Succession planning is an element of the HR and leadership remits that is both a necessity and arguably a bug bear. The ability to seamlessly replace leaders is no easy task for numerous reasons. Knowing when anyone is likely to exit can be unpredictable. While the nature of many executive level contracts often means there’s more time to find a replacement, the role that leaders play in a business means that another individual can’t just slot straight into a position without a lengthy onboarding process.

That’s why succession plans often focus on an internal talent group that can be moulded and shaped to replace executives. This approach means that a new leader will be able to fill in with prior knowledge of the organisation on an operational and strategic level, creating less disruption to business continuity. They will also already have the relationships with various divisions and trust with the workforce to make the transition relatively smooth.

However, with diversity a priority for many firms, this approach can often be considered to limit diverse thinking. Bringing someone new into executive teams brings multiple benefits to the business, including new ways of thinking that will often help with corporate growth and expansion.

External leaders come with a raft of new ideas, immediate experience of the market, and time spent navigating the challenging macroeconomic conditions elsewhere, giving them the confidence to make bold and business-critical decisions fast. But, of course, this can change the culture of the company, which in turn has the potential to disrupt the workplace.

A not-so fairy-tale story
Perhaps the best example to highlight the complexities of succession planning, but why it is also so critical to get right, is Disney’s CEO story over the last year. You may already be familiar with Bob Igor’s return, but as a refresher, two and a half years after he stepped down from his CEO role at the company, Igor returned at the end of 2022 to replace his successor, Bob Chapek.

There have been numerous reports since as to why Chapek’s tenure was short-lived, but having been handpicked by Igor originally and as a long-standing member of the Disney leadership team, Chapek seemed, on paper, to be an ideal candidate to take over. Having previously been in charge of the theme park division, he had experience both within the business and of leading teams across the company.

However, his experience and knowledge was arguably very different to that of Igor. Yes, he successfully led the theme park side of the company, but that doesn’t necessarily make him qualified to fill Igor’s boots – and that soon became apparent.

However, once that decision had been made, a global pandemic ensued which changed a lot for Disney. That meant that the leadership skills they needed shifted. However, it seems Chapek was the only candidate that had been lined up to succeed Igor, so no other options were explored, and that’s where things started to untangle.

The challenge lies in the fact that a succession plan can quickly become outdated or irrelevant based on external factors that are out of the company’s control. And in most instances, having a flexible plan that doesn’t rely on one successor is of the utmost importance.

Action is needed – and soon
It might not be easy, but succession planning is clearly a crucial part of any business and people strategy that simply can’t be overlooked. It’s concerning, then, that our recent Boardroom Navigator study found that 51% of firms across Europe don’t have a plan in place for their leadership teams. The data suggests that this isn’t for lack of wanting one, though. In fact, 80% of those that don’t have a succession plan in place indicated that they recognised the need to develop one.

While there will be nuanced reasons for a lack of planning on this topic, the difficulties in creating a succession strategy that can easily flex is no doubt one of the influencers. But with our data also showing that 64% of private equity investors are considering making leadership changes in their portfolio businesses, knowing where new leaders will come from is more critical than it has ever been.

Though not a ‘catch-all’ solution, in our experience, there are a number of actions that can make the process more effective, for example:

1. The supervisory board should be involved in discussions about new executive leaders. Disruptive growth will need different leadership to a business seeking stability, for example. The board can positively influence the succession process and take an objective view.
2. A leadership development programme will help to create a group of potential candidates. The succession story can then be communicated with employees, customers and investors, cementing their trust and support.
3. Existing C-suite leaders might consider executive coaching to help them transition out of their current position into a non-executive role. Sometimes it’s hard for an entrepreneurial founder to step back and hand over the reins, but they will have to respect the mandate of a new leader and coaching can help with this shift.
4. A time-limit to the transition period will also help. Existing leaders can pass on their knowledge, but new leaders will be clear on exactly when they can take over. The longer the transition period, the longer new leaders might feel ‘watched’.
5. External candidates will need a strong backbone to cope with such situations, but also, a high level of emotional intelligence to empathise with departing leaders. Internal candidates might have to deal with historical power dynamics, but they’ve also had time to build trust and show their skills. In both cases, the supervisory board can play a supportive role.
6. Cultural fit is vital in succession planning. The cost of hiring the wrong person is more substantial than the investment of hiring the right one. A well-thought-out plan, and close relationships between the board and its advisors, will help to make the process as smooth as possible.

Ultimately, succession planning and leadership development will help pay long-term dividends: everyone, including employees, investors, and even customers, will know the company is in safe hands. If the succession plan is not fit-for-purpose, a business can be plunged into times of uncertainty, with Bob Iger’s return as a CEO of Disney showing just how important getting this right in the first place is. Yet, not every firm will be in a position to bring back a former leader when things get tough under new leadership. This makes it imperative that firms dedicate resources to really plan and ensure they aren’t caught out when a leader leaves, unexpectedly or not.