Two-Thirds of Companies Are Not Prepared for Sudden Loss of Leadership, Survey Finds

The benefits of an effective succession plan are seemingly plain to see, but most companies are apparently wearing blinders, according to a recent study by the Institute for Corporate Productivity (i4cp). The study showed that more than two-thirds of polled organizations are not immediately prepared to fill a suddenly vacated leadership position, and just a third have identified an internal interim successor should their CEO suddenly depart.

Of all respondents, less than half (45 percent) report they have a formal succession plan in place, and only 46 percent conduct regular talent reviews to gauge the readiness of employees who may be counted on to fill leadership roles in short order.

“It’s somewhat surprising to me that more attention isn’t being paid to succession planning issues,” says i4cp executive-in-residence Jim Thomas. “Having the right people prepared to fill key positions is an essential business strategy in this time of fierce competition for talent. The defining moments in a company’s ability to stay competitive may rest in the focus it places on filling key positions with assimilated and capable replacements.”

Large companies, however, are paying closer attention to succession planning issues. When broken down by company size, 66 percent of organizations with more than 10,000 employees said they are prepared or very prepared to immediately fill a leadership role, while 75 percent have identified an interim CEO successor. Also, among companies with more than 10,000 workers, 86 percent report having a succession plan in place and 69 percent conduct regular talent reviews.

“I have held executive-level HR positions with several large companies, and the importance placed on succession planning was extremely high,” Thomas says. “It just makes sense. The future successful management of the company depends on the strategic initiative it places on having an integrated succession plan--specifically one that is consistently reviewed and used to fill key positions within the company.”

Of the organizations that have succession plans, 45 percent have a specific group (HR or other department) overseeing the plan (that number jumps to 74 percent in companies with more than 10,000 employees), while 39 percent include the plan in their career planning process. More than 38 percent review and/or refresh their plans a minimum of every two years, and 38 percent discuss strategic issues. Asked to describe their planning programs, 27 percent have an entry-level management trainee program (43 percent for companies with more than 10,000 workers), 26 percent have a formal plan for future hiring needs (50 percent in companies of more than 10,000) and 24 percent formally measure trainee job performance (41 percent in companies with upwards of 10,000 employees).

Almost a third of companies that have succession planning programs have had them in place for two or more years, while 23 percent have a system integrated with other business processes and 20 percent have a stand-alone succession planning program. For companies with more than 10,000 employees, 55 percent have programs that have been in place more than two years.

The organizational levels most likely to be addressed in companies of all sizes are at the executive and director levels (both at 45 percent) followed by CEO and vice president levels at 40 percent. In large companies, 81 percent of respondents address the executive level, while 76 percent include the vice president level and 71 percent address the director level.

Source: Institute for Corporate Productivity; www.i4cp.com.

Reprinted with permission. © CCH

(submitted Aug 20, 2008)

The benefits of an effective succession plan are seemingly plain to see, but most companies are apparently wearing blinders.