A proactive approach to board succession planning ensures leadership stability, which gives everyone else involved in the organization a sense of confidence. Considering the importance of taking a proactive stance around succession planning, it seems odd that only 34% of boards have a written succession plan. Despite acknowledging the importance of proactive board succession planning, boards provide a host of reasons why they don’t prioritize it.
Succession planning requires diligence and attention, and it’s common to keep pushing other priorities ahead of it. In addition to spending the proper amount of time in succession planning, depending on the board’s approach to it, there may be an associated cost.
Boards that continue to push proactive succession planning to the back row overlook the fact that board succession planning is part of their fiduciary responsibilities of duty of care. It’s also essential to mention that succession is part of good governance.
The failure to participate in proactive board succession planning poses a threat to an organization’s long-term sustainability. Investors are less likely to invest in a company with weak leadership. As boards miss opportunities to vet candidates, those candidates will be highly attractive to their competitors.
The Board and Proactive Succession Planning
The board is responsible for selecting, hiring and monitoring the CEO or executive director. They’re also responsible for firing and replacing the CEO or executive director when the situation is warranted.
Succession planning activities and programs vary substantially from one company to the next. Boards and their nominating committees should keep three particular situations in mind as they set up their succession planning program. They will need to plan for anticipated departures, leadership development and emergency departures.
Succession Planning for Anticipated Departures
The best-case scenario for succession planning is an anticipated departure where a board director’s term is ending or a CEO has a planned retirement. Knowing that there is some leeway gives the nominating committee a bit of breathing room in their search for replacement candidates. It’s reasonable to expect a timeframe of one to three years’ lead time to replace a CEO or board director.
Proactive succession planning will produce viable candidates to present to the board. In addition, it gives board directors time to think through how to plan for a smooth transition. It’s common for CEOs or executive directors to work with the board in finding a replacement. Current leaders have firsthand knowledge of daily operations and they are the best people to relay to the board how a transition will impact the organizational culture. The current leader will also know what priorities need to be addressed currently and what the strategic priorities and organizational aspirations are for the near future.
Taking a Proactive Approach to Leadership Development
Have you considered that your future leaders might be closer than you think? Companies are often remiss in developing leadership talent from within their companies. If your company lacks an organizational leadership development culture, it may be time to change that.
Think about the organizational structure of your employee hierarchy. Proactive succession planning requires offering current employees the opportunities for growth and advancement within the company. Bear in mind that providing current employees with opportunities for career development may have some budgetary impact that will need to be addressed. Employee retention will be better when employees know they have room to grow. Also, the company will also always have some degree of talent in the pipeline from internal sources.
Emergency Succession Planning Requires a Proactive Approach
At all costs, companies should have a designated plan for emergency succession planning. A host of things could occur that would take a senior leader away from their responsibilities. Illness, family issues, death or firing may cause the loss of a prominent leader at any time. Without a proactive succession plan in place, it creates stress and uncertainty among the ranks.
The current CEO or executive director is usually involved in developing an emergency plan to identify an interim and permanent replacement. It’s best to have a plan for a temporary absence of up to three months as well as a permanent replacement. The current CEO or executive director can be a valuable resource in addressing the core responsibilities for carrying out the company’s strategy in the leader’s absence.
While it appears that proactive succession planning is a tall order, digital solutions provide a streamlined, cost-effective approach.
Diligent Nominations Is the Modern Approach to Proactive Succession Planning
When issues like the lack of time and expense get in the way of proactive board succession planning, it’s time to get some help from technology. Diligent Nominations is the modern way to approach proactive succession planning.
With the Diligent Nominations tool, nominating committees can search and connect with the profiles of over 125,000 directors and executives. The tool places the best-quality prospects to complement your succession plans at your fingertips. You can even break down your search using granular filter options to search candidates by experience, demographics, region, sector and discipline.
Enhance your current board or leadership by using the tool to perform a health check of the board’s composition and effectiveness as compared to your competition. Get an instant health check on your board including gender and age diversity, director interlocks and overboarding.
Use the Nominations tool to get a quick glimpse of your board’s skills and expertise matrix to explore your board’s strengths and weaknesses. Assess the information for the whole board or for individual directors.
The Nominations tool makes quick work of analyzing director interlocks by individual or by company and it highlights overlapping directorship and seats on competing boards and notes seats on FATF-listed companies. With access to information from over 5,500 companies across 24 global markets and 40 indexes, Diligent Nominations eliminates every reason for not pursuing board succession planning proactively.
Solid preparation is often the difference between success and failure. It’s the board’s responsibility to be vested in the organization’s fiscal health and long-term sustainability. Leadership transitions have financial implications. Make your transitions smoother with help from Diligent Nominations.