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while 61 percent had no likely successor in mind. The paradox is that, all of the effort and planning that organisations normally build into their succession planning processes to mitigate against loss of valuable skills across the organisation such as; bench strength, role readiness, talent, potential, retention, promotion and mobility, are rarely applied to the boardroom. That corporate strategy and governance for many, does not include ensuring the consistent presence of a process, designed to maintain the continuity of an effective board or leadership, is surely wrong.
Despite the constantly shifting business landscape and the hectic pace of change, the succession planning process seems uniquely resistant to change, which brings the old adage; “if you do what you have always done you will always get what you have always got” into sharp relief. The current state of things poses some important questions: Is there a right approach to succession planning at board level in the current business and economic climate? Is there a correlation between the size, sector and scope of an organisation that lends itself to successful board succession planning? Are family run businesses better at it and why, apart from the unavoidable issue of nepotism? Are there countries where succession planning is or is not fundamental to the success of the
with a discussion around succession planning, and the usefulness of the process can also often divide opinion in the boardroom.
Looking at two very different geographical regions; the UK and the Middle East, the approaches to succession planning are quite different. However, there are some similarities around board leadership and team dynamics. In the UK, some sectors - i.e. those operating in a regulatory environment and subject to FTSE listing e.g. banking, may have had a head start on others in the succession planning stakes. The sector is given a helping hand under the auspices of the Financial Reporting Council’s (FRC) Corporate Governance Code, which set out in its 2016 discussion paper recommendations on succession planning in relation to Board Evaluation. The discussion paper states that board evaluations should inform and influence succession planning and that while succession planning should be included it should not be considered only once a year as part of the annual evaluation, but rather be regarded as a continual process. However, the discussion paper suggests that investors might welcome more detail and transparency on the board’s succession planning, which was considered not to be helpful, due to the delicate, and personal sensitivities that can surface amongst directors in the boardroom.
IT TAKES A CERTAIN LEVEL OF MATURITY, SELF- AWARENESS AND PROFESSIONAL SKILL TO ACCEPT AND OPENLY DISCUSS THE PROSPECT OF A SUCCESSOR. SUCH OPENNESS IS ALSO A REFLECTION OF AN EFFECTIVE BOARD IN GENERAL, ONE THAT CAN BE FORTHRIGHT, CANDID AND TRANSPARENT, EVEN IF THERE ISN’T AGREEMENT INITIALLY OR IN SOME CASES AT ALL
organisation? Would blanket adoption of the principles of the Corporate Governance Code, actually assist to embed a successful succession planning process? No question, at board level, succession planning can be an emotive and sensitive subject, and some would say a process shrouded in secrecy or with Machiavellian undertones. Indeed, some directors and CEOs are visibly uncomfortable
In my experience succession planning is the one area of the evaluation which produces the most potential tension, sensitivity and controversy between board members and the views and scoring by directors is very mixed, resulting in succession planning being ranked considerably lower than strategic management and financial oversight for example. It is not the mechanics of the succession plan, or the
board evaluation process per se, that produce the most potential ire amongst directors – in fact, directors are quite comfortable discussing potential successors two levels down - rather it is when discussion turns to the boardroom and CEO in particular that differences of opinion surface, and sometimes in a very competitive manner. This is where potential fractures manifest in board relationships, team dynamics surface and each director will have an opinion about who should replace the CEO - then the CEO will also have an opinion - and these views are often set on a collision course. CEOs in some key sectors, only manage an average tenure of 4.8 years - the UK has the fourth highest turnover rate globally (PwC May 2017). It takes a certain level of maturity, self-awareness and professional skill to accept and openly discuss the prospect of a successor. Such openness is also a reflection of an effective board in general, one that can be forthright, candid and transparent, even if there isn’t agreement initially or in some cases at all.
By contrast, in the Middle East, Arab family- owned businesses - which tend to be conglomerates and do not carry out Board evaluations - face similar and more emotional challenges with succession planning. They are not subject to the same regulations or codes of practice around governance and risk as here in the UK, and these businesses normally pass from generation to generation. Family members are expected to take the helm and the successor to the Chairman - often the founder and owner - would normally be the eldest son. This generational issue poses significant risks to the business as this subjective ’default succession plan’ assumes that the next generation of family members have the skills and expertise to take over the business and run it successfully. Sadly, there is evidence that these businesses have, by the time they pass to third generation, either collapsed or been taken over. Unlike the UK, this approach to business ownership is deeply cultural in a region whose people practices are still evolving. However, the absence of a rigorous and objective succession plan would seem to be undermining business success in the long-term.
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FOR FURTHER INFO
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