Why Succession Planning Goes Wrong – and What to Do About It
Introduction to the TOPS Model
Our recent blogs have focused on the importance of talent, specifically in a professional services environment. In this blog, we take a wider lens approach to talent and talk about a pressing topic impacting companies of all sizes, types, and industries: succession planning.
Poor succession management is one of the greatest, most costly threats challenging companies today – ineffective CEO and C-Suite transitions in the S&P 1500 costs companies nearly $1 trillion per year.[1] Additionally, succession planning is becoming an increasingly pertinent issue as the average age of the executive team continues to climb; between 2005 and 2009, the average CEO age increased by 14 years.[2]
Though companies acknowledge the need for a proactive and deliberate succession plan, many struggle to build and maintain them. In fact, 49% of companies don’t have a succession plan at all. For those that do, many delay planning until a clear need occurs and are therefore, caught off-guard. They hire ill-suited external replacements. They think up casual plans for high-level roles in their heads, ignoring the implications of transitioning internal successors out of their current duties.
Through our succession planning work, we have determined an approach and process to talent planning that enable organizations to 1) anticipate organizational risks and 2) build a plan to manage risk and ensure coverage for the whole organization. Our Talent Optimization Program and System (TOPS) provides a practical, comprehensive approach to succession planning and management:
In this blog series, we will focus on the core of succession planning, comprised of three components:
- Attrition Risk Analysis – Heat map to understand risks from attrition based on the ability to fill vacancies. Analyzed annually with event-driven updates between cycles.
- Succession Landscape – A storyboard on the state of the union to minimize strategic talent retention risks with actionable, measurable details on each position
- Progress Measurement & Evaluation – Real-time tracking of development plans and talent needs to ensure progress and respond to new risks and events.
Building the core relies on a process that should be conducted annually. Through the following 7 steps, companies can implement a repeatable program to manage attrition risk as talent becomes an increasingly contested resource. The completion of these steps enables companies to have a clear view of their attrition risk, succession landscape, and key steps necessary to continuously develop new talent.
In the next blog, we will discuss the first three steps in the process, defining the path forward for effective succession management.
[1] Claudio Fernandez-Araoz, Gregory Nagel, and Carrie Green, “The High Cost of Poor Succession Planning,” Harvard Business Review, May-June 2021.
[2] Aaron Schnoor, “The Problem of the Aging CEO,” Medium.com, February 6, 2020.
