When Executives Leave, Who Takes Over?

When General Electric CEO Jack Welch announced his retirement in 2001, the big question was, “Who will take his place?” Interestingly enough, he said at that time, “All I know for certain is that my replacement will not be like me.”

As more and more baby boomers retire, the corporate world is facing the most severe leadership shortage of our time. As a result, companies are investing more than ever before in recognizing the potential in and developing the talent of their key executives. Otherwise, when the time comes for their leaders to retire, these companies will find themselves in dire straits. What they desperately need—and for too long ignored—is a pool of talent that is ready to step in and move the organization forward.

According to a Caliper survey, half of the participating companies expect to lose 50% or more of their senior management by 2010. With key positions left unfilled, an organization can find itself at a standstill with decisions left unmade, problems left unsolved and money lost. To ease the transition of new management, companies can turn to succession planning, a process that identifies and develops highpotential employees to fill key leadership positions. With an effective succession plan in place, employees are prepared for high-level roles to help companies drive their competitive strategies, reinforce values and secure their futures.

To create a succession plan that produces a strong management talent pool, follow these steps:

1. Assess the business strategy and define leadership objectives. Succession planning cannot even begin without a thorough understanding of where the company needs to go—and how it plans to get there. Top management needs to assess the current and future business strategy. Then, a clear vision of the company’s competitive position in the marketplace will come into focus. From this, management will start to get a glimpse of the company’s future leadership needs.

2. Develop the model for an integrated talent management system. To prepare future executives, it is important to determine what they will be called upon to do and what competencies they will need to succeed. Once these are established, a company can identify and evaluate internal talent and then create a selection system to choose the best candidates for its high-potential talent pool. In addition to identifying executive competencies, organizations should try to uncover executive “derailers,” a.k.a. traits that can cause executives at any level to fail. These might include the inability to motivate others or build a team, indecisiveness or the tendency to take criticism too personally. Knowing what works and what doesn’t makes for a comprehensive leadership model.

3. Assess and align the talent in the organization with its business strategy. In this step, a company can begin to assess and identify people with leadership potential. To ensure the process is objective and to avoid overlooking individuals currently in non-management roles, assessments should be used along with information regarding an employee’s current performance. Casting a wide net makes certain you include promising people at various levels of the organization.

4. Provide leadership feedback and development planning. Filling key positions from within an organization is often more desirable than bringing in an executive from the outside. It has the added benefit of providing talent growth and retention, and employees can feel valued and confident they have a future with the company. Therefore, it is crucial to facilitate a clear understanding of an organization’s leadership competencies and developmental needs to the executive team.

5. Implement, monitor, measure and report developmental strategies. To be certain the right people are waiting in the wings, leadership development has to be a continuous process. People can change their behaviors and develop new skills if they are motivated and provided with the required resources and support. This type of learning can have a much greater and lasting impact than conventional training. As individuals in the talent pool grow, measure that growth over time. Also, implement specific strategies to address a company’s business needs.

Preparing individuals for future leadership roles will save time and money, while also maintaining the vision, goals and values of the organization and securing the growth of the company.

Herbert M. Greenberg, Ph.D., is president and CEO of Caliper.