The demands of boards are great, and the challenges are many – ongoing implications of a global pandemic, a highly competitive talent market, potential for economic slowdown, climate risk and ESG initiatives, increasing prevalence of cyberattacks, regulatory change – there are certainly no shortage of issues that are likely to require board attention in 2022. Given its contribution to managing risk, why is succession planning such an unpopular (or hastily addressed) agenda item?
Succession planning, whether for boards, CEOs or c-suite executives, is all about prudent risk management – planning for an unexpected absence or loss of a key person and avoiding or minimising disruption.
Sudden and unexpected changes of leadership can be incredibly challenging if there is no plan (or an inadequate plan) in place. Not just in terms of the loss of capability, but also the time and effort put into hurried efforts to find a replacement, which can be an unwanted distraction from more pressing organisational priorities. Not to mention the impact on stakeholder confidence in the board’s management abilities.
Yet some boards treat succession planning as a tick box exercise and don’t always make sufficient time on meeting agendas to have a robust discussion on the topic. Whether it is a discomfort around the table of talking about director retirements or more broadly capability, or simply a view that succession planning is not a pressing issue – this way of thinking could be getting in the way of actually doing what is best for a board.
Having a written policy for board succession planning is not enough. Particularly if it’s ‘shelved’ and only referred to when the board needs to replace a retiring director or given a cursory read as part of required annual review processes.
A board will benefit greatly from taking a strategic approach to succession planning and being proactive about building a plan that ensures when the opportunity arises, they are making decisions that will increase board diversity, fill current skill gaps or realign board competencies with an organisations ever changing strategic and operational goals.
Best practice succession planning is broad in scope and covers areas such as director tenure, assessment of skills and gap analysis, candidate and success profiles (perspectives, mindsets and experience required), timing of departures, leadership priorities, performance against diversity initiatives, and talent pipelines.
Taking an “evergreen” approach to succession planning is an effective way to ensure that it is included as a regular agenda item – looking at potential triggering events, identifying critical roles and multiple succession candidates (internal or external, interim or permanent), reviewing assessments and keeping track of education and coaching initiatives. Board succession planning should be an iterative process that is forever evolving, taking into account broader organisational and governance changes. Recent events have taught us that even the most unimaginable crisis can become reality and improving preparedness and response capacity is paramount.
The foundation of a good succession planning process starts with a gap analysis to measure director competencies and alignment with strategic goals. You may also benefit from a complete review of your succession planning policy and processes to ensure it is delivering value and has buy-in from around the boardroom table. Discussions about refreshing a board can be emotional, however is it important to make sure the process is collaborative and inclusive. In some instances, advice and direction from an external governance partner can make all the difference in terms of providing unbiased views on functionality, competency and strategic alignment.
Decipher Group provide a range of board advisory services which can be incorporated into a recruitment approach or utilised independently as part of annual review processes. We help boards with selection, evaluation, transition, and succession. We’d love to chat.
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