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FRC: Business culture pivotal to succession planning

Other key areas to succession planning include board evaluation, diversity and talent management

BUSINESS CULTURE is a central plank in establishing an effective succession planning framework, the FRC found following a discussion paper.

Responses to the paper described how the use of skills matrices, including personality-related versions to help with cultural fit, and completing a ‘gap analysis’ of board requirements might achieve a better link to strategy and company culture.

Ensuring the involvement of the chairman and senior independent director in both shaping a strong board and in underlining the importance of succession was also regarded as essential to succession plan.

The feedback paper also highlighted that cultures maintained by one or two dominant personalities was more likely to be unsustainable long-term. Similarly, becoming too reliant on one person’s skills was found to be flawed.

Many said that companies should be able to clearly connect the succession plan and talent development programme to the corporate strategy. Investors commented that they are interested in how these will contribute to the execution of strategy and the risks associated with not having the right people in place.

Other areas of interest included the nomination committee, particularly recommendations from Parliamentary Commission on Banking Standards which noted that there was a “widespread perception that some ‘natural challengers’ are sifted out by the nomination process. The nomination process greatly influences the behaviour of non-executive directors and their board careers”.

On board evaluation, the importance of the chairman setting a tone of transparency and openness was highlighted, while there was agreement on the setting of objectives at board, committee and individual director levels in order to benchmark to measure performance.

In-keeping with that theme, the benefits of a diverse board was underscored, with many suggesting aligning succession planning internally with the organisation’s diversity strategy and externally with the Davies report and recommendations in order to achieve effective diversity.

Similarly, the value of talent management was empahsised as a strong motivational force for employees who wish to develop their career within a given company and achieve senior positions. By the same token, establishing a rich seam of external talent was also underlined, with two of the 32 respondents advocating board apprenticeship schemes.

FRC chairman Sir Win Bischoff commented: “We were pleased to have received so many valuable insights into board succession. Companies which plan ahead effectively for board renewal are more likely to achieve a better combination of diverse skills and experience needed for long?term success. The nomination committee should also consider its role in developing the talent pipeline within the company.”

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