By Helen Pitcher
In the business world, the legacy of inadequate succession planning can include both a strategic mess and a large bill of financial expenses. Despite this, sadly there is no shortage of examples in the media headlines of the occasions when it happens, even with the best will in the world for exemplary corporate governance in our publicly listed boardrooms.
One way to ensure that it does not is to be far more proactive when it comes to succession planning. We need to see it as a means of instilling standards of best practice that are looking to future challenges, rather than being driven merely by a box-ticking mentality.
At an event earlier this month in London with INSEAD’s Director Network - where I was recently honoured to be elected President of the Board – we had a high-profile panel looking at the state of play following the Hampton-Alexander Review on the progression of women in business. We considered the issues urgently needing to be addressed in the UK to create businesses that are truly more diverse, and better fit for purpose for a world that is rapidly changing.
It was written up the next day in Board Talk, an independent blog around issues of concern to boardrooms.
For me, one of the most striking observations on the value of succession planning came during this evening, when we were discussing the urgent need to better progress towards diversity.
Speaking on the situation to date of female representation at the top of business in both non-executive and executive roles in the UK, the vastly experienced business woman Anne Minto said: “There are many shining examples (when it comes to progress), but there are many companies that are doing nothing – it is all about addressing the internal succession planning.”
We have done a lot of work at Advanced Boardroom Excellence on succession planning. We know that its power comes from both its initial and its ongoing remit: how to identify the universe of potential board directors for a given business, appoint them at the most appropriate time for both parties, and then how to develop them further for themselves, and for the business. In that initial identification lies the essential widening of an organisation’s horizons, and in the secondary development its close working with its greatest investment- its human talent.
But for it to be successful, how board succession is addressed must also get into the nitty gritty on the exact role of the Nominations Committee and the entire board in the process. Inevitably, the role of the Chair and the Senior Independent Director (SID) is key. But so is the need for data for knowledge on skill sets that are available, on relevant experience sitting around a boardroom table at any one time, on both cognitive diversity and, dare I say it - on temperamental compatibility.
In other words, succession planning is far from box-ticking, and not exactly what you would call ‘simple’, as a process. You need to think through all the various stages of positioning in the boardroom: from on-boarding and induction, to development and effectiveness training. While there is an acute need for one-on-one coaching and training, it is critical to be able to focus on the board as a whole, representing a diversity of viewpoint and thinking. It is all about having a perspective on the boardroom that comes from a strong knowledge and understanding of the business as a whole, as well as its changing needs.
If we are to create future boards fit for purpose with better ethnic and gender representation, then we need not only to have the data on potential candidates we can access – some of whom might not come from the usual places frequented in the past by executive search firms– but we also need snapshots of where exactly the business stands at this moment in time.
As men and women in senior business positions ourselves, we need to be hands-on in our support of improving the pipeline. We are starting a Sponsor3 campaign, whereby each of us takes individual responsibility to sponsor and mentor three women. We believe that if this is widely taken up, it could lead to a seismic shift in the professional female business pipeline.
Another of our panellists, Baroness (Ruby) McGregor-Smith, was clear on the urgent need for CEOs to collect the data on their organisational make-up. “Most FTSE companies cannot tell you the ethnicity breakdown throughout their organisation – they just do not know” she told us the other evening.
Clearly, there will be many variations on the impact of succession planning dependent on the size of the business in question, and its industry sector, as well as its geographical location. Businesses need to work hard to ensure that they develop a future pipeline of directors that best serves their unique purpose, and the challenges of the future including disruption.
At the end of the day, the CEO’s perspective will play a big part in any succession planning exercise, and it is for each business to judge how transparent it intends to be during the process. But it is clear that starting down the road to creating such a process is essential, even before regulation steps up the growing demands for clarity, which is increasingly being backed up by institutional investors.
At the end of the day, succession planning is about honest appraisal. It involves strategic insights that go to the heart of the long-term sustainability of any boardroom, and by extension, the business it heads. We can offer best practices for board succession that are aimed at keeping the UK in its leadership position when it comes to corporate governance.
Today, as 2017 draws to a close and Britain is poised to leave the European Union, we also believe that an essential component of any such credible future succession planning has to be a true commitment to diversity.