When it comes to replacing a top executive, many organizations rely on external recruits and hire an executive search firm to find the perfect C-suite executive. This is the core of my business. In some cases, it may be wiser to create and implement a succession plan that grooms individuals inside of your organization to fill the place of executives in the C-suite. This process cannot work for emergency succession planning, but when time is on your side internal recruiting is ideal. It behooves every company to have a detailed succession plan in place and focus on nurturing a pipeline of leaders.
There are many reasons why internal recruits are ideal. External hires are expensive; research shows that external candidates cost up to 65% more than internal candidates. Also, as Meg Whitman from Hewlett Packard Enterprises pointed out in a recent speech, external candidates come in with new strategies, ideas, and culture. I some cases that new perspective is needed and may be refreshing; in other cases, however, the transition can be choppy and cause, in Whitman’s words, jumping “from strategy to strategy . . . to learn five different businesses.”
Be mindful that internal succession can be full of pitfalls. Over 40% of high level promotions end in failure because individuals were not adequately groomed for the job. Also, preparing for the C-suite can take a few years; the typical age for moving into the C-suite is 45 to 56 years old, this means that candidates are prepped in their 30s and 40s; it can be difficult to identify who will mature into the role in several months or even several years.
When external recruiting is complicated and internal recruiting is difficult, what is a board to do? The key to succession planning is planning, envisioning who and what the organization will need for the future. This takes assessment, development, and support. First, assess each person in the organization; identify their skills, strengths, and where they can improve. Figure out what you need organizationally. How can the gaps between who you have and what you need be closed? Develop the potential leaders who may be ready for succession in a year or two. Provide these potential candidates with knowledge and experiences to build them as leaders. Give free reign on assignments that stretch your top employees and allow them to make decisions (and mistakes!) with a safety net. Support these key employees; avoid peaking and burn out by giving them higher positions and responsibilities after they show competency at their current positions. Reward your good employees and allow them to grow within the company.
The importance of succession planning cannot be emphasized enough; nurture your future leaders today because you may need them to step into your shoes tomorrow.