#MeToo Movement Exposes Lack Of Succession Planning

Boards and CEOs across industries, such as entertainment and technology, have been engaged in critical reflection and corrective actions concerning their corporate cultures in the era of the #MeToo movement.  Recently, after employees walked out, Google changed their sexual harassment policy. Within days, Airbnb and eBay followed Google’s example.

For many companies, this cultural movement brought about much-needed changes to policies, management practices, and executive personnel to begin the process of creating a culture that embraces diversity and rejects both explicit and implicit acts of sexual harassment and hostile work environment.

One the most dramatic examples of a global company initiating major cultural changes in 2018 was Nike, Inc. As reported by The New York Times, a small group of courageous women at Nike—fed up with a culture that tolerates sexual advances, harassment, and gender discrimination despite the many complaints lodged with the HR office—conducted a covert survey that asked their female peers about the prevalence and nature of sexual harassment and hostile workplace incidents across the company. Unbeknownst to the HR office, the report of survey findings were sent directly to CEO Mike Parker, who subsequently initiated an administrative review process whereby 11 top executives  left the company. Included among the many executive causalities of this crisis was Trevor Edwards, President of the Nike Brand and heir apparent to CEO Parker.

While the crisis endured by Nike illustrates the dire need for many companies to rigorously examine their corporate culture and ensure that workplace policies, management practices, and norms respect and encourage the best work from all employees, it also underscores a ticking time bomb for many organizations across industries: the complete absence or severely underdeveloped succession management capabilities. Overall, a shocking majority of organizations neglect to develop any formal succession planning practices or does so on an ad-hoc, episodic basis.

Consider the following data that highlight the general lack of preparedness for either planned or unplanned executive exits. Among Fortune 500 companies, only 54 percent actively developing CEO successors, while 40 percent report not having a single internal candidate to replace the CEO should he or she exit the position. The costs of relying on external talent for executive roles, including executive search costs, delayed strategic planning and capital projects, and ‘cascading turnover’ high-performing direct reports who feel overlooked when key executive positions are filled, is substantial. The cost of forced CEO exits and failure to develop robust succession management capabilities is estimated at $112B of lost market value. Even among companies that conduct formal succession planning, the vast majority do so exclusively for the CEO position while neglecting the many other strategically critical executive roles. In short, most organizations across industries have failed to develop comprehensive succession management capabilities that extend far beyond the board and far deeper that the CEO position.

Why do so many boards and executive teams fail to develop robust succession management capabilities? There exist at least seven common misnomers associated with executive succession that often delay or complete undermine company-wide efforts to develop formal succession planning practices.

• For many boards and executive teams, there is a misguided belief that executive succession is exclusively for the CEO position or for family businesses.

• For other organizations, the misunderstanding stems from the errant view that CEOs are exclusively responsible for identifying their successors—thereby precluding the need for any formal company-wide process.

• For public companies, the misunderstanding regarding executive succession stems from the fear that CEOs who initiate or support any succession management process are signaling their exits and therefore risk driving uncertainty in equity markets.

• Several executive succession misnomers are related to the process itself and how it becomes operationalized throughout the company.

• For many companies, the errant belief is driven by concerns about the costs of developing succession management capabilities as exceeding the benefits or returns. On a related note, the misguided view that succession planning must be (or should be) owned by HR stunts the organization’s full commitment to a robust set of capabilities.

• Finally, and most importantly, many boards and CEOs evidently remain committed to the notion that succession planning is a discrete event to managed when necessary. As the Nike case and numerous other examples illustrate, succession planning capabilities must become embedded in the company’s culture and operations in order to meet the demands of both planned and unexpected transitions in executive roles.