Guest post by David Reynolds I Davidson Executive

As the chairman or owner of an organisation, what would you do if your CEO resigned today, had a heart attack or could no longer perform the role?

Would you have a CEO in waiting, already trained and developed to take over the role?

Alarmingly, a recent survey by the National Association of Corporate Directors found two thirds of US public and private companies still admit they have no formal succession plan.

In a study by Korn Ferry, only one third of the directors of companies that do have such a program were satisfied with the outcome.

Succession planning should be a multi-year structured process tied to the organisation's leadership development programs.

The result of this? Succession planning for CEOs should become an outcome of initiatives that actively develop potential candidates over time.

Firstly, what are your pivot points?

Author and researcher John Boudreau  focuses on the notion of ‘pivot points’ – a term for those employees who have the greatest impact on the bottom-line.

Boudreau says companies that recognise and effectively manage their pivot points have a distinct competitive advantage. But what and, more importantly, who should you consider pivotal? It may not be who you think.

Boudreau  draws on Disney as an example. Which group of employees at Disney’s theme parks would you think are the most pivotal to the parks’ success?

Surprisingly it’s not  Mickey Mouse. Disney’s most pivotal talent is their street sweepers — the workers who direct excited guests to the best spots to see the parade, who locate shady spots for tired parents and provide assistance to lost patrons.

The street sweepers have the biggest impact on the customer experience — perhaps the most critical element to Disney’s success.

Understanding this, Disney places a greater emphasis on developing and nurturing these employees and their careers than they do any other group.

So how can you become a ‘sweeper’ within your organisation? How do you talk to your manager about developing your role to ensure that you’re viewed as pivotal?

Success will come when organisations understand the link between talent and strategy, and when employees become empowered to develop and act on the pivotal skills that are needed in their organisations.

So how do we empower talent within?

On-the-job training

Bjornberg and Feser suggest, in their recent article for the McKinsey Quarterly Report, that a leadership development process should be a combination of on-the-job stretch assignments along with coaching, mentoring and other regular leadership development initiatives and interventions.

Of significant importance is the need to align CEO succession planning and other leadership development initiatives to the organisation’s future strategies.

The succession planning process should also focus on the market and competitive context that the new CEO will confront in the future.

In identifying what is required of future CEOs, Bjornberg and Feser suggest three clusters of criteria can help organisations evaluate potential candidates.

These are: ‘know how’ such as technical knowledge and industry experience; ‘leadership skills’ such as the ability to execute strategies, manage change or inspire others; and ‘personal attributes’ such as personality traits, interests and values.

A successful succession plan can only be achieved if these criteria are developed in the context of the organisation's environment and future strategic direction.

Removing biases

In order for succession planning to be robust it is important to remove biases that often creep into CEO succession planning. There are three common biases that seem most common in CEO succession.

These include the MOM (“more of me”) syndrome;  the sabotage bias which consciously or unconsciously undermines the process by providing a candidate who may not be ready for the top job; and a herding bias where selection members consciously or unconsciously adjust their views to those of incumbent CEO or the Chairman of the Board.

However it is not just succession planning for the CEO that is important. A tailored leadership development program needs to be developed for the CEO’s direct reports and all pivotal talent within the organisation that is critical for its success.

Tailored leadership program

In January, Claudio Faser, Fernando Mayol and Ramesh Srinivasan, surveyed 189,000 people in 81 diverse organisations to assess how frequently certain kinds of leadership behaviour are applied within their organisation.

They found that 89 per cent of the variance between strong organisations and weak organisations, in terms of leadership effectiveness, was due to four behaviours.

The top four behaviours were:

1. Solving problems effectively
2. Operating with a strong results orientation
3. Seeking different perspectives
4. Supporting others.

There are many leadership competency frameworks that organisations are using to assess potential leaders and further develop their competencies.  

However, in my experience, many competencies are generic and little thought has been given to whether they are going to make a significant difference in terms of the effectiveness of the leader and what is required for the organisation at any point in time.

One might assume, from the research listed above, that if the organisation just focused on those four top behaviours, the return on investment for the development of those leaders may be maximised and the effectiveness of the leaders may be improved.

The Aberdeen Group’s Zack Lahey reinforces the issue that organisations face a shortage of critical skills in their labour pool. In Lahey’s research, 79 per cent of  the companies surveyed indicated they experienced a shortage of critical skills as being the main talent acquisition pressure that they were facing.

In identifying future talent, Lahey suggests organisations need to use analytical and more robust technologies which are objectively based.

This will allow them to better understand the current gaps and help them figure out how to improve talent acquisition overall. Ultimately companies need a wider scope of insights to deliver a better overall experience for individuals involved in the succession planning process.

So the questions for you as a Director, CEO or leader are:

1. Do you have an effective succession planning process in place for your CEO and leadership team?
2. Are your leadership competencies aligned to the organisation’s future strategic direction and organisational context?
3. Do you know what talent is pivotal to your organisation’s competitive advantage?
4. Do you have recruitment, reward and development programs in place for pivotal talent?
5. And most importantly, who are your street sweepers?

David Reynolds is the Group Manager of Davidson Executive