The secret of successful succession planning

It’s never easy when a key team member suddenly leaves a business, but when it’s the FD/CFO it can be particularly challenging. Big plans – expansion, mergers, acquisitions, restructuring, major investments, infrastructure overhaul – may be stalled or disrupted and shareholders and other stakeholders will be unnerved. At times like this companies want to be able to turn to their succession plan and find a useful document.

Yet our recent research among over 127 senior UK directors found that 46% of UK businesses don’t have a succession plan in place. Of those that do, most are incomplete. Only 53% include the FD function and many plans stop with the board; over a third do not consider senior managers at all. In fact, only 14% of companies have a comprehensive succession plan which they rate.

So where are these companies going wrong? What should a good succession plan entail?

The first thing to remember is that it can’t operate in isolation. If the plan is going to identify who in your organisation could move into more senior roles should a vacancy arise, then it also needs to also take account of the skills, experience, training, wider external influences, trends and thought processes they might need to make the step up and be backed up by a leadership development programme which delivers all of these.

The succession plan may highlight that there’s not a natural successor sitting within the organisation – or perhaps that there’s someone but they are years off being ready to make the move up. In such cases a recruitment strategy will need to be put in place to plug any gaps. That’s why, succession planning, leadership development and a recruitment strategy are ALL components of workable succession plan.

Another thing to consider is the scope of the plan. Many companies are tempted to simply focus on the very high performing roles – FD, CFO, CEO etc. However, in doing this you may overlook great talent sitting within the lower ranks. With a deeper remit succession planning can have a longer-term perspective, identifying who could fill gaps now, in a year, 24 months, three, four or even five years’ time. What training will they need, how long will this take, what gaps will these more junior team members leave?

In addition to going deep, you should also think flexibly and be forward thinking. The skills, knowledge and experience required for a role may change. If your business is say, planning an IPO, downsizing, opening new sales channels, or if the macro environment is changing, you could need a very different FD from the one you have today; a ‘like-for -like’ replacement may not be the right call.

 A like-for-like FD replacement there will be differences, and these may need to be compensated for within the senior team. The additional talents, skills and experiences the person leaving or joining has, will impact on the team’s dynamics and will potentially change the requirements for other roles. This all needs to be factored in.

Another thing to be flexible about is the internal versus external hire debate. There’s a lot of merit in developing your internal talent to take on top roles; they know the organisation and it’s motivating for staff to see someone rise through the ranks. However, this is not always the ideal solution. If the FD leaves before the next generation is ready, the company is heading in a new direction or is facing a specific new challenge an external hire may be a better strategy.

Also, it can be challenging for internal staff to accept someone who was once a colleague, as now the person in charge! So, some external hiring may not simply be inevitable but beneficial. By the same token, companies should be open to the idea of interims. An interim finance director may be an ideal solution if the internal candidate isn’t quite ready to take on the mantle or the business has a one-off challenge to tackle.

Lastly, if a succession plan is to be something more than a document sitting in a drawer and is going to be used, it cannot be a one-off exercise. It’s a dynamic document and process and it must have input and buy in from the senior team. They should be involved, be able to name their potential successors and support their development. By the same measure, if senior managers and directors are blocking the succession process address them.

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