Successful Succession Planning

Chapter 46 of the New York Stock Exchange: The Entrepreneur’s Roadmap from Concept to IPO

As companies grow and mature, one of the most important considerations for the future is succession management. Succession today means far more than finding
that one person to step in and take over a position. Rather than simply looking for replacements, succession planning requires a broad and deep talent pipeline—that is, developing and supplying talent at the top and at other key levels of the organization.

Too often, when organizations address succession planning, they engage in a common practice known simply as “replacement planning.” The primary purpose
of replacement planning is to identify immediate successors to take over a specific position in the organization should an emergency occur in which the existing executive (the “incumbent”) can no longer continue to serve. Sometimes, the replacement is referred to as a “truck candidate”; if the incumbent is “hit by a truck,” someone has been identified to take over and assume the responsibilities and requirements of the position. Replacement planning is most frequently focused on C-suite roles: CEO, chief operating officer (COO), chief financial officer (CFO), and so forth.

As a practice, replacement planning is a worthy pursuit. However, the primary fault with it is a lack of choice: the replacement is one person, and frequently this person may be the replacement for multiple positions. The replacement is often taken at face value, regardless of the changing issues, problems, and challenges confronting the organization—let alone the changes in competitive dynamics or the requirement for shifting strategies requiring skills, behaviors, and capabilities. The replacement plan is devoid of developmental considerations because it typically is not created or implemented to prepare the replacement for future needs.

Succession planning goes deeper. Its focus is not simply on preparing for an emergency replacement, but also considers multiple candidates for a given role in the organization. (The common practice is three successors identified for each role.) Successors are given comprehensive and rigorous assessments to identify their current strengths and weaknesses, the results of which are compared to anticipated requirements and capabilities of the role, and the strategic requirements of the organization. Any gaps are closed through the creation and implementation of a development plan.

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