MERC Partners, Leaders in Executive Search write about Succession Planning (Barry O`Connor, Managing Partner)

MERC Partners, Leaders in Executive Search write about Succession Planning (Barry O`Connor, Managing Partner)

Half of all boards admitted that they have little or no formal process for evaluating the performance of their CEO, according to a recent survey .  While share price may be close to most directors' hearts, a CEO has many deliverables on which he or she can be assessed. Amongst these is one which will provide comfort to most analysts and board members - the knowledge that there is someone suitable within the management team to take the helm should it be required in planned, or as can happen, unplanned circumstances. 

Evidence of shorter CEO tenures also makes planning more critical. The global average tenure of CEO's fell from 9.5 years to 7.3 years for the period 1995 to 2001. CEO's who are terminated for performance issues, last 5.6 years in North America while their European counterparts have a much shorter span of 4.8 years on average. According to Booz Allen Hamilton, 72 per cent of CEO's died in office or retired in 1995, while in 2001, this figure had fallen to 47 per cent with the rest leaving early due to mergers or poor performance.    It is critical therefore that the CEO ensures that a successor is identified and a succession plan developed and put in place. 

Best-practice organisations solidify succession planning as an integral process by linking the development plan with the overall business strategy. This link enables the board to devote adequate time to both. Successful organisations keep the process simple and focus particularly on tailored coaching for key executives. Executive mentoring and coaching has been well established in Europe and North America as an important part of senior executive development.  People at the top of organisations work in pressurised environments where time is always scarce and learning has to be 'time effective'. Using an experienced coach is a modern and highly effective way of delivering real learning and resultant real benefit to the bottom line.

The essence of coaching is to help the individual to think through his or her situation, to create a strategy for improvement, to prepare and then implement plans to achieve the desired improvements, and that progress and outcomes are reviewed with the coach to ensure maximum learning from the process.

Delivering the winning performance demanded in the highly competitive global market place puts an emphasis on strategic thinking, but also a greater premium on implementation skills.  It is often delivery, not strategic aims, which lets organisations down. Executives must learn and relearn and adapt their ability to deliver across a range of circumstances.  Notwithstanding, leadership is inextricably linked to situations and, to be successful, leaders need to be able to call on different personal competencies and styles as people and situations around them change. Personal style matters in leadership and there is a no 'one size fits all' teaching of leadership. Leadership develops faster when learned than when taught. It is in this learning context that one-to-one coaching, based on the executive's immediate job, can make a real difference.

As the average tenure of the CEO is getting shorter, the pressure to deliver short-term results can be severe. An under-performing executive team can cause an entire organisation to lose focus and miss market opportunities while a truly effective team can exert a powerful and immediate impact on growth and shareholder value. The CEO's ability to build, lead and empower a top executive team to succeed their tenure is increasingly the differentiator between success and failure.

So judging a CEO solely on the share price during his or her tenure is not enough. It is the onus of the incumbent CEO to ensure that an heir is firmly established to succeed.

 

Barry O'Connor is Managing Partner at MERC Partners, Ireland's leading executive search and selection practice. He is a graduate of University College Dublin and has over twenty years experience of human resource management, both in Ireland and overseas.