any potential reputational damage.

Monitor and support: Once the new appointee is in place, it is essential to continue to evaluate and measure progress against KPIs and work with them to tweak any teething problems. Support them to build a team with future leadership potential to maintain the continuous cycle of development of  talent.

By taking these steps and committing to a structured leadership pipeline, organisations can plan further into the future with confidence and build adaptability and agility into business models to allow dynamic transformation while preparing for any economic or organisational shocks. None of us could have predicted the global disruption and human loss of the Covid pandemic. How many organisations have learned from it and would be able to replace stricken leaders or respond with structural and operational change to adapt models to seismic shifts such as that one? Succession planning should be loosely based on the cycle of churn for different positions, but with a pool of talent from diverse backgrounds who can step in at any time to ensure continuity and growth even as organisational objectives develop and change.

Once natural succession planning has been built into a business model it can be self-sustaining, with increasingly measurable and visible benefits. At Rialto, we find that talent that has been nurtured from within by partnering with us through  coaching or attending a  leadership development programme tend to demonstrate increased commitment and engagement minimising attrition costs and disruption. Any company that manages to keep a loyal, happy and aspirational workforce that understands hard work and impressive performance will be rewarded with meaningful promotion, will see their global reputation enhanced, productivity increase and a virtuous cycle of talent and growth. This should be balanced, however, with the introduction of fresh talent from other backgrounds, companies, sectors, industries and countries to avoid stagnation and promote dynamic cultural evolution, creativity, energy and innovation.