June 17, 2020 – The last couple of months have been a wake-up call for many organizations. The potential effect of COVID-19 on executive health has made boards of trustees aware of the need to review their succession planning processes, according to a new report from DHR International’s Lisa Sprenkle Jones and Heather Smith.
“A viable succession planning process is not only critical to business continuity but has become an important part of business interruption preparation,” they said. “While many organizations are in survival mode and have postponed formal succession planning activities, there are still steps you can take to maintain a focus on the big picture and consider what to do now, in recovery and moving towards the future.”
Identify Emergency Replacements for Key Positions
The DHR report noted that often in succession planning, candidates will be designated as “ready now,” “ready one to three years” and “ready five-plus years.” Smart organizations also identify “emergency replacements” to seamlessly take over on a short-term basis. Although this might be the “ready now” candidate, it is often a well-respected leader or board member who could manage the position, but either does not desire, or is not the right fit for, a long-term replacement.
CEO, CFO and COO are often the first positions designated as key, but be sure not to overlook other critical positions across the organization that are linked to value-creation and impact strategic outcomes. The best source to identify an emergency replacement is the current incumbent, as the designated employee will need to be familiar with the team and processes. Formally document the responses and communicate to the board.
DHR cited a mid-cap financial services client which asked each of its executive leadership team members to identify an immediate back-up executive should they become sick with COVID-19 or have an unexpected temporary leave of absence. This was done swiftly and submitted to the CEO immediately.
The CEO confirmed the go-to list, reviewing it for any “fatal flaws” prior to communicating the plan to each identified successor. It was made clear that these successors differed from the official succession plan, and in fact, most of those identified for temporary stand-in were chosen for different reasons than a long-term successor. The important skills for the temporary successor included a true sense of urgency, deep operational experience and excelling in emergency situations.
“New leaders have emerged during the crisis, prompting boards and leadership teams to re-evaluate their current definition of high potentials and succession candidates,” the DHR report said. “Clients have shared stories of employees who have stepped up and demonstrated leadership who were not part of the current talent pipeline. On the opposite spectrum, we are also hearing stories of leaders crumbling under pressure, unable to make decisions and communicate with employees, potentially derailing their high-potential status.”
Lisa Sprenkle Jones is a partner at Elevate Partners, a DHR International company the advises clients on leadership and talent management challenges. She brings together customized solutions to help leaders and teams reach their highest potential. For more than 25 years, Ms. Sprenkle Jones has partnered with organizations from non-profits to global Fortune 100 companies to create dynamic, engaging cultures while optimizing individual, team and organization performance. She has expertise in organizational development, succession planning, leadership development, multi-source feedback, team development, talent assessment, and competency development.
DHR pointed to the CEO of a Chicago-based healthcare organization who realizes that the competencies required in the past are not necessarily the same skills needed of leaders moving forward. He expects the strongest leaders will engage their teams, encourage autonomy, delegate authority and be willing to pivot quickly based on data from various sources. The assessment process will be modified to ensure the organization is focused on both evaluating and developing these key competencies.
As a member of the board & CEO practice at DHR International, Heather Smith works with clients to place C-level executives and board directors. She works with public, private, and private equity-owned corporations across industries to place top C-suite talent and board directors to drive shareholder value. Ms. Smith is a prominent advocate for boardroom diversity and an established expert on board-ready preparation. Bringing knowledge of boards and boardroom risk derived from her career experience in the commercial insurance industry, she offers valuable perspective to DHR clients.
What to do in Recovery
“As we slowly move into recovery mode, it is likely that your organization is not the same as it was a mere three months ago,” the DHR report said. Changes to the business necessitate changes to the succession plan.
DHR provided questions to ask the leadership team. They include:
- How has our strategy changed?
- What does the business model look like in recovery?
- How does the leadership team need to change to reflect the changing business model?
- What are the future talent requirements?
- What are the current capabilities?
- Where are the gaps?
DHR cited a financial services firm that found that its customers were driving the need for increased digital expertise. In this scenario, leaders who cannot adapt to the new pace, manage change or struggle with technology, will not survive as leaders, the search firm said. Instead, new competencies will be needed including adaptability, quick decision making and resilience.
What to Do in the New Normal
Based on the review conducted during recovery, now is the time to re-evaluate (or launch) your succession planning and development process. How does the evolving organizational structure align with your current succession strategy and approach? DHR said that when strategy and competencies change, a revised assessment process may be necessary to evaluate the current pipeline and high potentials.
Continue Developing the Talent Pipeline
Succession planning is not an annual event, the DHR report said. “To be effective, it must be an ongoing process that includes continually identifying specific development needs at an organization, team and individual level,” the firm said. “Recognize and communicate how the strategy will impact critical competencies and the talent requirements.”
The DHR report said companies should thoughtfully identify opportunities (competency development, education, on-the-job experiences, new assignments, etc.) to develop and retain those in the leadership pipeline. To minimize transition risks, ensure systematic planning and development of key leaders who are ready to advance into critical roles.
Communicate Changes to the Board
As the emergency replacements have already been communicated, work with the board to discuss new updates to the succession plan, as well as individual development plans, said DHR. Based on experiences with other organizations, board members may provide additional insights that are valuable in the current environment.
“Although these are ambiguous times, take some time to consider how a thoughtful process now can establish a foundation in recovery and when we arrive at the new normal,” the report said.
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media