In waiting
3 Nov 08
Succession management is a key issue for accountancy firms large and small. Andrew Munro explains the results of an extensive study into why it can succeed or fail
by Andrew Munro
Proactive succession management has been identified as a key factor in shaping corporate survival and success.
The view comes from a ten-year follow-up research programme, examining the impact of succession management.
The project also indicates that many organisations may be approaching the subject in the wrong way, using practices and processes that fail to hit the mark.
In 1998 my firm, AM Azure Consulting, analysed a broad spectrum of organisations from the corporate and public sectors, looking at business capability and their succession management practices. We let the clock tick for ten years and have now looked at who survived and who succeeded. The results indicate the impact of proactive succession management, but they also ask difficult questions about conventional practice.
Of the dataset, only 60 per cent had survived in their original ownership profile, and only a quarter could be described as emerging from the last decade in better shape than they entered it. Was succession management activity ten years ago a dynamic in shaping this pattern of business success and decline?
The results are compelling. Succession management did make a difference: positive succession outcomes shaped success and a lack of proactive succession contributed to decline. Organisations lacking effective succession management were five times more likely to disappear than those that had robust practices. And high-impact succession organisations were three times more likely to succeed than those reporting limited practice in 1998.
But some aspects of succession management activity did not seem to make much of a difference. Organisations that had invested in an infrastructure of high potential assessment, general management training and development, succession reviews and information technology didn not see significant gains in organisational performance. The existence of a “good” process was not an indicator of positive organisational outcomes.
What did improve the odds of survival and success? Organisations that had made more senior executive appointments from within, which managed retention proactively, and had built flexibility within the executive population, were more likely to survive and succeed. Other key drivers of survival and success included:
• The development of specialist expertise to build high levels of technical know-how;
• Targeted management development to focus effort selectively on key individuals rather than attempt to build capability throughout the management ranks;
• The use of job moves and coaching to accelerate development (rather than training or business education); and
• Personal time and commitment from the top team in succession activity.
The analysis also looked at the impact of leadership. Overall evaluations of general leadership effectiveness in 1998 did not predict organisational outcomes by 2008. But low levels of visionary and entrepreneurial leadership did reduce the chances of survival and organisations with higher levels of leadership capability in troubleshooting and the management of people processes doubled the chances of succeeding.
These results seem to highlight two sets of firms: those that prioritised activity and focused on the substance of succession management, and those that implemented across-the-board processes. At “substance” firms, the top team was personally involved in succession management, identified organisational priorities and targeted investment on key roles and individuals, managed retention proactively, recognised that leadership requirements change as the business moves on, ensured that specialist expertise and technical know-how were understood and valued, and utilised job moves to provide leadership experience.
In contrast, “process” firms seemed to see succession management as a set of programmes, introducing high potential initiatives, implementing general management competency frameworks, training and business education, and conducting talent reviews covering the full management structure. The problem is that these initiatives did not direct sufficient attention or investment towards the key roles and people that would have most organisational impact.
Talent management is high on the corporate agenda and these results provide huge encouragement for those keen to take a long-term view of leadership planning to “future-proof” their organisations. However this analysis also challenges organisations about the design of succession systems and the tactics they are deploying. The key message seems to be to focus on well thought through business priorities that identify specifics – of leadership requirements, roles and individuals. The attempt to implement blanket organisation-wide processes based on a sense that we need better leaders will not drive organisational success.