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Succession Planning Crucial For Corporate Image

Absence of an effective succession plan can put a company’s image to jeopardy, feel experts


For Ken Makovsky, succession planning is all about safeguarding a company’s image. According to him, if the succession issue goes unattended, it can seriously dent the reputation of the company. “One of the main responsibilities for a CEO and the company’s board is the development of a succession plan to insure the continuity of the company. The company’s reputation can be seriously tarnished if the succession issue is left unaddressed,” he says.

Commenting on the necessity for company boards to have a fool-proof succession arrangement, Makovsky, President of Makovsky + Company, a PR firm based in NY, points out that although many boards recognize the importance of having succession plans in place, seldom do they implement them.

“Despite the critical importance of CEO succession, many companies are unprepared for the “changing of the guard” – either planned or unexpected. As a result, what should be an orderly, well-planned transition often turns into a crisis situation alarming virtually all of the company’s constituents – employees, suppliers, customers and, of course, investors,” he says.

In his latest blog comments – My Three Cents – Makovsky writes: “in just a few weeks of 2009, a number of corporate CEOs were sent packing. Seagate, Tyson Foods, and Borders Group were just some of the companies that announced changes at the top. Also, Apple chief Steve Jobs has taken leave of absence for health reasons after months of speculation. More CEO changes are rumored to be on the way and may include some of the world’s leading companies.”

“For instance, commenting in his blog on the situation at Apple, New York Times business columnist Joe Nocera wrote: “The time has come for Apple’s board to take control of this subject from Mr. Jobs and do the right thing by the company’s investors,” says Makovsky quoting the NY Times columnist.

A survey of more than 2,500 senior HR executives by Boston, MA, based talent development consultancy Novations Group reported that despite having succession planning in place, more than a fifth of the survey respondents believed it was valueless because, more often than not, they ended up recruiting someone externally anyway.

The report which was released last year further revealed that barely half of US firms regularly update their management succession plans, meaning that when valued high-flyers depart for greener pastures, it is more than likely that their only option will be to throw money at the problem.

Additionally, a December 2007 study by consultancy Mercer and The Center for Board Leadership, the research arm of the National Association of Corporate Directors, found that half the boards of public, private and nonprofit corporations considered their efforts around CEO succession to be less-than effective, says an article published in Management-Issues, an independent blog reporting on leadership, management and workplace issues.

A Practical Guide to CEO Succession Planning, by Russell Reynolds Associates, a leading executive search firm, outlines a number of steps designed to insure a smooth transition at the top.

“The transition from one CEO to another is a critical moment in a company’s history. A smooth transition is essential to maintain the confidence of investors, business partners, customers and employees and provides the incoming CEO with a solid platform from which to move the company forward. A properly designed and executed succession plan is at the center of any successful transition,” the report explains.

Quoting the Russell Reynolds report, Makovsky also believes that boards should chalk out a succession plan which should be reviewed twice a year. This will establish, he says, the basis for selecting a new leader through an examination of the company’s strategic direction while factoring in various business challenges.

The report also outlines the steps to insure a successful transition such as knowledge sharing between the outgoing and incoming CEO as well as a program to communicate with the company’s various stakeholders.

Yet another survey report on succession planning says it is one of the five challenges currently faced by executives. According to the new Succession Planning Highlight Report released in October 2008 by the Institute for Corporate Productivity (i4cp), succession planning is about much more than just planning. “A good succession plan gives careful consideration to a range of issues including transparency, retention, and the development of high-potential talent, the dilemmas of internal versus external successors, and the overall management and execution of such plans.”

i4cp’s research showed that succession planning is a business consideration that will increase in importance in the coming years, with nearly nine in 10 business professionals saying it will be an extremely important or important issue in the future. The report also found that a significant percentage of 526 executives (75 percent) ranked succession planning among the top five challenges facing them in 2008 and in the future, followed by developing leadership skills among leaders and recruiting and selecting talent.

Interestingly, Brian Sullivan, CEO of New York based executive search firm CT Partners, also believes that companies that fail to make succession plans for key senior roles will be hard-hit by shortage of talent. “If a company’s top brass leaves without a replacement, then it will not have a senior management team capable of continuing its business strategy,” says Sullivan in a report published in Asia One.

“If there’s no methodology in place to invest in the next tier of people and cross-train them, then you’re in the compensation-chasing, external recruitment game, which can really have a negative impact on your profit and loss statement,” warns Sullivan.

Related Links:

  1. Heads in the Sand On Succession Planning
  2. Most Companies Lack Formal Succession Planning Process


About fayazuddin a. shirazi