Is your succession plan in good shape?

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Monday, 01 February 2021 (0 Comments)

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By Parmi Natesan and Prieur du Plessis

“Succession planning for key roles such the CEO, CFO, board chair and lead independent director is crucial at the best of times ̶ and even more so when the world is turned upside down.”

Leadership is critical to any organisation’s success and its ability to cope with unexpected situations. Consequently, the King IV Report on Corporate Governance makes it clear that succession planning is one of the board’s important functions: both for itself and the key members of the executive team. It also makes it clear that succession planning should cover both the long term and emergency situations such as the current COVID pandemic.

However, succession planning with its inevitable whiff of the passing of time, possible failure and even mortality is a task that boards may tend to defer ̶ even now when the likely impact of the COVID virus on leadership teams is so immediate. Research by Russell Reynolds Associates and The Conference Board indicates that more than 60% of directors surveyed stated that their board had not reviewed or updated the succession plans for the CEO and other key executives in the light of health risks posed by the COVID-19 crisis.

These survey results are global, but there is little reason to doubt that they hold good for South Africa. And as evidence grows that the pandemic will remain a force to be reckoned with for the foreseeable future, boards should make sure their succession planning, including interim/emergency planning, is in good shape.

Adapted from PWC’s “How the best boards approach CEO succession planning”, here are practical tips for boards to follow:

Make sure you understand what is required. Boards should identify the critical positions both on the board and management team which require succession planning. The skills, experience and personal character traits required for each of them must be carefully identified. Equally important, these must be reviewed to ensure they align with the business strategy ̶ something that is constantly changing.
Appoint an owner of the succession-planning process. Like any other corporate process, who is responsible for what needs to be well understood and appropriate lines of accountability established. The process should include a timeline and a clear indication of how the plan should be continually updated. No matter who the process is delegated to, the board is ultimately responsible and so must receive regular reports ̶ many commentators recommend that it should be a standing agenda item.
Include an emergency succession plan as a separate item. As COVID has shown, it’s important to have contingency plans in place. In a pandemic situation, too, multiple leadership roles could be vacant as executives fall ill. While a long-term succession plan is generally best kept confidential, there is a case to be made for greater transparency regarding emergency plans: those designated to stand in for ill executives would benefit from the opportunity to prepare for a role they might have to assume with no warning. It’s also worth noting that the characteristics required of any given interim leader might differ quite markedly from those required of a long-term successor.
Involve the people fulfilling the role from the start. Many organisations find there are advantages in making planning for their own succession an important element of every senior position. An awkward issue is made routine, and focusing on what their successors should be like could also prove valuable in keeping individuals alert to how they need to be changing.
Build a strong pipeline. Boards should ensure a comprehensive internal programme for identifying succession candidates exists and includes first-hand experience in the functions relevant to the position. They should also commission the benchmarking of external talent in order to identify external candidates and deepen their understanding of the internal candidates.
Implement a robust onboarding protocol. Anyone taking on a senior leadership role needs all the help he or she can get in order to begin adding value within the least possible time. This is particularly true for external candidates, but internal candidates also have to make a difficult transition ̶ board support for its appointees is vital.
Communicate with stakeholders. Given the importance of succession planning, boards should ensure stakeholders understand what the process is and who is responsible.

Succession planning should be an integral part of every organisation’s continuing efforts to stay at the top of its game, and it must be able to cope with both planned and unplanned successions.